Historically, homeowners and commercial insurance policies provide coverage for any and all direct physical loss or damage caused by the peril of hail and its ensuing damage. Carriers are trying to limit this exposure by raising the standard under policies from a direct physical damage standard to a functionality standard – damage that affects the function of the insured property.
Carriers are still obligated to investigate all hail claims and cannot deny a hail loss claim if the roofing system has been compromised in any way, even under this higher functionality standard. Nevertheless, I am seeing an increase in hail loss claims that are being denied based on this newer functionality standard despite the policy unambiguously providing coverage under the direct physical loss standard.
What standard applies?
The standard the carrier is permitted to apply is based on the terms of the agreement between the parties, i.e., the insurance policy. If the policyholder paid a premium for direct physical loss to his or her structure, then cosmetic damage is covered and the carrier must meet its obligation to indemnify the insured and restore the property to its pre-loss condition. This includes the roof and windows damaged by hail. Anything less is unacceptable and a carrier applying a functionality standard when one does not exist under the terms of the insurance policy is liable for a breach of contract, and may be liable for bad faith damages for taking such an unreasonable position in its denial of owed benefits.
I recently discussed this issue with a nationally acclaimed licensed public adjuster, Kevin Burpee, of Pride Public Adjusting. He has been practicing for over twenty-five years and is seeing an increase in carriers wrongfully denying direct physical damage caused by hail based on a functionality standard that does not exist in the subject policy.
He commented on how this is adversely affecting policyholders:
It is incredibly frustrating for our policyholders because standard practice is to adjust a covered claim and help our policyholders get back to work or restore their home. As soon as a carrier denies a valid hail loss claim, it immediately causes stress and frustration because the claims process is effectively over and an attorney is typically required to resolve the coverage dispute, causing substantial delay and harm to our clients.
If you encounter a carrier applying the wrong standard during the adjustment of your claim, you should retain a competent professional that can help you obtain the benefits that your premium payments provide.