Judges should be aware of the extreme and aberrant arguments being made by a few insurance company lawyers about physical damage requiring damage to be “functional” damage. These lawyers argue that property insurance policies contemplate this “functional damage” requirement.
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In the recent case of Rainforest Chocolate, LLC v. Sentinel Insurance Company, Ltd.,1 the Supreme Court of Vermont found coverage for Rainforest where Sentinel’s “false pretense” exclusion turned out to be ambiguous as there were at least two reasonable interpretations of what constituted “physical loss or physical damages.”2
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Insurance companies have turned the property insurance world upside down by denying claims based on engineers who claim that no "functional damage" occurred and only "cosmetic damage" was sustained at the insured property. Most of us in the property insurance claims business have been taught that any "physical damage" is covered by a property insurance policy. This concept of "physical damage" as the bell weather proof of the type of damage covered under property insurance policies is changing and challenged by some insurers and their forensic vendors who claim that "cosmetic damage" is not really the type of "physical damage" covered under insurance policies.
I’ve lived all over the country and prior to making my way to the East coast, I was lucky enough to live in the Rogue Valley in Southern Oregon, home of Harry and Davids, Jackson and Perkins, and—for you craft beer aficionados—Rogue Brewery. One of my favorite things in the Rogue Valley is the Shakespeare Festival in Ashland, Oregon, which runs from February through October every year.
Many of you might have either read or heard about the massive gas leak that affected thousands of residents of Porter Ranch, a suburb of Los Angeles. The gas leak emanating from a nearby underground gas storage facility (operated by the Southern California Gas Co.) purportedly has stopped after a fix, but not before causing an estimated 100,000 tons of methane to be emitted into the atmosphere. Many scientists are calling the Porter Ranch gas leak the biggest in U.S. history.
Only insurance company claims managers and their paid for lawyers could argue that a hail dented roof is not a covered loss under a property insurance policy which specifically covers hail damage. A federal appellate court decision issued last week1 helps put an end to these crazy attempts by insurance company lawyers that argue virtually anything to get out of the contractual promise.
One area of dispute in property insurance claims involving hail or storm damage is how much needs to be replaced. When part of a building’s roof or siding is damaged as a result of a storm, sometimes the replacement material is no longer available. The issue becomes does the entire roof or siding have to be replaced in order to achieve a perfect match?
For coverage to be afforded under insurance policies there is a requirement that the insured property suffer a direct physical loss from a covered cause of loss. This often leads to disputes and litigation concerning whether property suffered a physical loss. Insurance carriers argue that a physical change in the insured property must occur before coverage attaches. Policyholders, however, often have damaged property and business interruption without a physical change to the insured property. When is coverage provided in such circumstances?
Property insurance policies cover physical damage to property. Cosmetic damage has traditionally been paid if the damage is greater than the deductible. Lately, some ingenious insurance company lawyers are wrongfully arguing that their stingy insurance company claims managers are correctly not paying for cosmetic damage.
While a majority of property insurance claims involve homeowners or commercial property owners whose buildings are damaged by hurricanes, floods or windstorms, it is not unheard of for a golf course to sustain damages as result of these types of perils. This subject matter is of particular interest to me because of my golf background. Prior to my becoming an attorney, I played collegiate golf at Notre Dame and also competed professionally on a developmental tour for the LPGA. During my golf career, I was fortunate to have the opportunity to travel and play some of the most challenging golf courses in the country.
For those of you who may not be avid golfers, the difficulty of a golf course is determined by a course and slope rating which is calculated for each set of tees. These ratings are not only important in calculating a golfer’s handicap for the course but are also considered by those who rank the top golf courses.