Insureds Must Segregate Damages That Occur Prior to Policy Period From Those Occurring During the Policy Period

The Northern District of Texas recently granted summary judgment in favor of an insurer where the insured failed to segregate damages occurring prior to the policy period from those occurring during the policy period.  In Frymire Home Services, Inc. v. Whitfield Capital, LLC, 2020 WL 7259335 (N.D. Tex. Dec. 10, 2020), at issue was hailstorm damage to a commercial office building.  The insurance policy at issue insured against loss and damage to the property occurring during the policy period, so long as the loss is not excluded as “wear and tear” or inadequate maintenance.

Prior to the policy period, the insured had the property appraised.  The appraisal report identified two areas of significant roof leak and recommended immediate repair of the areas and replacement of the roof within two years.  The insured alleges that during the policy period, a thunderstorm produced hail and damaged the property.  The insured made a claim and the insurer assigned an adjuster to inspect the property.  The engineer retained by the insured found that the roof sustained direct physical damage from hail and wind-blown debris that required replacement.  The engineer acknowledged possible prior damage but concluded that it was the June 2018 storm—the one that occurred during the policy period—that caused damage that required roof replacement.

The insurer retained Haag Engineering (“Haag”).  Haag concluded that hail did not cause damage to the roof.  Moreover, Haag found that there were no reports of hail in the area during the policy period.  The insurer denied the insured’s claim based upon Haag’s report.  The insured subsequently filed suit against the insurer.  The insurer sought summary judgment on the insured’s claims.

The court grated the insurer’s motion for summary judgment on the insured’s breach of contract claims because the insured failed to provide evidence to segregate its damages.  Under Texas law, the insured cannot recover under an insurance policy unless facts are pleaded and proved showing that damages are covered under the policy at issue.  The burden of segregating damages attributable solely to the covered event is a coverage issue for which the insured—and not the insurer—bears the burden of proof.  The court explained that Plaintiffs bore the burden of providing “some evidence” permitting a fact finding to distinguish between damages arising prior to the June 2018 storm and those arising as a result of the June 2018 storm.  The insured should have submitted evidence enabling a jury to estimate the amount of damage caused by the June 2018 storm versus the damage that pre-existed the policy period.

The court also found the insured offered no evidence in support of its intentional misrepresentation claim; thereby granting summary judgment on the claim in favor of the insurer.  Further, the court granted summary judgment in favor of the insurer on the insured’s remaining extracontractual claims because plaintiffs did not claim an independent injury. Specifically, the court explained that the insured’s remaining claims were based upon “unpaid coverage benefits rather than some other, independent injury.”