Last week, a federal District Court in the Southern District of Texas concluded there was no evidence that hail damage to the insured’s metal roof was not merely “cosmetic” as defined by the policy and granted summary judgment in favor of the insurer based on the “cosmetic loss” exclusion.  In Farris v. State Farm Lloyds, No. H-19-3872, 2021 WL 398489 (S.D. Texas [Houston Division], Feb. 4, 2021), the metal roof of Plaintiff’s home was allegedly damaged in a hailstorm. Eleven months later, when Plaintiff's parents and other family members were getting roof replacements paid for by their respective insurance companies, so the insured made a claim with his insurer, State Farm. The policy with State Farm contained a Cosmetic Damage Endorsement which excluded “cosmetic loss,” which was defined as a “loss that alters the physical appearance of the metal roof covering but does not result in the penetration of water through the metal roof covering ….”  State Farm, finding no non-cosmetic hail damage to the roof (and the cost to repair other damage was below the policy deductible), denied the claim. The insured then filed suit, asserting breach-of-contract and extra-contractual claims.  In response, State Farm filed a motion for summary judgment, which the court granted.

In granting summary judgment, the United States District Court concluded that “there [was] no evidence that any hail damage to the metal roof was not merely “cosmetic” as defined by the policy and within the Cosmetic Damage Endorsement exclusion.” Interestingly, the court relied on the insured and his own causation expert’s deposition testimony. The insured admitted that there were no areas of the roof found to be punctured by hail.  The insured’s causation expert also testified that although hail hit the ridge cap of the metal roof, it did not create any penetrations or water intrusion.

Because the insured did not establish a right to receive benefits under the policy or an injury independent of a right to benefits, which is required to recover damages based on an insurer’s statutory violations, the court held that they could not recover on their bad-faith claims. With respect to an “independent injury,” the court quickly rejected the insured’s assertion that he sustained such an injury as he was “forced to appear for deposition, respond to discovery requests, allow multiple adjusters and experts access to inspect his property, and engage legal representatives to endeavor to obtain policy benefits.”  To that end, the court recognized the rule that “[a]n injury is not ‘independent’ from the insured's right to receive policy benefits if the injury ‘flows’ or ‘stems’ from the denial of that right.”     

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