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plaintiff Rosemarie Wheeler (“Wheeler”) and defendant Safeco Insurance Company of Indiana (“Safeco”) regarding a claim for damage to Wheeler’s home, which she claims was caused by a hailstorm in San Antonio, Texas on May 28, 2020 or around May 28. 2020. IRosemarie Wheeler v. Safeco Insurance Company of IndianaNo. SA-21-CV-00343-XR, United States District Court, WD Texas, San Antonio Division (April 29, 2022), the USDC was faced with claims for summary judgment from the insured for damages and bad faith and the insurer’s motion to eliminate the cause of ond tro.
BACKGROUND
Doug Lehr (“Lehr”), an inspector for Safeco, inspected the property after a claim for hailstorm damage. Lehr observed hail depressions in the roof. Because Wheeler’s policy includes an exemption from cosmetic damage for sheet metal damage, Lehr hired an engineering firm, Rimkus Consulting, to determine if the damage to the metal roof was cosmetic or structural. Erik Valle, an engineer, inspected the property and determined that there was non-cosmetic damage to the sheet metal ridge and high panels, but the other dents on the roof panels were cosmetic and had not affected the roof’s function.
After receiving Valle’s report, Lehr made an estimate of damage to Wheeler’s home, including the exterior heights, repair of the window screens, front and rear tires, personal property, stucco, garage door panel, shingles and trim on the detached house, air condenser, and more. the main ridge of the main house and panels with a high capsule. Safeco issued a payment to Wheeler based on Lehr’s estimate and denied coverage for the damage to the metal roof panels based on the policy’s exclusion of cosmetic damage.
Wheeler then retained public adjuster Elvis Spoon, who made an estimate including a complete roof replacement, which amounted to $ 140, 617.62. Spoon did not agree that the roof damage was cosmetic but did not provide any further information to dispute Valle’s determination. Safeco stood by its previous denial.
Wheeler’s complaints were twofold:
- Safeco’s application of the exemption from cosmetic damage and
- Safeco’s position that she is not entitled to compensation cost benefits under the insurance unless she spends the money on compensation costs that exceed the actual cash value of her claim, which represents her deductible.
DISCUSSION
Wheeler’s request for declaratory relief is a duplication of her positive grounds for bringing an action before the Court.
The most important issues to be decided in this case – whether the property damage is covered by the insurance and whether Safeco handled Wheeler’s claims properly – are based on measures that have already taken place and have been presented as positive reasons for bringing an action before the court. The court therefore rejected Wheeler’s request for declaratory relief.
The plaintiff’s claim for summary judgment
The burden of establishing coverage rests with the insured. The insurer is responsible for determining an exemption from the insurance. Safeco points to the insurance’s exclusion for cosmetic loss or damage to the sheet metal roof. The policy defines “cosmetic loss or damage” as “any loss that is limited to the physical appearance of a metal roof surface.”
Whether the adjuster’s action which calculated the loss based on the expert’s opinion was contrary to the policy – in other words whether the damage to the roof was non-cosmetic – is a matter of fact. A summary assessment is inappropriate for resolving a factual issue.
Wheeler argues that the views of Safeco’s experts are irrelevant and provide no probative value as to whether the damage to the plaintiff’s roof is limited to “cosmetic” as that term is defined in the policy. Thus, Wheeler claims, Safeco has not fulfilled its burden of showing that the exclusion of cosmetic damage undoubtedly applies in this case.
The experts’ reports on the roof are relevant to the suit. However, this does not change the Court’s view. Safeco has managed its burden of showing that an exemption from coverage can apply.
As there is a real dispute over material facts as to whether the damage to Wheeler’s metal roof panels was cosmetic or non-cosmetic, and thus whether Safeco failed to comply with the agreement, the court denied a summary judgment regarding Wheeler’s breach of contract claim.
Defendant’s claim for summary judgment
Safeco requested a summary judgment regarding Wheeler’s non-contractual claims. Wheeler’s claim that Safeco unreasonably investigated her insurance claim is not supported by any evidence.
An insurer is obliged to adequately examine a claim before it is rejected. An insurer fails to reasonably investigate a claim if the investigation is made as a pretext for rejecting the claim. An insurer’s trust in an expert report does not support a finding of bad faith unless there is evidence that the report was not objectively prepared or that the insurer’s trust in the report was unreasonable.
There is no conflict of evidence as there is no evidence that Valle’s report was not objectively prepared or that Safeco’s confidence in the report was unreasonable. The undisputed evidence in the journal shows that shortly after Wheeler reported the hail damage to the roof, Safeco took reasonable steps to investigate Wheeler’s claim. Lehr hired a professional engineer, Valle, because he could not determine whether the damage to the sheet metal roof was cosmetic or non-cosmetic after his visual inspection. Valle inspected the roof and took photographs, looking for any chips or scratches in the roof’s protective coating and distortion or separation in the panel seams.
An insurer does not act in bad faith if they are wrong about the correct design of the insurance. If the dispute concerns “the actual basis of the claim, the correct legal interpretation of the policy, or both”, such claims are the subject of an analysis of breach of contract rather than bad faith. Safeco investigated the claim, and although there is a dispute as to whether Safeco correctly denied coverage, Safeco may deny coverage based on an incorrect application of the policy without being held liable in bad faith.
There is no evidence that Safeco refused coverage when its liability was reasonably clear under the insurance.
Texas courts have repeatedly held that evidence that only shows an honest coverage dispute does not, alone, show bad faith. Wheeler has only provided evidence that there is a dispute over genuine coverage. Safeco was allowed to rely on its expert report to deny Wheeler’s claim.
For the reasons stated, the plaintiff’s claim for a declaratory and summary judgment was rejected. The defendant’s claim for summary judgment was upheld in relation to the claim of bad faith and the plaintiff’s chapter 541 and section 542.003 claims were dismissed with precedent.
The plaintiff’s breach of contract and Texas Prompt Payment Act claims remain.
Neither party was the overall winner. Both lost parts of their claims for summary judgment. The trial, with such a simple difference of opinion, wasted the time of the parties and the court. The two may now be brought before the trial on the breach of contract claim.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.
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