Isn’t it great when people work together for a noble cause and great success happens?
Merlin Law Group attorneys Drew Houghton of Oklahoma and Dan Ballard of Redbank, New Jersey worked with policyholder attorney Jason Liss of Michigan to obtain a significant decision yesterday in the Southern District of New York.1
In summary, the case decided that:
- Appraisal can determine the cause of a loss in New York.
- The insurer’s actions and delays may prolong the recovery.
The insurance company argued that causation and other issues were “coverage issues”; reserved for the court. The judge saw through this increasingly common but flawed argument by lawyers for insurance companies, and ruled:
Plaintiff contends that the alleged “coverage issues” identified by Defendant are in reality nothing more than factual disputes relating to causation and the magnitude of the loss. I agree with. First, on the issue of “whether direct physical loss or damage occurred during the relevant period of insurance,” there is no genuine dispute. The defendant admitted that physical loss or damage occurred during the relevant policy period by assuming partial coverage for the loss. Although Defendant correctly notes that the assumption of partial coverage does not automatically eliminate the possibility of additional coverage problems, …. acceptance of coverage does not eliminate the possibility that this particular coverage issue remains a problem. The dispute as to which damage was caused by the June 10 storm or by the July 13 storm turns to causation.
As to the remaining five coverage issues asserted by defendant, none of them require the court to construe the meaning of the terms of the insurance contract or rule on the scope of coverage. Plaintiff does not dispute that the policy offers no coverage for damages from “prior losses,” “wear and tear,” or “cosmetic damage.” Likewise, plaintiff does not dispute that the age of the roofs would affect the recoverable amount and has provided undisputed documentary evidence that the roofs are less than 20 years old. There are no genuine legal disputes regarding the terms of the policy. All that remains are questions of fact relating to damages and questions of damages are suitable for assessment. Looks Zarour v. Pac. lndem. Co., 113 F.Supp. 3d 711, 715-16 (SDNY 2015) (‘[A]apportioning causation” is “essentially a matter of fact … to be resolved by making factual judgments about events in the world, not legal analyzes of the meaning of the insurance contract. … Accordingly, the question of causal injury is properly subject to assessment.” Amerex Grp., Inc. v. Lexington Ins. Co.678 F.3d 193 206 (2d Cir. 2012)).
Regarding the insurer’s actions or inactions affecting the reinstatement period, the court again ruled for the policyholder:
I agree with the plaintiff. An insurer’s delay in paying amounts to repair an insured property may affect the theoretical time required to repair such property. Looks Streamline Capital, LLC v. Hartford Cas. ins. Co.No. 02 Civ. 8123, 2003 WL 22004888, (SDNY Aug. 25, 2003) (`Several cases from other jurisdictions support the notion that a late payment can have a direct effect on the timing of an insured’s resumption of business.’). SR Int’l Bus. ins. Co. v. World Trade Ctr. Properties, LLC2005 WL 827074 (SDNY Feb. 15, 2005), cited by defendant, holds only that the time to make repairs is a theoretical, not an actual, calculation, but does not challenge the general rule that an insurer’s delay can add to the theoretical time period.
The language of the insurance is clear: End of the liability period[s] when the building and equipment could with reasonable care and delivery be repaired or replaced[.]’ The key question for the theoretical calculation is when the claimant could have repaired or replaced relevant property. It follows that any facts affecting the insured’s ability to repair the property with due care and delivery are appropriate considerations for the theoretical calculation. Looks 2005 WL 827074 (citing United Land Investors, Inc. v. Northern Ins. Co. of Am.476 So.2d 432 (La.Ct.App. 1985) (extending the reinstatement period to account for delays caused by insurance companies); Eureka-Security Fire & Marine Ins. Co. v. Simon, 1 Ariz.App. 274, 401 P.2d 759 (Ariz.Ct.App.1965) (extending recovery period for delays caused by insurer and landlord.) An insurer’s delay in payment may affect the calculation when an insured could have repaired or replaced the premises. Whether defendant’s delay in payment actually affected plaintiff’s ability to repair or replace the property is a disputed issue of fact.
The logic of both findings is sound. Appraisals must determine the extent of the injury and consider various facts to do so. These damage facts are what property insurance adjusters do all the time without thinking that these are coverage issues. Adjusters always discuss how much wear and tear occurred and the various delay facts that occurred regarding the recovery period to determine the amount of the loss. Valuation is not just a debate about the actual price of a nail or piece of lumber.
A good result for policyholders everywhere.
Unity is strength… when there is teamwork and cooperation wonderful things can be achieved.
— Mattie Stepanek
1 Laxminarayan Lodging v. First Specialty Ins. corp.No. 1:21-cv-07506 (SDNY May 11, 2023).