Insurance companies and their experts have a long and growing checklist of excuses for not paying hailstorm losses. Many of these excuses revolve around allegations that the observed damage was not caused by the particular hailstorm being adjusted. When insurance companies say the alleged hailstorm damage occurred outside the policy time frame, can the issue still be adjudicated?
While the answer may require specific state law, a federal judge in Kentucky forced an assessment last month with this ruling:1
The appraisers and judge shall determine whether the subject property damage in this case was caused by a hailstorm that occurred on June 17, 2019. If the appraisers and judge determine that the subject property damage was caused by a hailstorm that occurred on June 17, 2019, then the appraisers and judge shall determine the value of the loss. In determining the value of the loss, the appraisers and adjudicators shall consider only damage directly resulting from the hailstorm of June 17, 2019. In no event shall the appraisers or adjudicator deem the value of the loss to include any damage that occurred outside the effective period of the policy, February 26, 2019 to 26 February 2020.
Before doing so, the federal judge noted Kentucky law:
Although some courts in other jurisdictions consider causation to be part of the coverage analysis and a legal question for the court, see, for example, Rogers v. State Farm Fire & Cas. Co., 984 So. 2d 382, 392 (Ala. 2007), federal courts in Kentucky have repeatedly said that “the court may allow the appraiser to determine both the cause of the loss and the amount of the loss.” Motorists Mut., 2005 US Dist. LEXIS 24415, 2005 WL 2674987, (citing CIGNA Inc. Co. v. Didimoi Prop. Holdings, 110 F. Supp. 2d 259, 268-69 (D.Del. 2000); looks Woods Apts. v. United States Fire Ins. Co., 2012 US Dist. LEXIS 207483, 2012 WL 12996188 (WD Ky. May 30, 2012); Cincinnati Specialty Underwriters Ins. Co. v. CFLP 1, LLC, 2015 WL 5793951, (WD Ky. Sept. 30, 2015) (`The cause of the injury and the amount of the loss is for the judge to resolve.’). This applies even if the valuation provision does not explicitly state that the valuers can determine the cause of the damage.
The lesson is that review panels can make these decisions if state law allows it. Alabama doesn’t, and Kentucky does. Always refer to state law as laws vary from state to state.
I know it may seem like the insurance system is flawed because there is no set rule but depends on state law. Yet even Congress has passed laws allowing each state to regulate insurance as the state sees fit to do.
Thoughts on Friday
Work hard. I got a job a year earlier. Junior faculty members used to say to me, ‘Wow, what’s your secret?’ I said, ‘It’s quite simple. Call me any Friday night in my office at 10 o’clock and I’ll tell you.’
1 Estate of Mattingly v. State Auto Prop. & Cas. ins. Co., no. 3:21-cv-274, 2023 US Dist. LEXIS 9275, 2023 WL 320004 (WD Ky. Jan. 19, 2023).