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When hail damages, the roof of Swiss cheese is limited to damage done by hail



The Texas Court of Appeal was asked to determine whether an insured who receives a payment from the insurer on his claim is exempt from fulfilling the requirement to separate covered losses from uncovered losses according to the doctrine if simultaneously causes the latter gives an action for breach of contract. Prime Time Family Entertainment Center, Inc .v. Axis Insurance Company And Andrew Jencks, No. 11-18-00241-CV, State of Texas in the Elevenh Court of Appeals (October 16, 2020) demanded the insured payment of the undisputed amount exempt from the requirement to segregate covered from uncovered damage.

BACKGROUND FACTS

Prime Time Family Entertainment Center, Inc., operates a commercial company in Abilene. Prime Time received commercial insurance from AXIS Insurance Company. The AXIS policy insured Prime Time's property against hail damage.

In June 2014, Abilene was hit by a major hailstorm. Prime Time submitted a claim to AXIS for roof damage which Prime Time claimed had suffered due to the hailstorm. AXIS then began investigating Prime Time's allegations. AXIS did not initially identify significant hail damage to Prime Time & # 39; s roof. AXIS also learned about possible pre-existing, uncovered damage to the Prime Time roof during this initial investigation.

In May 2015, an AXIS adjuster sent a payment letter to Prime Time. The letter informed Prime Time that AXIS paid for hail damage from the hailstorm in June 2014. The letter estimated that Prime Time had received repairable hail damage on its roof of $ 245,716.16. AXIS attached the payment for $ 173,980.35, which represents the amount after AXIS deducted Prime Time's deductible $ 25,000 and "temporarily deducted $ 45,735.81 in recoverable depreciation." Axis refused to pay the full cost of replacing the ceiling and Prime Time sued AXIS for incorrectly denying and underpaying Prime Time's claims.

During the discovery, Prime Time produced an email between Prime Time's agent and Dow Roofing Systems, the company that installed and guaranteed Prime Tim's original roof. The email was sent in May 2014, a month before the hailstorm in June 2014. In that email, Prime Time described its roof as "Swiss cheese" and asked Dow to replace the entire roof under the warranty agreement. The e-mail contained a schematic image showing thorough roof leaks at the Prime Time facility. Through third-party discovery, AXIS obtained other documents showing a comprehensive history of roofing issues and warranty claims from Prime Time from 2008 to the "Swiss cheese" email in May 2014.

Policy

The AXIS policy provided coverage for hazards that occur for a period of one year. Prime Time claimed that its loss was the result of a covered hazard that occurred during the AXIS insurance period. Prime Time claimed that AXIS had breached the contract by underpaying Prime Tim's claim due to the loss of the roof due to the hailstorm.

AXIS successfully moved for a summary judgment. The Court granted AXIS a summary judgment.

ANALYSIS

Prime Time claims that the trial court erred in issuing a summary judgment on its claim for breach of contract. An insurance is an agreement that establishes the respective rights and obligations that an insurance company and its insured have agreed. An insured cannot recover under an insurance unless the facts have been invoked and proved that damages are covered by his insurance.

Texas Doctrine of Concurrent Causes

AXIS requested a summary assessment according to the doctrine of concurrent causes. According to this doctrine, where covered and uncovered hazards combine to create a loss, the insured has the right to recover only the part of the damage caused solely by the covered risk. The doctrine of simultaneous causes is a rule that embodies the basic principle that insured persons do not have the right to recover under their insurance policies unless they show that their damage is covered by the insurance.

When an insurance company shows that an uncovered risk may have caused the insured's loss, the burden is shifted to the insured to provide evidence that enables the assessor to separate covered losses from uncovered losses. The failure to segregate covered and uncovered dangers is fatal to recovery.

AXIS invoked the doctrine of concomitant causes in its proposal for a summary assessment by presenting the evidence that Prime Time had problems with the roof for several years before the 2014 hailstorm. competent summary assessment that an uncovered source may also have caused the damage and thereby impose on the insured burden to establish evidence that the jury can separate covered losses from non-

Court of Justice

After the court granted AXIS: s request for a summary judgment, Prime Time submitted a request for reconsideration in which it requested that the court consider new evidence in the form of a depositary transcript by AXIS's representative. Prime Time claimed that the deposit raised factual questions about its claim for breach of contract and its extra contractual claims. Prime Time specifically claimed that AXIS's representative had acknowledged that AXIS had not paid $ 45,735.81 in recoverable depreciation after Prime Time had replaced the ceiling. The trial court then entered into a decision to accept Prime Tim's new evidence as part of the summary evidence in the case. However, the trial court denied Prime Time & # 39 ;s request for reconsideration.

The appeal

Prime Time does not claim on appeal that it has evidence that divides its alleged losses between covered and uncovered hazards. Prime Time essentially claims that AXIS has either waived or refrained from invoking the doctrine of simultaneous causes because it characterized part of the Prime Time claim as undisputed in the 2015 payment deed. Courts have repeatedly refused to apply the doctrine of estoppel and exemptions in order to “change, rewrite and enlarge the risks covered by an insurance policy.

However, it is axiomatic that the contractual coverage of an insurance policy cannot be extended by an exemption or estoppel on the part of the insurer. AXIS 'payment of part of the Prime Time claim for hail damage, as well as AXIS' characterization of part of the Prime Time claim as "undisputed", cannot extend the coverage as originally the insurance policy. AXIS was therefore not excluded from invoking the theory of simultaneous causes. It is inappropriate for an appellate court to otherwise allow Prime Time to extend the coverage provided by the policy by waiving or stopping AXIS.

Prime Tim's claim for breach of contract is governed by the terms of the insurance. not AXIS measures to adjust a claim made under the policy. Therefore, AXIS correctly invoked the doctrine of simultaneous causes in its draft summary judgment.

An insured person cannot claim insurance benefits as damages for an insurer's statutory breach of the Settlement Rules on Fair Damage if the insurance does not give the insured the right to receive these benefits. An insured cannot recover any damages based on the insurer's statutory breach if the insured had no right to receive benefits under the insurance and was not injured independently of the right to benefits.

The Board of Appeal concluded that the insurer's payment of a claim. does not excuse the insured from segregating covered losses from uncovered losses in a subsequent breach of contractual measures on the insurance policy and confirmed the summary judgment of the Court of Justice in favor of Axis. the insurer, AXIS, from paying for damages not covered by the insurance because the insured would not, and probably could not, remove the wear and tear problems with the roof that caused them to claim a new roof under a warranty one month before the hailstorm. What neither the parties nor the court dealt with was the fact that the insured, Prime Time, made a claim knowing that the roof was a total loss before the hailstorm, and fraudulently sued for both damages which it should have known it was not entitled to receive. plus exemplary damage. A report should have been made to the Texas Department of Insurance for an investigation into potential insurance fraud.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims handling, fraud and insurance fraud and almost equally for insurance companies. policyholder. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.

For the past 52 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become insured.

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