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The Insureds’ Burden: Determining Date of Loss in Texas

Texas Law360
May 1, 2018

By Todd M. Tippett and Walter W. Cardwell IV
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In recent years, Texas experienced an insurance litigation barrage. Most carriers that write property insurance policies in Texas, particularly residential policies, have seen a dramatic increase in litigated claims. Last year, the Texas Department of Insurance reported an unprecedented 1,400 percent increase in lawsuits arising from wind and hailstorm insurance claims.[1]

Many of these lawsuits have a common genesis; that is the increasingly common practice of canvassers, typically contractors or public adjusters, walking door-to-door in neighborhoods long after a hail or wind event occurs. Property owners are solicited to file insurance claims with promises of a “free roof.” Often, these claims are filed many months or even years after the purported hail or wind event. This business model often creates problems in determining what damage, if any, actually resulted from a recent hail or wind event versus damage that may have been preexisting from previous storms.

The fundamental question in these matters becomes: Which party bears the burden of establishing when the hail or wind damage being reported in a claim actually occurred?

Under well-established Texas law, as in most states, the insured bears the burden to support its claim and show that the alleged damage occurred on the reported date of loss.[2] In Hamilton Properties v. The American Insurance Co. et al., a claim was presented involving late-reported hail damage to an old and deteriorated roof.[3] The insurance company moved for summary judgment, arguing the insured had failed to satisfy its burden to segregate damage attributable to a covered peril, hail damage occurring on the reported date of loss, from damage attributable to a noncovered peril, such as old hail damage or roof deterioration due to age. The court granted summary judgment in favor of the insurance company based on the insured’s failure to satisfy its burden to establish when the reported damage occurred. The court also recognized that insurers should have an opportunity to inspect in a timely fashion and confirm that the alleged damage occurred on the reported date of loss and that the damage is, in fact, the result of a covered peril and not the result of deterioration or some other noncovered peril.

The Hamilton decision was bolstered when, in the more recent Seim case, insured homeowners brought suit against their insurance company alleging causes of action arising from the carrier’s denial of their storm claim.[4] During the litigation, the insureds filed numerous petitions constantly amending and altering the date, and in some cases dates, of loss.

The carrier moved for summary judgment on both procedural and substantive grounds, arguing that the insureds’ claims were time-barred as the final amended petition was served outside the statute of limitations. The insurance company also argued that the insureds had no evidence supporting their claimed dates of loss, specifically arguing that the insureds could not prove that they sustained a loss that fell within the coverage afforded by the policy.[5]

The trial court granted summary judgment in favor of the carrier on both procedural and substantive grounds. On appeal, the appellate court ruled that the insured had failed to meet its burden to demonstrate the loss occurred during the policy period.[6]

These authorities clearly establish that under Texas law it is the insured’s burden to establish that the alleged hail or wind damage occurred on the reported date of loss. The insurer’s burden under Texas law is the same as it is with respect to any other claim issue — to conduct a timely and reasonable investigation. Such investigation may confirm that the damage occurred on the reported date of loss, in which case there is no dispute as to the issue. Or, such investigation may reveal damage from multiple causes or numerous storm dates, some or all of which may not fall within the coverage period or the terms of the policy. And in some cases, it may be virtually impossible to determine when the damage occurred.

In situations where damage is the result of multiple causes, Texas courts follow the doctrine of concurrent causation. This doctrine provides that when “covered and non-covered perils combine to create a loss, the insured is entitled to recover only that portion of the damage caused solely by the covered peril(s).” [7] Under Texas law, it is the insured’s burden to segregate covered damage from the noncovered damage, and the insured is entitled to recover for damage that it can establish arises solely from a covered peril.[8]

That being the case, there are a variety of tools that both an insured (in meeting its burden under the law) and an insurer (in conducting its reasonable investigation) may use in determining the date on which hail or wind damage occurred. These include:

Weather Reports

The first and most obvious place to look to determine date(s) of loss are wind and hail reports for the areas affected. These reports may aid in identifying whether there is only one or multiple potential dates of loss. However, it is not a best practice to rely solely and entirely on these summary weather reports in making date of loss determinations, as the methods for collecting the data can vary. Nevertheless, they do serve as a good starting place. Often, a more thorough evaluation of weather data by a forensic meteorologist may be necessary.

Historical Photos

Historical photos of the property can often be helpful to an investigation into when damage occurred. Satellite photos, Google Earth images, photos taken during the adjustment of prior claims, photos taken during the underwriting of the property, public adjuster photos, contractor photos and “showroom” style photos of a property before or after a property sale can all be helpful. The existence of photos of the property from different periods of time may enhance the parties’ understanding of both the scope and timing of claimed damage.

Experts

It is hard to beat hiring an expert, particularly one who has worked in the affected area recently. The downside can be expense. Meteorologists, building consultants and engineers can be good sources for a reliable date of loss analysis. Qualified experts with experience in this area have various techniques to evaluate when observed damage to a building may have occurred.

Local Knowledge

As the old fishing saying goes, nothing beats local knowledge. Employees, neighbors, former property owners and tenants can often provide information as to when storm events actually occurred at the location and the condition of the insured property (or their own property in the case of neighbors) at a particular date in time. However, it is important to remember that just because local knowledge confirms that a storm event may have recently occurred, that fact alone does not always concretely establish that any damage to the property at issue occurred during that specific event.

Dating HVAC Units and Permanently Installed Equipment

Another subtler method of establishing dates of loss can be done via an analysis of heating venting and air conditioning units, or other similar permanently installed equipment, found at a property. Since it is often the case that these units are not installed at the same time, one unit may be damaged more (or less) than another unit immediately adjacent to it. If you can collect the dates each of the units were installed, the time period that certain damage occurred can be bracketed, at least to some degree.

There is no disputing that an insurance policy should respond to the claim of a building owner who satisfies its burden that it has suffered covered hail or wind damage occurring on a date of loss within the period of coverage provided by the insurance policy. Conversely, insurance companies should not be asked to respond to damage that actually occurred long before the policy was in place. Nor should they be asked to respond to damage caused merely by age or gradual deterioration. Texas law is clear that the burden to establish that damage occurred during the policy period and to allocate between covered and noncovered causes is on the insured. That said, insurers should conduct a reasonable investigation of these issues and, when there exists a reasonable question as to the date or cause of reported damage, request that the insured provide information in support of its position. It is not enough for the door-to-door canvasser to simply list the most recent storm on the claim submission form and allege that all damages to the property are the result of that storm. Texas law is clear that the property owner must establish that the reported damage is both covered by the insurance policy and occurred on the reported date of loss.

Todd M. Tippett is a partner at Zelle LLP in the firm’s Dallas office. Walter W. Cardwell IV was an associate with Zelle, also in the firm’s Dallas office.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Texas Department of Insurance Final Presentation to the Texas Legislature, February 1, 2017 (located at http://www.tdi.texas.gov/reports/documents/weatherrelatedpropertyclaims.pdf)

[2] See e.g. Hamilton Properties v. Am. Ins. Co., No. 3:12-CV-5046-B, 2014 WL 3055801 (N.D. Tex. July 7, 2014), aff'd, 643 F. App'x 437 (5th Cir. 2016); see also Wallis v. United Services Auto. Ass’n, 2 S.W.3d 300, 303 (Tex. App.—San Antonio 1999) 

[3] Hamilton Props. v. Am. Ins. Co., No. 3:12-CV-5046-B, 2014 WL 3055801 (N.D. Tex. July 7, 2014).

[4] Seim v. Allstate Texas Lloyds, No. 02-16-00050-CV, 2017 WL 1738028 (Tex. App. May 4, 2017), reconsideration en banc denied (May 4, 2017)

[5] Seim v. Allstate Texas Lloyds, No. 02-16-00050-CV, 2017 WL 1738028, at *2 (Tex. App. May 4, 2017), reconsideration en banc denied (May 4, 2017).

[6] Id.

[7] Wallis v. United Services Auto. Ass’n, 2 S.W.3d 330, 303 (Tex. App.—San Antonio 1999, pet. denied); see also Travelers Indemnity Co. v. McKillip, 469 S.W.2d 160, 162 (Tex.1971).

[8] Wallis, 2 S.W.3d at 303.

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