Lawyers handling insurance claims run into situations where damages that have occurred to property have to be segregated. This happens most often in the context of hail and wind damage to property. The U.S. District Court Northern District of Texas, Dallas Division, issued an opinion that does a good job of discussing how the courts are to look at these situations. The case is styled, Generation Trade, Inc. v. Ohio Security Insurance Company.
In this case, Generation bought the subject property in 2014, and had it covered by Ohio ever since. In July 2017, Simon, the owner of the property, observed hail damage and promptly reported the damage to Ohio. Ohio inspected the roof and acknowledged there was hail damage but after reviewing hail events over a period of time was unable to determine when the loss occurred.
This property was originally built in 1981 and was covered with a 24 gauge metal roof except for a small portion of the roof that was installed in May of 2016, that had 26 gauge roofing.
Ohio’s expert, Yang, concluded the damage to the roof occurred over the years since 1981, except for the damage to the 26 gauge roofing, which Ohio accepted responsibility for repairing. This lawsuit resulted for the other damaged portions of the roof.
Under Texas law, when covered and excluded perils combine to cause an injury, the insured must present some evidence affording the jury a reasonable basis on which to allocate the damage. The insured can satisfy this “some evidence” standard by providing circumstantial evidence. The insured does not have to present overwhelming evidence that would allow a jury to flawlessly segregate covered damage from non-covered damage to satisfy this some evidence standard. It is clear that the burden of segregating the damage attributable solely to the covered event is a coverage issue for which the insured carries the burden of proof. Failure to segregate covered and non-covered perils is fatal to recovery. This rule of concurrent causation is not an affirmative defense or an avoidance issue, rather it is a rule embodying the basic principle that insureds are not entitled to recover under their insurance policies unless they prove their damage is covered by the policy.
Ohio’s reason for refusing to pay the whole damage is that some of the damage could have occurred prior to the policy inception in 2014. Much discussion is given to the competing expert reports in this case.
Because Ohio was able to produce some evidence that a non-covered hail storm could have caused some of the loss, the burden is on Generation to present some evidence to allow a trier of fact to segregate covered losses from non-covered losses.
The Court found that Parker, Generation’s expert, was unable to testify with any degree of engineering certainty as to which hail dents resulted from a 2016 hailstorm as opposed to a hail storm not covered by the insurance policy. This was fatal to Generation’s claim and this Court granted summary judgement in favor of Ohio.