This may come as a surprise to some, but Texans take note: if there is a hailstorm in your area, it is apparently your duty to “promptly” climb up on your roof – or hire someone to do it for you – to check for hail damage. Not physically fit to do so? Can’t afford to hire someone to do so? Well, too bad. Because if you don’t learn of that hail damage until too far down the line and you therefore don’t “promptly” make a claim under your applicable insurance policy, then you don’t have coverage. At least that’s what the U.S. District Court for the Northern District of Texas held in the decision issued this week in Certain Underwriters at Lloyd’s of London v. Lowen Valley View, LLC, Case No. 16-CV-0465-B, Memorandum Opinion & Order (N.D. Tex. July 21, 2017) (read it here).
Quick summary: Unbeknownst to the Insured, a hail storm occurred in June 2012; Insured realizes hail damage on hotel’s roof in November 2014, during the course of a property evaluation and is informed by both Insured’s roof inspector and Insurer’s adjuster that roof is significantly damaged as a result of the June 2012 hail storm.
Moral of the story: 30 months between a hail storm and an insured’s submission of a claim is too long to secure the coverage paid for under an occurrence policy. It does not matter that: (1) the Insured is unaware that a hail storm occurred; (2) the hail damage caused no interior leaks to the hotel which would have put the Insured on notice of the hail damage; or (3) the Insured does not conduct routine roof inspections because it can only be accessed by a crane.
In Lowen Valley View, the Insureds owned the Hilton Garden Inn in Irving, Texas and, in November 2014, evaluated the property for potential capital improvement projects. During the course of that evaluation, the Insureds noticed that the hotel’s roof shingles looked bad. So they hired a roofing contractor, who inspected the property and found evidence of “significant hail damage.” The most recent hailstorm that could have caused this damage was in June 2012, so the Insureds immediately made a claim under their property policy that was in place in June 2012. Lloyd’s then sent its chosen adjuster to inspect the property and that report concluded that the hotel suffered significant hail damage that would require that the roof be replaced rather than repaired.
The decision doesn’t indicate how much the replacement of the roof was estimated to be, but rather than pay to replace the hotel’s roof, here is what Lloyd’s did instead: (1) issued a reservation of rights letter; (2) hired outside counsel to file a lawsuit against the Insured, seeking a declaratory judgment that there is no coverage under the Policy because of the Insured’s failure to “promptly” notify Lloyd’s of the damage; (3) hired yet another engineering firm to examine when the hail damage occurred; (4) required the Insured to provide testimony in an Examination Under Oath; and then (5) spent the next 15 months conducting expert discovery, engaging in mediation, and motions briefing. And Lloyd’s won. So perhaps it was all worth it.