A western New York man may sue for fraud for allegedly beingtold by a claims representative that his homeowner’s insurancepolicy would not cover property damage that was caused by the 5- to7-foot snowfall in a November 2013 storm, a federal judge ruled.

Nicholas Kraatz did not file a claim based on the conversationhe said he had with the USAA Casualty Insurance Co. claimsrepresentative 12 days after the record-setting storm in theBuffalo area. Kraatz maintained that the representative told himthat because of his high deductible — $8,040 — it was probably notin his best interests to file a claim.

When Kraatz finally did file a claim in August 2015 at theurging of a friend in the insurance business, USAA denied it, claiming it was not filedpromptly, court papers showed.

Kraatz, described in his complaint as a disabled Iraq Warveteran, said he ultimately was forced to take out a $171,000second mortgage on his home to pay for damage caused by thestorm.

‘No record’ of the call

In its papers, the insurer argued that it had no record of aconversation between Kraatz and a claims representative on Dec. 1,2013, as Kraatz insists took place, and that the contact with himin August 2015 was the first for which it had documentation.

Although Kraatz was not able to produce a transcript of his Dec.1, 2013, conversation with the USAA claims representative, he wasable to show that he was dissuaded from filing a claim for propertydamage during a 14-minute call that day with the requisitespecificity to defeat USAA's motion to dismiss the fraud charge,ruled Chief Judge Frank Geraci of the U.S. District Court for theWestern District of New York in Kraatz v. USAA CasualtyInsurance Co.

Because Kraatz’s policy covered the same kind of structural “collapse” caused by the weight of“snow, ice or sleet” that Kraatz contends occurred to thechimney, roof and garage of his Alden home under the accumulatedweight of the huge 2013 snowfall, Geraci said a court could findthat USAA acted with “falsity” in its dealings with theplaintiff.

“Given that plaintiff’s alleged description of the cause ofdamage is nearly identical to the description of damage which thepolicy covers, plaintiff’s allegation that the claimsrepresentative knew he was making a false statement when he said,on the spot, that that damage ‘would not be covered’ is persuasiveand at least compelling as any competing inference,” Geraci wroteon March 6.

In addition to the structural damage caused by the snow and ice,Kraatz said his house became flooded when the precipitation meltedafter the weather warmed to 60 degrees following the storm. Theflooding, in turn, triggered electrical fires in the house, hiscomplaint said.

Consequential damages could beavailable

Geraci also said that as his case moves forward, Kraatz may seek as“consequential damages” for fraud the cost of borrowing money toreconstruct his home. The judge said that, contrary to USAA’sargument, an insurer should expect to be held liable for the costof money that has to be borrowed if it is found to havefraudulently refused coverage to a policyholder.

Among the Kraatz claims that Geraci did dismiss on USAA’s motionwere for negligent misrepresentation and punitive damages.

USAA disputes the plaintiff’s allegations, according to RogerWildermuth, a spokesman for the insurer.

Joel Stashenko is a reported for the New York Law Journal, asister publication. He can be reached at [email protected]. On Twitter:@JoelStashenko