Filed Under:Claims, Catastrophe & Restoration

Avoid getting blown away by wind damage claims

Coverage Q&A

Specific circumstances will determine the extent of coverage after a loss caused by wind, water or mold. Here, severe winds in Lancaster County, Penn., earlier this year ripped the roof from this horse stable as well as several other agricultural buildings. (AP Photo/Kirk Neidermyer)
Specific circumstances will determine the extent of coverage after a loss caused by wind, water or mold. Here, severe winds in Lancaster County, Penn., earlier this year ripped the roof from this horse stable as well as several other agricultural buildings. (AP Photo/Kirk Neidermyer)

Analysis brought to you by the experts at FC&S Online, the unquestioned authority on insurance coverage interpretation and analysis for the P&C industry. To find out more — or to have YOUR coverage question answered — visit the National Underwriter website, or contact the editors via Twitter: @FCSbulletins.

Question: I have a homeowners claim in Maryland with an HO 03 10 00 policy.

The risk sustained wind damage to the roof, fascia, soffits, and gutters on April 2, 2016, and a claim was filed on April 17th. Prior to my involvement, the insured's contractor met the independent adjuster for the inspection. The adjuster allowed for replacement of the back slope of the roof and some damaged soffits, fascia, and gutters.

The contractor and homeowner thought the entire roof should have been covered due to damage. The contractor advised me that he pointed out wind damage to the front slope of the structure and the adjuster told him that wind could not simultaneously damage both front and back slopes of a structure.

Related: 10 windiest large U.S. cities

My initial inspection showed wind damage on the front slope and a failure of a brittle test that would show whether a roof was reparable.

After submitting my supplemental estimate the independent adjuster contacted me to schedule a re-inspection. He stated that he had photos of the front slope and that it did not have damage at the time of the initial inspection. He also agreed that the roof was not reparable.

At the re-inspection on September 20, 2016, I showed the adjuster additional damage on the front slope. He stated that it was "prejudiced" against the insurance company because it had been too long since the initial inspection and that the policyholder would have to file an additional claim. I asked him for the photos showing the shingles in question had not been damaged. He said it was ridiculous for me to ask that question and that I should show him photos proving when all of the damage occurred on the roof.

My first question regarding this claim: If he has no photographic evidence from his first inspection showing whether or not the damage had occurred, wouldn't that kill any argument he has that the damage occurred after the initial inspection? Isn't it the policyholder's burden to prove a loss occurred, but the insurer's burden to show why the loss is not covered under the policy?

Related: 3 ways to validate claims through weather data

There was also damage to both the metal soffits and the wooden soffits to which the metal soffits had been attached. I advised him that both the metal and wooden soffits should be covered. He stated that only one or the other should be covered because the wood soffits are an "abandoned surface." There is no mention of abandoned surfaces in the policy. It is my understanding that it was a term that someone made up and has no legal or policy basis whatsoever.

My second question: Is there any basis for an insurer to deny payment due to the concept of an "abandoned surface”?

— Maryland Subscriber

Answer: Wind gusts can easily occur in both directions on the same day, even within the same storm. The National Weather Service can confirm wind speeds and direction if necessary. You are correct in that the carrier must prove its reason for denial, so it is on the carrier to prove that there was no damage to the front, especially since the contractor pointed it out.

Related: Here's why some water damage claims aren't covered

We found no reference to "abandoned surface" in an internet or Westlaw search other than that which applies to mining and underground or surface mines. This has no use as far as roof is concerned, so the adjuster needs to explain the term and show where it is being used in the industry.

Covering damage from repeated wind-driven rain

Question: We have an HO 00 03 05 11 with endorsement HO 32 32 06 12, which states that constant or repeated discharge, seepage, or leakage of water is excluded. This paragraph replaces a paragraph that pertained to plumbing. Repeated wind-driven rain caused hidden damage, namely rot, and water damage to insulation that could not be seen. Would wind driven rain be excluded if it occurred over an 8-year period but the insured could not see the damage? Part of the original causation may have been due to improper chimney flashing. 

— Texas Subscriber

Answer: While there is an exception for mold hidden behind walls, that exception applies only when the water is caused by a plumbing, heating, air conditioning system, sprinkler system, or household appliance, or a storm drain or water, steam/sewer pipes off the premises. The endorsement removes that and in its place excludes water caused by repeated seepage or leakage. Wind-driven rain really is not repeated leakage or seepage, it is forced in by the wind. Wind-driven rain is excluded under the water exclusion. There is no coverage for this loss.

Related: Why it is important to properly investigate mold claims

How to calculate percentage deductibles

Question: Our insured has commercial property coverage for three buildings at one location in Florida with wind deductible of 5 percent per an ISO Wind or Hail Percentage Deductible endorsement, CP 03 21 06 95. If a wind or hail event damages only one of the buildings at this location, is the 5 percent deductible calculated on the insured value of that damaged building or 5 percent of the insured value of all three buildings? For example, building No. 1 is insured for $100,000, building No. 2 is insured for $200,000, and building No. 3 is insured for $300,000. If only building No. 1 suffers wind or hail damage, is the deductible $5,000 (5% of $100,000) or $30,000 (5% of $600,000)?

— Florida Subscriber

Answer: Upon reading the ISO CP 03 21 06 95, it is our opinion that the 5 percent deductible would be calculated only on the building that suffered damage. Section B.1. states that to calculate the deductible for specific insurance, other than builders risk, on property not subject to value reporting forms, the deductible is applied to the limit of insurance applicable to the property that has sustained loss or damage. Section A states that a separate deductible is calculated for each building if two or more buildings sustain loss or damage. So, the intent is for each building to have a separate deductible, including instances when only one building out of three sustains damage.

Related: Determining apartment building risk

Mold that is consider secondary damage to an original loss from wind or water may not be covered. (Photo: iStock)

Mold that is deemed secondary damage to an original loss from wind or water may not be covered. (Photo: iStock)

Mold, water damage and fungi exclusions

Question: Our client is an HVAC contractor who performed maintenance at the home of their customer. Part of the maintenance was the "blowing out of the lines," which apparently caused a condensation pipe leading away from the A/C system to become disconnected. Over the course of the next 2 to 3 weeks, and during the time that the homeowner was on an extended trip, the condensation water leaked onto a plaster ceiling in a bedroom, allowing water to saturate the ceiling and insulation. Upon his return, the homeowner found the ceiling bowed from the weight of water, and mold had ensued. The ceiling paint was lead-based so its removal required special handling. That accelerated the repair costs, but that was part of the damage and basically immaterial to the claim. The total cost of repair was in the $5,000 range and not large enough for the customer to incur legal costs to litigate the denial.

Related: 4 options to consider when adjusting HVAC hail claims

The insurer investigated and subsequently denied the claim, citing the CG 21 67, fungi or bacteria exclusion. The statement to me during the investigation was that "everything that was removed from the room contained mold and mildew", which we do not dispute, but the property was also wet. The mold did not grow on other areas that were not originally affected by the water and had to have still been wet at the time of the work.

Our agency appealed the declination to both regional and national levels of management of the insurer without success. As agents, we are struggling to understand how the property damaged by the water is not a covered claim. Wasn't the original intent of this exclusion to exclude mold/mildew and its remediation?

— North Carolina Subscriber

Answer: Reading the facts of the loss and the wording of CG 21 67, we agree with you. The water damage should be covered; the mold damage is not covered. CG 21 67 excludes coverage for BI and PD that would not have occurred but for the existence of fungi or mold and also excludes cleanup costs. However, the BI and PD have to be caused by fungi or bacteria. It seems to us that the damage and even the mold were caused by the water. The insurer is making the case that the mold caused the water damage and not vice-versa. The insurer and its coverage counsel seem intent on denying coverage, but we are of the opinion that they are wrong in their interpretation of CG 21 67.

Mold damage following water heater breakdown

This question involves form CP 10 30 04 02. A water heater burst suddenly, spilled a large amount of water, and was repaired shortly after the damage. But some of the water seeped under the floor and caused a mold problem that was not discovered until months later. The adjuster is denying the mold claim because it constituted water damage that developed over more than the 14 days cited in the form's exclusions. We think the 14-day exclusion does not apply to the additional coverage for fungus because it requires only the water damage to be sudden and accidental. What do you think?

— Kentucky Subscriber

Answer: We agree that the 14-day exclusion would not apply because that exclusion stipulates that there must be repeated seepage, which is not the situation you describe. The additional coverage for fungus would apply as water damage is one of the specified perils, which are covered by the additional coverage. "Water damage" is defined as "accidental leakage or discharge of water as the direct result of breaking apart of an appliance." However, other than this additional coverage, there is no other coverage for the mold damage.

See also: 

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