Date of Loss Makes a Difference

 

June 11, 2018

 

The United States Court of Appeals for the Fifth Circuit has determined that Lloyds of London insurers don't have to pay a hail damage claim because the Hilton brand property hotel operator was uncertain about when the hail damage occurred. The case is Certain Underwriters at Lloyd's of London v. Lowen Valley View, L.L.C., No. 17-10914, 2018 U.S. App. LEXIS 15337 (5th Cir. June 6, 2018).

 

Lowen Valley View L.L.C. and Panade II Ltd. (Lowen Valley), which own and operate a Hilton Garden Inn in Irving, Texas, were insured by Lloyds of London Insurers with a commercial property policy from June 2, 2012 to June 2, 2013. In December 2014, Lowen Valley notified Lloyds that the hotel had suffered hail damage. After inspection, an adjuster determined that the damage to the roof was so severe that the roof had be replaced, and estimated the total repair cost of $429,225. Lloyds then commissioned an engineering firm to prepare a report analyzing the claim. Two other reports followed. There were multiple hailstorms in the years preceding the claim, only one of which fell within the policy period. The initial report stated that the most recent hailstorm that occurred with hailstones large enough to cause the damage had occurred on June 13, 2012 . . . A second report concurred with the initial report stating that the damage most likely occurred on June 13, 2012. However, there was no clear evidence that this storm was the sole cause of loss. Lloyds denied the claim and filed suit in the U.S. District Court in Dallas seeking a declaratory judgment that it was not obligated to provide coverage to Lowen Valley. A third report from the engineering firm said that it was unlikely that hail fell on that location only one time.

 

The U.S. District Court granted the summary judgment in favor of Lloyds because the evidence that was submitted revealed several hail storms that had struck the hotel in the several years preceding the claim that Lowen Valley filed. The district court held that Lloyds was entitled to the summary judgment because the evidence submitted was not reliable enough for a jury to determine which storm damaged the hotel, or if it was a combination of the three storms. The U.S. Court of Appeals affirmed the District Courts decision.

 

Editor's Note:

 

An insurer is liable only for losses covered by the insurance policy. When covered and excluded perils combine to cause an injury, the burden to produce evidence that provides the jury a reasonable basis on which to allocate the damage falls on the insured. In cases like the one at hand, where the insured fell short of meeting the burden, the insurer is entitled to summary judgment. Because the owner of the Hilton could not show that the hail damage had occurred during the policy period, the court determined that Lloyds, the insurer, should not be held liable for the damage that occurred to the hotel. Had the storm that most likely caused the damage occurred within the policy period, the court may have allowed this case to go to trial.

 

This is a clear example of the difference between claim-made and occurrence based policies. Had this been a claims-made policy, the loss could have been covered by the subsequent policy since the claim was made during the policy period. However, this is an occurrence policy, and in order for damages to be covered, the cause of loss must occur during the policy period.