Daniel Lund III | Phelps Dunbar
When the judge’s opinion starts out that way, you know one side in the case is about to take it on the chin.
A contractor’s builder’s risk insurer with a policy covering a warehouse renovation project in Beaumont, Texas, was asked to cover damages caused to the building by a thunderstorm which occurred while building was under renovation. The thunderstorm caused “‘a portion of the Warehouse’s roof being worked on [to] peel[] back’ and allow water to flow into the warehouse, flooding the floor and mezzanine office space of the existing warehouse.”
The day after the storm, the contractor submitted a claim to the builder’s risk insurance to address the damage to the warehouse’s roof and interior. The insurer pushed back:
“[The policy]… coverage does not include [the] existing building. It was confirmed that the intent of the policy was to insure replacing the roof. We understand a substantial amount of damage from rainwater affected the ‘existing building[‘s]’ interior surfaces. As discussed, this ensuing water damage to the interior is exclusive of our adjustment as it is not covered property.”
Builder’s risk policies differ from many other types of business insurance policies and come in all different flavors. As a result, coverage can significantly from provider to provider, and even policy to policy. Here, the builder’s risk policy excluded from “Covered Property” “[e]xisting buildings or structures to which an addition, alteration, improvement, or repair is being made… .”
Hence, when the contractor sought to back into coverage for the damaged interior of the existing building by asserting the applicability of an exception to a water damage exclusion (the exception covered water damage if the damage was caused by a “Covered Cause of Loss” to its roof or walls, through which the water entered), the court was unpersuaded: “When looking at the plain, ordinary language of the contract, the court has no alternative but to read the contract as excluding from the definition of ‘Covered Property’ the instant warehouse at the center of this dispute.”
The court also rejected the contractor’s argument that “during acquisition of the builder’s policy at issue, [the contractor] was ‘under the impression that the Policy covered all damage related to the reroofing process’…”: “[T]he court is bound by the plain language of the policy when determining the existence of coverage, and simply cannot consider a party’s expectations during insurance acquisition.”
Toccoa LTD v. N. Am. Roofing Servs., LLC, 2023 U.S. Dist. LEXIS 107887 (E.D. Tex. June 8, 2023) (the magistrate’s recommendation; summary judgment was subsequently granted by the district judge at 2023 U.S. Dist. LEXIS 107405 (E.D. Tex. June 21, 2023))
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