Court Rules in Favor of Homeowner Faced with Conflicting Duties under Insurance Policy

Sometimes homeowners who have suffered damage to their home can be firmly placed between the horns of a dilemma when their insurance policy requires conflicting obligations.  Homeowners policies all require an insured to take reasonable steps to mitigate further damage after a peril has caused a loss.  Standard homeowner policies also require that the insurer be permitted to conduct a reasonable inspection of the property to assess liability and evaluate the extent of the damage.  When harsh weather causes damage to a home, delays by the insurance carrier in conducting an inspection can present a quandary for property owners trying to comply with these duties imposed by their homeowners policy.

Santacruz v. Allstate Texas Lloyds, a recent Texas federal court decision, addressed these competing obligations.  The court ruled in favor of the homeowners on a motion for summary judgment brought by the insurer against the policyholders’ common law bad faith claim.  The insured’s home was damaged by a wind and rain storm.  The wind tore tiles off the roof which allowed rain penetration that caused damage to the interior of the home.  The insurer immediately reported the damage to his insurance company.  The insurer informed the policyholder that an adjuster could not get out to inspect the property for a few days.

In the interim, the policyholder had a contractor inspect the property.  The contractor indicated that mitigation measures, such as covering the opening with a tarp would not be effective in preventing further damage.  Because weather reports indicate further storms were imminent, the insurer advised repairing the roof to prevent further damage.  The insured hired the contractor to perform the repairs per the recommendation.  When an insurance company adjuster showed up a few days later, the adjuster took a few photos of the repaired roof and left.  The insurance company then denied the policyholders’ claim, and the insured filed a lawsuit alleging a common law bad faith claim.

The insurer defended the denial by claiming that the insured failed to provide access to the roof prior to undertaking repairs.  The insured countered by indicating that his policy imposed a duty to prevent further damage.  The policy did not contain a provision that required the policyholder to allow the insurer reasonable time to conduct an inspection.  The insurer contended the repairs prevented the insurer from determining whether the loss was the result of a covered peril.  The policy expressly excluded losses caused by rain unless the damage resulted from openings caused by wind.  The trial court granted summary judgment for the insurer.

The appellate court reversed the grant of summary judgment based on a finding that the insurer failed to perform its duty under the policy to conduct a reasonable investigation.  While the adjuster did take pictures, the court noted that the insurer failed to do any of the following:

  • Talk to neighbors to determine if they suffered wind damage
  • Check weather reports for the date in question
  • Discuss the condition of the roof with the homeowner’s contractor

The appellate court found that a jury could conclude that the failure to do more than snap a few pictures of the repaired roof constituted a bad faith failure to conduct a reasonable investigation.  This case demonstrates the types of strategies insurance companies use to avoid paying legitimate claims.  If the homeowner had covered the roof with plastic or a tarp, the home might have well suffered more extensive damage.  It is a safe bet the insurance company still would have denied the claim based on the insured’s failure to take adequate measures to mitigate further damage.  

My law firm represents policyholders in claims disputes in Miami and throughout Florida.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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