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Last Post 05/19/2014 11:00 AM by  Leland
Commercial Claim Pre-Existing Damage
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05/15/2014 1:08 PM

    Commercial owner claims that the insurer cannot claim pre-existing damage if they did not pre-inspect the property for insure-ability.  The property was an abandoned school house that is almost 100 years old.  It suffered wind damage to the roof.  There was water intrusion through all of the parapets as the caps were blown off.  The owner had a roof put on a complete TPO roof that was not permitted and not made code compliant.  The interior leaks do show that there was leaks consistent throughout the whole roof surface.  

    I am being asked to consider the whole roof replacement as being good enough although I know that there still is water under the temporary roof and there is no insulation on the roof.  

    Let me know your thoughts.

    Thank you,



    Jud G.
    Senior Member
    Senior Member

    05/16/2014 5:10 PM
    I'm working with the information you provided and making many assumptions. Others that post here may create a fuss over insufficient info.

    Based on your description of the risk, I'm guessing this is a carrier that typically insures less than desirable structures. Carriers who do usually issue standard ISO CP forms. Pull the policy; there should be a clause that specifices nonpayment of any loss that preexisted policy inception.

    Inform the owner that the contract that they purchased prevents them from claiming pre-existing damage. His point about a lack of an UW inspection and/or identification of pre-existing damage prior to policy inception is rendered irrelevant with a clause that's as common as this one.

    The policy may also identify lack of payment/coverage for defective installation and any other repair related to defective materials, etc.

    It appears that the policyholder is well aware of the pre-existing damage issue, but you may wish to seek permission to assign expert assistance to confirm and document the presence of pre-existing damage, installation defects, code violations, etc. It also appears that the tarp is preventing you from conducting a proper inspection. If this is the case, you may need to remove the tarp or have his crew come out to remove it for you. Consult the carrier to see about expensing this labor item with a specific reservation of rights provided as the cover.

    Good luck.

    05/17/2014 6:56 AM

    As Jud stated in his, this post is based on the limited information that you have provided. 

    Typically, there is a date of loss (DOL) associated with a claim assignment. You are there to determine the damages resulting from an occurrence on the DOL. If certain damages pre-date the DOL, they should be observed and reported, but you should ask the carrier if they wish an estimate of those damages. Some carriers are quite benevolent and will ask an adjuster include them in their estimates, while others will not. Benevolence should not be confused with obligation in these cases. That said, there could be code upgrade allowances and a host of other factors that could benefit the insured in the situation that you described. If the roof is not properly installed and was damaged, it could go either way, but you need to make sure that whichever way you lean is supported by policy language. If it's a standard ISO or AAIS policy, the vast majority of those policies have specific exclusions for "mechanical defect", "inherent vice", "improper installation" and several other terms that may apply to your loss (with limited info, there is only so much we can help with here). If it is a manuscript policy, you never know what might be in there and you have to read it. If you do find something that tells you to lean one way or the other, keep reading; rest assured that you will find something that contradicts it :). 

    If there are "pre-existing" damages, as you put it, you should make mention of them in your report and have the insured file a claim with a proper date of loss for those damages, as they are unrelated to the loss that was reported and most policies have a "per occurrence" deductible. If the insured files a claim for damages that pre-date policy inception with a corresponding DOL, well, the answer there is self explanatory. The only policies that I have ever seen that are retroactive are PL policies, and that would not apply here. 

    This really all comes down to reading the policy and it's endorsements. As I tell our field guys,our examiners and myself on a very regular basis: "If you are going to say no, or you think you should say no, you had better be able to justify it with policy language.". Every single "no" that we have ever presented a carrier has been backed up with policy language, so that when the insured (or their contractor or their counsel or their brother in law's cousin's best friend who knew someone who worked at a Baskin Robbins next door to an insurance company a few years ago) inevitably asks "Why did you say no?", they can be given an answer supported by the policy. If there is a gray area that is very open to interpretation, you don't say "no". 

    In this specific case, without getting into the various aforementioned potential exclusions, the DOL is the biggest factor. Right at the top of every policy is an inception date (this is an important part of the policy). If the loss pre-dates the inception date, and the policy is "new business", meaning that the policy is new and not simply a renewed policy, the loss becomes the problem of whatever carrier (if any) was insuring the risk at the DOL.

    05/18/2014 8:31 AM

    Again, as others have stated, more information needed.

    First, I would want to separate reported information from confirmed facts.

    The way I read your post, it appears that the Insured had repaired the roof by doing a TPO layover? Are you trying to see if the repair was appropriate and reconciling the remaining evidence?

    Or, was the wind damage caused by a roof that failed more easily because it was not code complaint (or installed over damaged substrate?) The parapet cap fastening was inadequate? What was the wind speed in this event, what did surrounding properties experience?

    Sounds like more investigation is warranted and subrogation should be addressed if payment is made.

    Just food for thought.

    Senior Member
    Senior Member

    05/19/2014 11:00 AM
    Mr. Williams tells us the roof in his claim was not installed to code and was done without permits.

    A roof that does not comply with code requirements or was installed without permits does not necessarily have a construction defect that would cause or contribute to the loss.

    For example the government might require that "cool roofs" be installed. with a rating for reflecting heat of the sun. The insured installs a black tar roof instead of the white EPDM he should have. That might be a roof that fails to meet code and was done without permits, but when a hurricane wind tears it off it could still be a covered loss. In that example the lack of a permit and not meeting code didn't cause or contribute to the loss.

    It is also possible to have a really old house that was built before the city was founded. Such a house might have been built without permits and won't meet today's code. Those two facts by themselves are not a reason for denying a claim. We need to know what the defect is.

    Mr. Williams- please tell us if there was a construction defect that contributed to the loss- was the roof improperly installed? How? And did the improper installation contribute to the loss?
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