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Coverage for Interior Damage Caused by Hail

Author: VU Faculty
 
Question“A large hailstorm and heavy rain resulted in substantial interior damage to a commercial building. There was no wind or hail damage to the metal roof but it is the opinion of several roofers and contractors that hail stones clogged up the drains causing the water to back up into the interior of the building. Our question is whether we could find coverage for this type of situation under the Commercial ISO Special Cause of Loss form CP 10 30? Could this still be considered 'Hail damage'?”
 Answer?
An interesting situation. We ran this by the VU faculty and got the following mixed bag of responses.
 
 
Faculty Response  
Tough one. There is no direct coverage afforded in the form. In general,  coverage for interior water damage requires a breach in the building or structure. As the broadest policy form the burden to deny rest with the carrier. Present the claim in the best light and see what exclusion the carrier comes back with then prepare a rebuttal. I am afraid that without a breach of the building and being the cause of loss is water damage it will be an uphill battle to receive coverage.

Faculty Response 
Well in my 50 years in this business this is a new one. The way the CP 10 30 reads I don't think it meets the policy wording, thus no coverage. The CP 10 30 says [emphasis added]:
 
C. Limitations
The following limitations apply to all policy forms and endorsements, unless otherwise stated:
1. We will not pay for loss of or damage to property, as described and limited in this section. In addition, we will not pay for any loss that is a consequence of loss or damage as described and limited in this section.
 
c. The interior of any building or structure, or to personal property in the building or structure, caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or
(2) The loss or damage is caused by or results from thawing of snow, sleet or ice on the building or structure.
 
From the question it doesn't sound like there was any direct damage FIRST BY 'Hail'. The CP 10 30 also says [emphasis added]: 
 
When Special is shown in the Declarations, Covered Causes of Loss means direct physical loss...
 
But there is more. I then went to CP 10 10, the Basic Cause of Loss and it says [emphasis added]:
 
Words and phrases that appear in quotation marks have special meaning. Refer to Section E. Definitions.
 
A. Covered Causes Of Loss
When Basic is shown in the Declarations, Covered Causes of Loss means the following:
1. Fire.
 
4. Windstorm or Hail, but not including:
a. Frost or cold weather;
b. Ice (other than hail), snow or sleet, whether driven by wind or not;
c. Loss or damage to the interior of any building or structure, or the property inside the building or structure, caused by rain, snow, sand or dust, whether driven by wind or not, unless the building or structure first sustains wind or hail damage to its roof or walls through which the rain, snow, sand or dust enters; or
 
Note in the 'lesser' coverage Basic form it specifically says 'hail' damage. The form does not define the word 'damage', but a basic dictionary states:
 
1. noun 
physical harm caused to something in such a way as to impair its value, usefulness, or normal function.
 
2. verb
inflict physical harm on (something) so as to impair its value, usefulness, or normal function.
 
To make a long answer shorter I think the Basic form would cover this loss, thus courts will hold the superior 'Special' form should do likewise. 
 
Faculty Response
I don't think you can. But, regardless, I would present the argument to the insurer that the efficient proximate cause of the loss was the hail that blocked the drains.
 
Faculty Response
How about this as a possibility:
 
CP 10 30 06 07
C.  Limitations
1. We will not pay for loss of or damage to property, as described and limited in this section. In addition, we will not pay for any loss that is a consequence of loss or damage as described and limited in this section.
c. The interior of any building or structure, or to personal property in the building or structure, caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or
(2) The loss or damage is caused by or results from thawing of snow, sleet or ice on the building or structure.
And what if vandals purposely clogged the drains, say on Halloween, and the rain causes the same type of loss as done by the melting hail?  Since this provision is not within the anti-concurrent section, I think the insured could make a valid claim for VMM. 

Faculty Response
I think the answer is yes. If the hail caused the damage in an unbroken chain to events, then it is the proximate cause of loss. With a named peril policy, the insured would have to prove that was the case. With a special cause of loss policy the insurer would need to disprove it.

Faculty Response
I think there is coverage. There is a Limitation for interior damage unless the structure has been breached, but it doesn’t mention hail. It does mention sleet but sleet isn’t hail.
 
Last Updated:  August 14, 2014
 
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