“Ordinance or Law” Provision Mandates Coverage for Roof Repair

Tred R. Eyerly | Insurance Law Hawaii | April 23, 2018

The Tennessee Court of Appeals found that the insured was entitled to coverage under the policy’s  “ordinance or law” provision for repairs to prevent a future collapse of both the damaged and undamaged portions of the building. Jefferson Cnty. Schools v. Tenn. Risk Mgmt. Trust, 2018 Tenn. app. LEXIS 138 (Tenn. Ct. App. March 15, 2018).

A major rainstorm caused a portion of Building 8, an aging vocation building at a high school, to collapse. Building 8 was covered through Tennessee Risk Management up to $100,000. Excess claims were covered by Travelers Indemnity Company. The policy included an “ordinance or law” provision providing for coverage of expenses “caused by the enforcement of any ordinance or law.” Further, the insurer agreed to pay for the loss to any undamaged portions of a building caused by the enforcement of any ordinance or law that required the construction or repair of buildings.

After the collapse, the Tennessee State Fire Marshal’s Office issued a directive to school officials requiring a structural engineer to evaluate the unimpaired structure to ensure that the structural integrity of the remaining building was in adequate condition and future collapses would not occur.

The insured hired a structural engineer and expensive work ensued. Travelers paid for the reconstruction of the collapsed portion of Building 8 and certain additional work on the rest of the building. However, disagreements arose as to additional coverage. The structural engineer determined that compliance with the Fire Marshal’s directive required vertical reinforcement of the remainder of Building 8. The insurer’s structural engineer disagreed that the additional reinforcement was necessary and Travelers declined to pay for the additional work.

The insured sued, arguing that under the “ordinance or law” provision, the insurers were responsible for the additional work undertaken in order to comply with the Fire Marshal’s directive. The case was tried without a jury. The trial court ruled that the insured had failed to show that the additional work was due to a loss caused by the enforcement of any ordinance or law. There was no showing of a code violation in the portion of the building that did not collapse.

On appeal, the insurers argued that the Fire Marshal’s directive, lacking in any citations to specific code violations, failed to constitute an “ordinance or law.” The Fire Marshal, however, had authority to adopt building codes for the State of Tennessee. The insured had to comply with the Fire Marshal’s directive before it could use a repaired Building 8. The insured’s engineer determined that reinforcement of the walls to the non-collapsed parts of Building 8 was required in order to comply with the Fire Marshal’s directive. The fact that the insurers’ structural engineer did not think the additional work was necessary did not negate the opinion of the insured’s engineer in accordance with the Fire Marshal’s directive to ensure the structural integrity of the remaining building.

The court found that it was within the Fire Marshal’s authority under Tennessee law to issue the directive it did. It was this directive that triggered the “ordinance or law” provision of the policy. Therefore, the insurers were responsible for covering the cost of the additional work necessary to comply with the Fire Marshal’s directive.

Disputed Facts on Cause of Collapse Results in Denied Cross-Motions for Summary Judgment

Tred R. Eyerly | Insurance Law Hawaii | January 22, 2018

Although the court concluded that the policy covered a loss caused by the weight of snow, disputed facts as to the cause of the collapse led to the denial of cross-motions for summary judgment. Freeway Drive Inv., LLC v Employers Mut. Cas. Co., 2017 U.S Dist. LEXIS 207165 (E.D Mich. Dec. 18, 2017).

Freeway Drive owned a single story commercial building insured by Employers Mutual Casualty Company (EMCC). The building sustained damage when trusses within the roof shifted and dropped, causing visible sagging. EMCC denied Freeway Drive’s claim.

Freeway Drive hired structural engineer Abdul Brinjikji to inspect the damage. He visited the building three times. On the first visit, he saw snow on the roof but could not estimate how much. Nevertheless, he opined that the collapse was caused by an overload of snow. He developed a plan to shore up the roof and repairs commenced.

After repairs were completed, Brinjikji visited the property a second time. He sill opined that the collapse was caused by snow load. His opinion did not change after this third visit.

EMCC retained an engineer, Richard Hamann, who also investigated the cause of the collapse. After the inspection, EMCC stated in a letter to Freeway Drive that the damage to the roof trusses was a result of fire retardant applied to the roofing structure when it was built. Over time, the fire retardant, along with moisture in the attic, resulted in structural failure of the trusses. EMCC concluded that the loss did not fall within the policy’s collapse coverage, that the damage was not caused by a “specified cause of loss” as defined by the policy, and that the loss was subject to the policy’s collapse exclusion.

After receiving EMCC’s denial letter, Freeway Drive tested a sample of the truss lumber for the presence of fire retardant. The test indicated the presence of small amounts of Boron, which was one of three major fire retardant tracer elements. But the amount of total fire retardant that permeated into the wood was minimal. Brinjikji later testified that Boron did not affect wood like earlier used fire retardants in older buildings did.

Freeway Drive sued EMCC and cross-motions for summary judgment were filed. The court first determined that the policy was “all-risk,” meaning the loss was covered unless the particular damage was specifically excluded.

Next, the court noted that “weight of snow” was a specified cause of loss” under the policy. While EMCC did not dispute that damage caused by weight of snow was covered under the policy, it contended that the plain language of the “Collapse Exclusion” barred coverage for collapse due only to the weight of snow. EMCC said that coverage could only be extended if a snow-load collapse occurred after construction, remodeling, or renovation was complete, and because of the use of defective materials or methods.

The court disagreed with EMCC’s attempt to limit the analysis to the “Additional Coverage – Collapse” provision of the policy. Although collapse was excluded from the policy, the exclusion did not apply if coverage was provided under the Additional Coverage-Collapse provision or if the collapse was caused by a “specified cause of loss.”

EMCC argued that the collapse exclusion exception had to be read in harmony with the Additional Coverage – Collapse provision. Interpreting the policy to provide collapse coverage for collapse solely due to a specified cause of loss rendered as surplusage the unambiguous language of the Additional Coverage-Collapse provision.

Freeway Drive argued that the plain language provided that collapse coverage was restored under the exclusion when the collapse was due to the weight of snow. The Additional Coverage – Collapse clause and the “specified causes of loss” provision were distinct exceptions to the collapse exclusion that had to be applied separately.

The court agreed with Freeway Drive. The policy provided coverage for collapse due only to a “specified cause of loss,” i.e., the weight of snow, regardless of the Additional Coverage – Collapse provision.

Nevertheless, the experts disagreed on the cause of the loss, creating a factual dispute as to whether the weight of snow, or deterioration due to fire retardant, caused the collapse. Hamann said that further testing was needed on the roof trusses. In the first test, traces of fire retardant were found. Brinjikji could not say for certain that the conditions in which the retardant could have affected the trusses did not occur. Neither party could demonstrate the absence of a dispute of material fact that either the weight of snow, degradation, or both, caused the loss. Therefore, summary judgment could not be granted to either party.

Roof Matching in Montana

Jennifer Van Voorhis | Property Insurance Coverage Law Blog | December 13, 2017

We received a request for a blog related to decisions on roof matching under homeowner’s policies of insurance. In 1997 the Insurance Commissioner’s Office of Montana took a position on roof matching under the contractual duty to make a policyholder “whole” again, and the query was whether Montana had case law or statutory provisions at this time that codifies that practice.

On August 20, 2003, John Morrison, Commissioner of Insurance, issued a Memorandum on replacing damaged roof materials, stating it was the continuing position of the agency that under a ‘make whole’ provision in any insurance contract, damaged roof materials must be replaced with similar quality, kind, texture and colored materials such that there is a reasonable match with any existing materials, and if materials that meet that criteria were not available, the existing materials must be replaced to match the new materials.

On July 6, 2009, Monica J. Lindeen, the Insurance Commissioner, issued an Advisory Memorandum on the replacement of damaged building materials, addressed to “All Licensed Insurers Authorized to Write Property/Casualty Insurance; All Insurance Producers Authorized to Sell, Solicit, or Negotiate Property; Casualty Insurance And Insurance Adjusters,” stating:

It is the position of this agency when a loss requires replacement of building materials that the materials must be replaced with similar quality, kind, texture, and colored materials such that there is a reasonable match with any existing materials. In the event that materials which meet these criteria are not available, the existing materials must be replaced to achieve a match. This applies to interior and exterior losses.

Other than these two additional Insurance bulletins, I was unable to find a codification of this premise in Montana Legislature or insurance code.

Following Pennsylvania Trend, Federal Court Finds No Coverage For Construction Defects

Tred R. Eyerly | Insurance Law Hawaii | December 5, 2016

Bound by Pennsylvania law, the federal district court found there was no coverage for defects in the installation of a roof. State Farm Fire & Cas. Co. v. Kim’s Asia Constr., 2016 U.S. Dist. LEXIS 138915 (E.D. Pa. Oct. 5, 2016).

Kim’s Asia Construction contracted to remove and dispose of Powerline Imports, Inc.’s roof, and then install a new roof. After completion of the project, Powerline sued, alleging that Kim’s Asia’s negligent construction of the roof caused the roof to leak, even in minor rain storms. Kim’s Asia made additional repairs, but the leaks continued. Powerline had to hire a new contractor to remove and dispose of the roof and install another roof. Powerline then sued Kim’s Asia.

Kim’s Asia sought defense and indemnification from State Farm under its comprehensive business liability policy. State Farm began defending Kim’s Asia under a reservation of rights, but filed a complaint for a declaratory judgment that it had no duty to defend or indemnify. State Farm filed a Motion for Judgment on the Pleadings and/or Motion for Summary Judgment.

In Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A. 2d 999 (Pa. 2006), the Pennsylvania Supreme Court found that the key term in the dictionary definition of “accident” was “unexpected.” This implied a degree of fortuity that was not present in a claim for faulty workmanship.

Here, the underlying complaint alleged that Kim’s Asia “negligently installed a roof which leaks so badly that it cannot be repaired and needs to be completely replaced.” The allegations related directly to Kim’s Asia’s allegedly poor construction of the roof it agreed to build, and therefore amounted to a claim for faulty workmanship.

The presence of the word “negligence” in the underlying complaint did not change the analysis. The key question was whether there was a causal nexus between the property damage and an occurrence, i.e., a fortuitous event. The underlying complaint did not allege anything “unexpected,” “unintentional,” or “fortuitous” about the damage to the roof. Nothing in the complaint suggested that Powerline’s claim was anything other than a claim of faulty workmanship. Therefore, the events alleged in the underlying complaint did not qualify as an “occurrence” under the policy.

Therefore, State Farm’s Motion for Judgment on the Pleadings and/or Motion for Summary Judgment was granted.

What Makes a “Complete” Roof?

Shane Smith | Property Insurance Coverage Law Blog | August 31, 2016

The Utah Court of Appeals ruled last week that a homeowners’ insurance policy did not cover water damage where the house did not have a “complete” roof.1

In this case, the Poulsens were in the process of replacing roof shingles on their houserrof when a storm containing “gusting winds and torrential rains” ripped off the underlayment, allowing rain to enter the interior of the home damaging the structure and their personal property. When they began replacing the shingles they had removed the old shingles and an underlayment of black felt tar paper, exposing the plywood deck. They next installed a new ice and water shield and underlayment. It was when they were installing the last two rolls of underlayment that the storm ripped the underlayment off of the roof.

Their insurance policy provided limited water coverage,2 however it contained the following Temporary Roof Exception:

The foregoing specified causes of loss are subject to the terms and limitations set forth in Section I …, for any such specified cause of loss or extension of coverage. A roof or wall does not include a temporary roof or wall structure or any kind of temporary tarp, sheeting or other covering.

(Emphasis added.)

When Farmers denied the Poulsens’ claim, they filed suit. Farmers filed a motion for summary judgment on the basis that the Temporary Roof Exception applied because the plywood, IWS, and underlayment layers amounted to only a temporary roof. The court looked at two issues: (1) whether there was a roof; and (2) whether the roof was temporary.

The Poulsens, in opposition to the motion for summary judgment, submitted an expert witness affidavit where their expert opined that because the underlayment and ice and water shield were intended to be permanently installed on the house, the covering was not a temporary roof or other covering. The expert also stated “underlayment without shingles is not a complete roofing system, neither are shingles without … underlayment a complete roofing system per code. It takes both components to make the roofing system resistant to high wind, snow, ice and water.”

However, the court noted that on appeal the Poulsens did not identify “any authority suggesting that component parts of a roof that together fall short of a complete roofing system could fairly be considered a ‘roof’ for purposes of a homeowner’s insurance policy” or “any authority to the effect that an insured ‘could reasonably believe the commonly understood meaning’ of the word ‘roof’ in an insurance policy encompassed an incomplete roof that was unable to resist wind, snow, ice and water.”3

The appellate court held that the trial court did not err by concluding the layers of plywood, ice and water shield, and underlayment did not constitute a roof within the meaning of the insurance policy. Because there was no roof, the policy did not cover damage caused by water entering the Poulsens’ property:

It is true that the court stated that the plywood, IWS, and underlayment “constitute[d] only ‘other coverings’ until such time as shingles are installed.” But the court did not rule these layers made up a temporary roof that the Temporary–Roof Exception would exclude from the LWC Provision’s coverage. Rather, the court ruled that no roof, temporary or permanent, existed at the time of the windstorm, and thus that the LWC Provision did not come into play at all.


1 Poulsen v. Farmers Ins. Exchange, 2016 UT App 170, — P.3d —, 2016 WL 4151905, (Aug. 4, 2016).
2 “We provide limited coverage for direct physical loss or damage to covered property from direct contact with water, but only if the water results from:
(1) the build-up of ice on portions of the roof or roof gutters on a building structure;
(2) hail, rain, snow, or sleet entering through an opening in the roof or wall of a building structure only if the opening is first caused by damage from the direct force of the following:
i. fire;
ii. lightning;
iii. explosion (other than nuclear explosion);
iv. riot or civil commotion;
v. aircraft or vehicles;
vi. vandalism or malicious mischief;
vii. collapse of a building structure or structural part of the building structure;
viii. falling objects; or
ix. windstorm.”
3 See ¶13, footnote 4: Cf. Gutkowski v. Oklahoma Farmers Union Mut. Ins. Co., 2008 OK CIV APP 8, ¶¶ 10–11, 176 P.3d 1232 (holding that “a roof is a unified product comprised of all its component parts and materials, including felt [underlayment], flashing, sheathing (decking), valleys, nails, caulk, drip edges, and shingles” and therefore rejecting an insurance company’s argument that, because asphalt shingles were a second and separate roof from the layers beneath them, it was only obligated to pay for hail damage to the “upper roof” made of asphalt shingles); Dewsnup v. Farmers Ins. Co. of Or., 349 Or. 33, 239 P.3d 493, 499 (2010) (stating that “a roof should be sufficiently durable to meet its intended purpose: to cover and protect a building against weather-related risks that reasonably may be anticipated” and that “the meaning of the term ‘roof’ is sufficiently plain that we need go no further to define its meaning”).