Advise & Consult, Inc.
A recurring issue in property insurance litigation warrants closer attention. Policyholders—and at times their representatives—often believe they understand the cause of a loss. The sequence of events appears to align. The damage is evident. The explanation seems reasonable.
However, in litigation, outcomes are not determined by what appears logical. They are determined by what can be established through admissible evidence.
A recent federal court decision from Illinois serves as a cautionary example. The policyholders asserted that a storm caused a power outage and electrical surge, damaging critical building systems and resulting in substantial losses. The theory was plausible, and several individuals involved in the property’s operations believed this to be the cause. The claim nevertheless failed because it was not supported by sufficient proof.
Notably, the court never addressed policy exclusions. It did not need to do so. The claim was dismissed because the policyholders failed to satisfy their initial burden of establishing that a fortuitous event caused the damage.
This decision highlights three important principles applicable to many property insurance claims. First, expert testimony on causation is often essential, particularly in technically complex losses. When damage involves electrical systems, power surges, equipment failures, or alleged lightning events, courts generally will not accept causation theories based solely on lay observations. Retention of qualified experts—such as electrical engineers and meteorologists—is typically necessary to establish how a specific event caused the alleged damage. Without this evidentiary link, a claim lacks a critical foundation.
Second, first-hand knowledge is crucial. In this case, the witnesses relied upon were not present at the time of the alleged event. Their testimony was based on information learned after the fact. While such accounts may assist during the investigative phase of a claim, they frequently carry little weight in court. Judges and claims professionals give priority to testimony grounded in personal observation rather than second-hand reports.
Third, hearsay can subtly but significantly undermine a claim. In the claims process, information often passes through multiple individuals—for example, from a tenant to a property manager, from the manager to a contractor, and from the contractor to an adjuster. Over time, the narrative may appear consistent and credible. Yet consistency alone does not render evidence admissible. Absent testimony from individuals with direct knowledge of what occurred and what was observed, a court may disregard the information entirely.
These considerations are especially critical when causation is likely to be contested. To withstand scrutiny, a claim must be supported by a complete and verifiable chain of evidence explaining what occurred, how the event affected the property, and how it resulted in the specific damage claimed. If any link in that chain is missing or rests on assumption rather than proof, the claim is vulnerable.
This does not suggest that the policyholder’s understanding of the loss is incorrect. Rather, it underscores the need for claims to be developed and documented in a manner that meets evidentiary and legal standards. Achieving this often requires early engagement of qualified experts, careful identification of appropriate witnesses, and deliberate consideration of how evidence will ultimately be presented. The critical question is whether the facts—rather than assumptions—provide the necessary verification for coverage.
These efforts should not be reserved for litigation. They should be integral to the claims process from the outset. Early evaluation and documentation of causation strengthens the claim and improves its defensibility if challenged.
The objective is not to complicate claims unnecessarily, but to ensure they are supported in a manner that allows them to withstand legal examination and succeed on the merits.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 801.641.8304, or email experts@adviseandconsult.net.