Court Finds Matching of Damaged Materials is Required by Policy

    The court granted, in part, the insured's motion for summary judgment by finding that matching roof tiles were required under the policy. Bertisen v. Travelers Home and Marine Ins. Co., 2024 U.S. Dist. LEXIS 3907 (D. Colo. Jan. 8, 2024). 

    The insureds sued Travelers for breach of contract, common law bad faith, and unreasonable delay or denial of benefits. They alleged that their residence was damaged by a hailstorm and that Travelers breached their policy and acted in bad faith in the handling of the claim. The insureds demanded an appraisal to determine the "amount of loss" under the policy and an appraisal award was issued. Travelers then denied payment for all roof tiles that were contemplated by the appraisal award.

    On Traveler's prior motion for summary judgment, the court held that the appraisal award's determination of the "amount of loss" encompassed causation of the loss. The court granted the insured's motion for summary judgment, in part, concluding that, at least with respect to 191 roof tiles which were undisputedly damaged and not paid for, the insureds were entitled to summary judgment. But the court denied summary judgment beyond those 191 tiles and explained that whether the policy required replacement of the remaining roof tiles on a cosmetic-matching basis was a legal coverage issue.

    The court then granted the insureds leave to file a second motion for summary judgment to address whether or not cosmetic matching was covered under the policy.

   During the appraisal, it became apparent that the type of roof tiles on the insured's roof were no longer manufactured. The appraisal award awarded a "replacement cost value" of $157,141.19. The umpire reasoned that "the entirety of the tile roofing should be removed and replaced" because it was not "reasonably possible to remove and replace only some of the tiles or to remove some areas of tiles without compromising the aesthetics of the roofing."

    The insureds completed repairs to their property for the replacement cost amount set by the arbitration award, $157,141.19, and requested reimbursement from Travelers. Travelers issued a payment of $63,385.07, which did not include payment for undamaged roofing tiles, contending they were not covered by the policy. 

    The policy promised that Travelers would "pay the cost to repair or replace, after application of a deductible and without deduction for depreciation, . . . the replacement cost of that part of the building damaged with material of like kind and quality and for like use." The insureds argued that the end result of a mismatched tile roof would leave them with a worse roof aesthetic, which did not restore the roof's value and did not fulfill the policy's promise of "like kind and quality." Travlers argued that because the policy covered only property that experienced "direct physical loss," the policy covered only tiles that were physically altered.

    The policy limited coverage to "direct physical loss" to property described in Coverages A and B. Coverage A covered "the dwelling on the 'residence premises,'" which was defined broadly as "the one family dwelling where the insureds reside." In light of this broad language, it would not be unreasonable to interpret the "property" experiencing "direct physical loss" to refer to the insureds' residence as a whole, such that direct physical damage to the home triggered coverage,. The specific unit of "property" that had to suffer a "direct physical loss' was not clear under the policy. 

    Travelers argued that because there was no provision for payment for repair or replacement of undamaged property components, the policy language was intended to only cover physically damaged property, not cosmetic mismatches resulting from replacement of damaged property. There was nothing in the policy, however, supporting the argument that covered property had to be reduced to indeterminate "components" for purposes of coverage.Travelers could have drafted the policy to contemplate that any damage to the residence would be measured at a granular level, but did not do so. 

    The insureds argued that the policy's use of "like kind and quality" required matching, arguing that simply replacing only the damaged tiles – which were no longer manufactured – with replacement tiles would leave them with a mismatched roof, such that the unmatching replacement tiles would not be of "like kind and quality' to those tiles that were replaced, and the insureds would not be made whole. The court agreed that this was a reasonable interpretation of the policy language.

    Therefore, the policy was ambiguous as to whether it required matching coverage and the court was required to construe the policy in favor of coverage. Matching was therefore required under the policy. The motion for summary judgment was granted to this extent.