Fifth Circuit Reverses Summary Judgment Award to Insurer on Hurricane Damage Claim

    The Fifth Circuit reversed the district court’s grant of summary judgment to the insurer on a property damage claim arising from Hurricane Harvey. Advanced Indicator and Manufacturing, Inc. v. Acadia Ins. Co., 50 F.4th 469 (2022).

    After Hurricane Harvey struck southern Texas in 2017, Advanced submitted a claim to Acadia for damage to its building that it claimed was caused by the hurricane’s winds. Acadia sent an adjuster, Nick Warren, as well as an engineer, Jason Watson. Watson determined that pre-existing conditions – including ongoing leaks from deterioration and poor workmanship – caused the damage, rather than winds from Hurricane Harvey. Warren adopted these conclusions in his recommendations to Acadia. Acadia denied Advanced’s claim based on these reports.

    Advanced sued Acadia, alleging breach of contract and bad faith. Advanced filed a motion to remand to state court which was denied. Acadia moved for summary judgment arguing that it did not breach the policy and that Advanced could not segregate any damages caused by hurricane from pre-existing damage. The district court granted Acadia’s motion, finding that Acadia’s denial of Advanced’s claim was based on “extensive consideration of the evidence.” Further, Advanced failed to carry its burden of showing that covered and non-covered damages could be segregated as required by Texas’s concurrent causation doctrine. Finally, the bad faith claim was dismissed because there was no breach of contract.

    On appeal, the Fifth Circuit affirmed the denial of the motion for remand. Turning to the motion for summary judgment, the district court had granted the motion because: (1) it credited Acadia’s investigation over Advanced’s investigation, essentially finding that Hurricane Harvey did not cause Advanced’ damages; and (2) the district court found that because Advanced could not differentiate its pre-existing losses from its Hurricane Harvey losses, its claim failed under Texas’s concurrent causation doctrine. 

    The Fifth Circuit found that Advanced presented testimony of a public adjuster who stated that the roofing system “completely failed,” and that the damage was caused only by the hurricane. Further, Advance’s expert testified at his deposition that the damage was caused by Hurricane Harvey. Finally, prior reports demonstrated that the building was in good shape. Viewing this evidence in a light most favourable to Advanced, a reasonable jury could find that Hurricane Harvey’s winds were the cause of the damage to the building 

    Next, the Fifth Circuit turned to the district court’s alternative holding that Advanced could not segregate covered losses from non-covered losses, thereby invoking the concurrent causation doctrine. The insured had the burden, but could carry its burden by putting forth evidence demonstrating that the loss came solely from a covered cause or by putting forth evidence by which a jury could reasonably segregate covered and non-covered losses. 

    Here, the same evidence that supported Advanced’s argument that Hurricane Harvey caused some of its damage supported its argument that Hurricane Harvey caused all of the damage. Both Advanced’s public adjuster and expert testified that the hurricane was the sole cause of Advanced’s loss. Accordingly, because a jury could reasonably find that all of Advanced’s loss came from a covered cause, the concurrent causation doctrine does not bar recovery.

    Because it was possible the breach of contract claim would survive, the bad faith claims was also reversed in error.  Therefore, the district court’s decision to grant summary judgment was reversed.