Policyholders and Public Adjusters Often Need to Hire Their Own Experts—Part Two

In yesterday’s post, Policyholders and Public Adjusters Often Need to Hire Their Own Experts, the court found that the insurance policy did not provide coverage for the claimed damages for two primary reasons.1 First, the plaintiffs failed to demonstrate that the damage to their home occurred during the policy period or was caused by a covered event, such as a hailstorm or windstorm. The evidence, including expert reports and weather data, indicated no significant hail or wind events at the plaintiffs’ address during the relevant period. Moreover, the plaintiffs provided inconsistent dates for the alleged storm, with some dates falling outside the policy period, and their evidence lacked specificity or neighborhood relevance.

Under Texas law, the insured party bears the burden of proving that a loss occurred during the policy period and was caused by a risk explicitly covered by the policy. Kimberly and Michael Cutchall, the plaintiffs, failed to meet this burden for several significant reasons.

The policyholders claimed a hailstorm damaged their property, but their evidence was inconsistent and contradictory regarding when this storm occurred. Mrs. Cutchall testified that the storm happened in “March or April of 2021,” a timeframe that falls outside the policy period beginning May 29, 2021. Mr. Cutchall, on the other hand, admitted that he could not recall the date of the alleged storm. Additionally, one of their experts, Mr. Allen, provided three different dates for the storm, two of which also fell outside the policy period. The lack of a consistent timeline undermined their claim that the damage occurred during the policy period.

Furthermore, Chubb’s experts, including a meteorologist, conducted an extensive review of weather data from credible sources such as the National Oceanic and Atmospheric Administration (NOAA) and third-party forensic weather services like CoreLogic and Verisk. Their analysis revealed no hailstorm or windstorm capable of causing the alleged damage to the property during the policy period. The meteorologist specifically addressed and discredited the date of August 16, 2021, which Mr. Allen ultimately identified as the date of loss. This meteorological evidence strongly refuted the claim of a covered event. The policyholders did not hire a meteorologist to provide a date of a hailstorm.

I previously emphasized this point in Which Hailstorm Damaged Your Roof? The Time of Hail Damage Is Often Disputed:

The lessons to learn from this case are many. First, just because you find hail damage, it may not result in a valid hail damage claim if the insurance company starts looking for ways to claim that hail damage may have occurred at a different time. This is because most states require policyholders show that damage happened during the policy period.

Second, meteorologists are important when insurance companies challenge the date of a hail damage. Engineers are not meteorologists.

The policyholder relied on testimony and reports from their experts, a public adjuster, Mr. Halliday, and an independent adjuster, Mr. Allen, but this evidence was insufficient to establish a covered event. Mr. Halliday claimed that the storm occurred on May 18, 2021, basing his conclusion on a general news report about hail activity in Houston. However, this report did not contain data specific to the plaintiffs’ neighborhood or address and could not establish a connection between the alleged hailstorm and the damage to their home. Mr. Allen’s testimony was even more problematic. He initially provided three different dates for the storm and ultimately conceded during his deposition that a meteorologist’s analysis would be more reliable than his own. This admission was significant because Chubb’s meteorologist directly contradicted Mr. Allen’s conclusions, further weakening the plaintiffs’ case.

The inspections of the property conducted by Chubb’s experts revealed no physical evidence to support the claim that a hailstorm or windstorm caused the damage. The experts found no wind-created openings, hail impact marks, or other indicators of storm-related damage on the roof. Although there was evidence of some minor hail damage to the gutters and an air conditioning unit, Chubb’s experts determined this damage predated the policy period and likely occurred before 2020. This reinforced Chubb’s position that no storm-related event occurred during the relevant timeframe.

The court emphasized that the policyholder’s evidence was insufficient to raise a genuine dispute of material fact. In a motion for summary judgment, the nonmoving party, in this case, the policyholders, must present specific, competent evidence showing that a covered loss occurred during the policy period. Here, the reliance on anecdotal or generalized evidence, conflicting testimony, and a lack of neighborhood-specific meteorological data failed to meet this standard. The court also noted that, even if some damage occurred during the policy period, the policyholders did not eliminate the possibility that it was caused by excluded factors such as pre-existing damage or defects in property construction rather than by a covered storm.

Ultimately, the policyholders could not establish that their property damage resulted from a hailstorm or windstorm during the policy period, as required by the terms of their insurance policy. The absence of credible, neighborhood-specific evidence of a covered event, combined with the inconsistent and unsupported claims, was a critical factor in the court’s decision to grant summary judgment in favor of Chubb.

Absent eye-witness testimony, most disputed hailstorm claims will require the policyholder or the policyholder’s public adjuster to hire an expert meteorologist and a structural engineer or roofing expert. This should typically be done before a lawsuit is filed.    

The second reason the court found no coverage was the failure to segregate covered damages from uncovered damages. This reason is unique to Texas insurance law, which applies when damages are caused by a combination of covered and excluded risks, where the insured bears the burden of providing evidence that allows a jury to allocate damages specifically to covered causes. Unlike the 49 other states in the Union, under an all-risk or open perils policy, Texas requires the insured to prove the amount of damages not excluded. This Texas requirement exists under the rationale that insurers are only obligated to pay for losses that fall within the policy’s coverage terms, and any damages attributable to excluded causes must be separated from those resulting from covered perils. In this case, the policyholders did not meet this burden, which was fatal to their breach of contract claim.

The policyholders’ own evidence identified causes of the water damage in their home that were explicitly excluded under the terms of their insurance policy with Chubb. For example, the roofer identified issues such as inadequate attic ventilation, which caused moisture to accumulate in the home’s walls, leading to water damage, mold, and mildew. Similarly, the mold remediation company discovered potential problems with the HVAC system that could result in excess condensation and microbial growth. These findings directly implicated exclusions in the policy, which did not cover losses caused by wear and tear, deterioration, construction defects, or dampness of the atmosphere. Despite this, the policyholders made no effort to distinguish between damages caused by these excluded factors and those they alleged were caused by a covered event like a hailstorm or windstorm.

Chubb’s investigation also identified a mixture of covered and uncovered damages. The insurer determined that some of the claims, such as minor hail damage to the gutters and air conditioning unit, warranted a payment of $27,385.81, which Chubb issued to the policyholders. However, Chubb’s experts also identified numerous uncovered causes of damage, including thermal and moisture variations, improper ventilation, and a lack of sealant around certain fixtures. The policyholders did not provide any evidence to reasonably allocate the damages between these covered and uncovered causes, as required under Texas law.

The policyholders argued that Chubb’s responsibility to segregate damages was an affirmative defense that Chubb failed to plead. However, the court rejected this argument, clarifying that the doctrine of concurrent causation is not an affirmative defense but a principle of insurance coverage law. This doctrine underscores the basic premise that insured parties are entitled to recover only for losses covered under their policy. Because the plaintiffs bore the burden of proof on their breach of contract claim, it was their responsibility to provide evidence segregating covered damages from those excluded under the policy. Their failure to do so left the court with no basis to allocate damages in their favor.

Additionally, the policyholders attempted to excuse their failure to segregate damages by asserting that Chubb had not specifically identified a policy provision requiring the segregation of covered and non-covered causes. The court dismissed this argument, reiterating that the duty to segregate damages is a legal requirement inherent in proving a Texas breach of contract claim rather than a contractual term within the policy. The policyholders also suggested that all the damages should be considered covered because Chubb had acknowledged rainwater intrusion in its investigation. However, the court pointed out that not all rainwater damage qualifies as a covered loss under the policy, particularly when other excluded causes, such as construction defects or maintenance issues, are involved.

I have written about this unique Texas rule in many posts because it is so counterintuitive to what is required everywhere else. If you have or are handling a loss in Texas, I suggest reading The Unique Texas Method of Treating Exclusions Regarding Multiple Causes of Loss, where I warned:   

In every state of the Union except one, all risk insurance policies have the common rule that the insurance company must prove the excluded cause of loss. There is a reason why Texas has the word ‘lone’ when being described as the ‘Lone Star State.’

…to be clear, in all states, the policyholder must first prove that damage happened during the policy period. Once damage is proven, the burden, except in Texas, is shifted to the insurance company to prove that the cause of the damage is excluded. Texas, when faced with ‘concurrent causes of loss,’ places the burden on the policyholder to prove that the exclusion does not apply…

After yesterday’s post, I received several private texts about this case. In tomorrow’s post, I will make a few more points about it as the grand finale.

Thought For The Day

“I like Texas food and Texas music, and they have a lot of it there. They have icehouses instead of liquor stores, and you can drive through and get beer-to-go.”
—Johnny Cash

1 Cutchall v. Chubb Lloyd’s Ins. Co of Texas, No. 23-3745 (S.D. Tex. Dec. 31, 2024).