Our second appellate brief of the year was filed this week: My Roofer v. State Farm Fire & Casualty.
This case is especially exciting because it might make the law in Colorado. The issue is whether a roof’s decking (sometimes referred to as sheathing) must be covered by an insurance policy when there is a covered loss to the roof’s shingles. There is currently no case law in Colorado on this issue and we have at least three other cases where an insurance company has covered the cost to replace the shingles, but omitted from that cost the amount to replace the decking.
It is well-known that shingles cannot be installed onto a flimsy, damaged, or otherwise unsuitable decking. The decking must be in a good enough condition to accept and retain nails that hold the shingles in place. The roof decking at issue in My Roofer was in terrible condition. This fact was obvious as soon as the roofers stepped foot onto the roof. Once the shingles were removed, in fact, a roofer stepped through the decking, leaving a gaping hole and further necessitating replacement of the decking before any shingles could be installed.
The underlying loss to the roof’s shingles, of course, was covered under the insurance policy. At the trial level (handled by another law firm), it was unclear what the actual cause of loss was but it was ultimately conceded to be either wind or hail, both covered perils under the policy. The trial court determined, however, that while the shingles were damaged by a covered peril, the roof decking was damaged solely by wear and tear, and was therefore excluded from coverage. The trial court even acknowledged that the only way to replace the shingles was to replace the roof decking. Yet, the trial court maintained that no coverage was warranted because no covered peril directly caused the loss to the roof decking.
Before I go into my arguments made in the opening brief, it is important to understand how the trial court could reach this conclusion given the undisputed facts that, I think, should have rendered the opposite result. The issue is a matter of insurance policy interpretation. When the court analyzes a policy for coverage, it should take the plain language of the policy and apply the coverage that an ordinary, objectively reasonable person would expect when purchasing the policy. Here, the trial court conducted a coverage analysis solely for the roof decking, and apart from the roof shingles. This is where the trial court erred. Instead of conducting one, singular coverage analysis for the covered loss to the shingles, it treated the ‘loss’ to the roof decking as its own separate event.
So, I argued the plain language of the insurance policy covers the loss to the roof decking, when a proper coverage analysis is conducted for the covered loss to the roof shingles. The insurance policy explicitly states that it will cover all amounts “actually and necessarily” spent to replace the damaged portions of the property. If a roof decking must “actually and necessarily” be replaced in order to replace the covered roof shingles, then the insurance policy ought to cover it based on insurance policy’s plain language.
I next argued that, even if the Court wants to make two separate coverage analyses for the roof decking and the roof shingles, the insurance policy still covers the replacement of the decking under the efficient proximate cause rule. This rule states that where two causes contribute to a loss, the cause that ‘sets the other in motion’ is the cause that matters for insurance coverage. Here, the only reason to replace the decking was to replace the shingles. Likewise, if the shingles hadn’t been damaged during the hail or wind storm, then the decking would not need replacement. Thus, the efficient proximate cause of the loss to the decking was the loss to the shingles. The hail or wind that damaged the shingles, set in motion the need to replace the decking. Basically, the trial court erred in excluding coverage for the roof decking when it found the “direct cause” for the replacement of the roof decking was wear and tear, when the correct standard is the “efficient proximate cause.”
As an aside, this argument might only work where there is no anti-concurrent causation clause (ACC) in the insurance policy. ACCs typically say that “if X contributes directly or indirectly to a loss, then no coverage.” An ACC is essentially the way insurance companies contract out of the common law efficient proximate cause rule. In My Roofer, there were some ACCs in other provisions of the policy, but not in the “wear and tear” exclusion. I think, however, that if an ACC ever applied to the “wear and tear” exclusion, a court should nevertheless find coverage. Think about it, if wear and tear contributes in any manner to a loss, then what peace of mind would you have, as an insured, that your loss will ever be covered? An insurer could say, “I’m sorry the wind blew off the roof of your house, but we think wear and tear might have been a factor, so we’re not going to cover it.” In legal terms, an ACC applying to a wear and tear exclusion would be an “illusory” provision and would therefore be void as against public policy.
Lastly, I argued that the Option OL (ordinance and law) covers the loss to the roof decking. In Centennial, Colorado, where the subject property was located, the city prohibits the installation of shingles onto a flimsy, damaged decking. Thus, the decking had to be replaced because the City required it. I think this argument was a little weaker, but it was also the argument that was stressed the most at the trial level (again, handled by a different law firm). The City never required the decking to be replaced, as in, no enforcement official came to the property and wrote a citation or order requiring My Roofer to replace the decking. If that had been the case, then it’s likely that would have resolved this issue. Nevertheless, I think the trial court could have just as easily found coverage under the Option OL if it would have conducted a proper coverage analysis for the roof shingles.
Ultimately, we want the Court of Appeals to rule that when conducting a coverage analysis for a roof, the cost of replacement must consider all the roof’s components, including the decking. I’ll keep you posted on the new developments after we get the insurance company’s Answer…