Ugly is Beautiful: Your Insurance Company Probably Has to Pay for Cosmetic Damage Claims

This is one of those examples that make insurance dispute lawyers angry. Let us say that a rogue thunderstorm sweeps through town, causing the trees to shake loose of branches, limbs and acorns. After the storm, you realize that your roof is stippled like a golf ball. It is still functional, and there is no damage to any other part of your property and the roof doesn’t leak – it’s just, well, ugly. You file a claim with your insurance company for the damage to your roof, only to hear them reply that cosmetic damage is not “functional” damage, and therefore your claim will not be covered.

Turns out, this is not necessarily true. Whether the damage was cosmetic, functional or some combination of the two, it still constitutes direct physical loss – and more than likely, direct physical loss is what is covered under your policy.

Bad Faith vs. Bad Policy

This does not mean you can immediately start making claims for cosmetic damage. If your policy is an “all-risk” policy covering all risks of direct physical loss, and it does not specifically exclude damage that is cosmetic only, then you most likely have a strong claim for reimbursement for the damage. In fact, some courts have held that refusing to pay for hail dents just because the roof is still functional can constitute bad faith. Unfortunately, in response to this, some insurance companies have begun adding exclusions to their policies that specifically exclude direct physical loss that is cosmetic only in nature. I haven’t seen many (if any) of these policies in Tennessee yet, but I have seen a few from other states. This is yet another reason to carefully review your insurance policy before you have a loss. It goes without saying that most people assume that if hail falls and beats up their metal roof, causing dents visible from the ground, that those dents would be covered by their insurance policy. But if your policy has that exclusion, then you might be in for a surprise.

As a final word about the “cosmetic v. functional” distinction, it is important to note that dents in a metal roof can still constitute “functional” damage (for those policies that have such a requirement). For example, if the hail caused the paint or finish on the metal roof to crack or peel, then that exposes the bare metal, thereby causing rust and oxidation and ultimately shortening the life span of the roof. This is “functional” damage and therefore would be a compensable claim even under insurance policies that exclude damage that is cosmetic only.

Tennessee Trial Court Opinion on Cosmetic Damage

There are handful of opinions around the country holding that there is no distinction between cosmetic and functional damage in policies covering all risks of direct physical loss. I’m not aware of any that hold in favor of the insurance company that “cosmetic only” damage is not covered. Last summer, I was involved in a Nashville claim involving a metal roof on a hotel that was dented during a hailstorm, and we were finally able to get a decision on this important issue by a Tennessee judge. In that case, Chancellor Russell Perkins held:

Based on the undisputed facts, the Court is asked by [the insured] to rule, as a matter of law, that the hail dents to the metal mansard roof of the Insured Premises constitute direct physical loss or damage under the subject insurance policy. . . . The Court concludes as a matter of law that if there are hail dents to the metal mansard roofs, no matter where they are visible from the ground or visible with or without the aid of chalk, then such dents constitute direct physical loss or damage under the insurance policy and therefore constitute a covered claim under the policy.

Chancellor Perkins got it right, but his opinion is not binding precedent. As a result, this fight will continue until the issue is decided by the Court of Appeals.

Bringing a bad faith claim is anything but plain and simple. That is why you want the help of an experienced Tennessee insurance dispute attorney to assist with your claim. McWherter Scott & Bobbitt has successfully represented clients in Nashville, Chattanooga, Memphis and Jackson, and in other states around the Southeast, in breach of contract and bad faith actions against insurers. To make an appointment, please contact Brandon McWherter or Clint Scott, or contact our office to learn more.

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