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Insurer wins dispute over payment for roof repair


A federal appeals court has affirmed a lower court ruling that holds an insurer is not obliged to take depreciation into account when calculating a payment for damaged roofs.

In June 2016, a hailstorm damaged 31 townhouses managed by Canyon Springs at Soaring Eagles in Colorado Springs, according to Monday’s ruling by the 10th U.S. Circuit Court of Appeals in Denver in Canyon Springs at Soaring Eagles Townhome Owners Association Inc. v. Country Mutual Insurance Co.

Bloomington, Illinois-based Country Mutual estimated total replacement costs for damage to the roofs, siding, doors and windows would be $1,031,295.13, and of that the estimated cost for repairing the roofs was $758,634.35.  Canyon Springs repaired only the roofs, spending $761,911.74.

Both the estimated and actual costs of the roof repairs was less than the association’s policy’s deductible of $789,297.12, according to the ruling.

Country Mutual issued a payment for the actual cash value of the damaged property but refused Canyon Spring’s demand that it pay for the “holdback depreciation” applicable to the roofs. Holdback depreciation refers to the cost of repairs that exceed the property’s actual cash value at the time of the loss, according to a footnote to the ruling.

The association filed suit in U.S. District Court in Denver, charging the insurer with breach of contract, bad faith and unreasonable delay/denial of insurance benefits, according to the ruling.

The district court ruled in the insurers’ favor and was upheld by a unanimous three-judge appeals court panel.

Referring to the policy, the ruling said, “like the district court, we conclude that the Replacement Cost endorsement is clear in how it calculates Country Mutual liability for loss or damage.”

The endorsement “starts with the ‘cost to repair or replace’ and then applies the deductible, but not depreciation,” it states. This results in a negative number, and the “repair/replacement cost did not exceed the deductible. Thus, the calculation ends, as there is no compensable repair/replacement cost,” the ruling said.

“We conclude based on the unambiguous terms of the insurance policy, that Country Mutual is not liable for holdback depreciation,” it said, in affirming the lower court’s ruling.

Attorneys in the case could not be reached for comment.




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