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Everest Re wins ruling in hotel roof damaged by windstorm

Everest Re

A federal appeals court affirmed a lower court ruling in favor of an Everest Re Group Ltd. Co. unit in litigation over a hotel roof that was damaged in a windstorm.

Ocean City, Maryland-based Bethany Boardwalk Group LLC owns and operates a hotel in Bethany Beach, Delaware, one of whose buildings was damaged in a 2018 windstorm, according to Friday’s ruling by the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, in Bethany Boardwalk Group LLC v. Everest Security Insurance Co.

A September 2018 windstorm with wind gusts reaching 39.6 miles per hour resulted in one of the hotel’s roofs being partially blown off, which allowed rainwater to infiltrate the building, damaging the drywall and carpeting in a hotel room and the hotel restaurant’s ceiling, the ruling said.

A properly installed system should have withstood wind gusts of up to 55 miles per hour, according to the ruling.

Bethany submitted a claim under its Everest policy. An insurer-sponsored engineering report concluded the damages were mainly caused by improper installation of the building’s roof system. As a result of this report, Everest denied coverage, stating the faulty workmanship fell under a policy exclusion.

Bethany filed suit against the insurer in U.S. District Court in Baltimore, which ruled the policy required Everest to cover Bethany’s costs incurred in repairing the hotel’s interior water damage and the resulting lost business income, because windstorm is a covered loss.

The lower court also agreed with Everest that the hotel’s damage from the interior water damage and lost income did not exceed the applicable $100,000 deductible.

But the court said Everest did not have to cover the roof repair costs because the damage was caused by faulty workmanship, which was an excluded loss.

On appeal, a three-judge appeals court panel affirmed the lower court. “Put most simply, we agree with the district court,” the decision said, in affirming the lower court’s ruling.

Attorneys in the case did not respond to requests for comment.