Many insurers write insurance policies that suggest purely cosmetic damage is excluded from coverage, while only functional damage is insured. The line between functional and cosmetic damage is not always obvious. This line was the subject of an important opinion from an appellate court this year. The principle upon when the case turns is important for insured Minnesota property owners.
A common exclusion found in Minnesota insurance policies states:
[Name of insurer] will not pay for cosmetic damage to roof surfacing caused by wind and/or hail. Caused marring, pitting or other superficial damage that altered the appearance of the roof surfacing, but such damage does not prevent the roof from continuing to function as a barrier to entrance of the elements to the same extent as it did before the cosmetic damage occurred.
The important question is as follows: when does something become functional damage? Some insurers would say functionality begins only when the roof can no longer do anything – like shed water or hold snow. The property owner in this case argued that a loss of load capacity was enough for functional damage.
The insured property owner hired an expert who gave the opinion that due to a hailstorm, the roof for this building that was still standing and shedding that rainwater no longer “resist the wind loads or snow loads that are common for the Cannon Falls area”. The question presented was very focused. Is a roof that still looks like it did before the storm, but is now weakened, damaged to the point of an insured repair?
The appellate court in this instance, the Eighth Circuit Court of Appeals, applied Minnesota insurance law to determine the question. The Eighth Circuit did not agree that a reduction in the lifespan of the roof constitutes damage under this policy exclusion. It did agree, however, that a weakened roof no longer able to resist wind and snow loads as it did before is damaged and covered by insurance. The reason is the language of the policy: the roof no longer is able to “function as a barrier to entrance of the elements to the same extent” as before the damage. All roofs have a limit to how much load they can bear. This is the part of the “extent” to which the roof serves as a barrier to the elements. If a hail damaged roof can no longer bear the same weight of snow or resist wind, it does not function as a barrier to snow or wind “to the same extent” as before the hailstorm.
This is a very important principle and is applicable to all cases involving this or similar exclusions. An insured loss is a matter of degree. Some “marring, pitting or other superficial damage” is still covered if it impacts the roof’s functionality to some degree. The need to prove a leak is not needed for coverage under the policy.
Keep this case in mind if your insurance company argues observed damage is merely cosmetic and therefore not covered by the policy exclusion. Read the policy closely. If the exclusion operates like this one, then there is legal authority for the idea any loss of function is an insured loss.