Another Court of Appeals Victory: Insurance Company Must Pay for Additional Costs Associated with Ordinance & Law Enforcement

Smith Jadin Johnson attorneys Alexander Jadin and Bradley Hammond won another case at the 8^th Circuit Court of Appeals upholding a policyholder’s right to coverage for its damaged roof. See Cincinnati Ins. Co. v. Rymer Companies, LLC, No. 21-2259, (8^th Cir. July 28, 2022). The issue was whether the insurance company was required to pay additional costs for building code compliance, even though these costs were sought, but not awarded by an appraisal panel.

The insured property was a commercial shopping center.  A tornado caused damage to the roof, but the roof was old and had some prior small leaks that were not a part of the claim. The parties were unable to agree on the amount of loss, so the parties went to appraisal. The appraisal panel awarded repairs for a part of the roof, but when the policyholder sought a building permit to complete partial roof repairs, it was denied. The building code did not allow for partial roof repairs to a wet roof and instead required the full roof to be replaced.

Thereafter, the policyholder sought payment for full roof replacement which was rejected by the insurance company. The insurance company asserted that since the wet roof was not caused by the wind loss, ordinance or law coverage was not available. The policyholder argued that the scope of repair, as determined by the appraisal panel, did not meet building code requirements, which required full roof replacement. This gave rise to the ordinance or law coverage.

The parties landed in court, where the district court erroneously ruled in favor of the insurance company. The district court asserted that the policyholder did not meet its burden of proof that the wind loss gave rise to coverage for ordinance and law enforcement. Smith Jadin Johnson appealed.

At the 8^th Circuit Court of Appeals, the Court overruled the district court’s decision and adopted SJJ’s argument.  The Court held that the preexisting condition of the roof did not violate the building code. Rather, enforcement of the building code was the result of the scope of repair for the tornado/wind loss and the building code’s limitation of repairs to wet roofs. In other words, but for the tornado/wind loss, there would have been no enforcement of the building code requiring full roof replacement.  Accordingly, the policyholder is entitled to a full roof replacement.

This is an important win for property owners who suffer damage that requires additional repairs because of the building code.  Naturally, this is the purpose of insurance – to be made whole in the event of an unexpected loss.

If you are facing issues with your insurance claim, contact us today.