In all-risk policies, an excluded cause of damage must be the sole cause of damage for the exclusion to apply, a federal appeals court decided last week in an opinion that clarifies North Carolina law but could make some claims more costly for insurers.
“The district court’s conclusion comports with North Carolina precedent, which has set out different causation standards for all-risk insurance policies than what app
lies to other types of insurance coverage,” the U.S. 4th Circuit Court of Appeals wrote in Wake Chapel Church vs. Church Mutual Insurance.
The precedent is a 1973 decision by the North Carolina Supreme Court, which laid down a general rule that, for all-risk policies, “coverage will extend when damage results from more than one cause—even though one of the causes is specifically excluded,” the appellate judges explained.
The 4th Circuit’s Feb. 19 decision hinged on the cause of scratches and scrapes on Wake Chap
el’s metal roof in Raleigh. The church filed a claim in 2018, arguing that the damage was the result of a heavy snowstorm. An engineer reported that ice and snow sliding on roof was one cause of the damage.
See more beautiful photo albums Here >>>
Wisconsin-based Church Mutual, one of the world’s largest insurers of churches, denied the claim, contending that the scratches came from workers and a crimping machine when the roof was installed almost two decades earlier. The installers had also failed to apply a protective coating on the roof, the
insurer said. The church’s policy excluded payment for damages caused by decay, deterioration, latent defect or “a quality of the property that causes it to damage itself.”
The chapel filed suit, alleging breach of contract and bad faith. After a four-day trial, a jury found in favor of Wake Chapel, noting that the snowstorm caused the damage. The jury awarded $1.1 million for actual cash value on the roof. Church Mutual asked for a directed verdict overruling the jury. The district court judge declined, and the insurer appealed to the 4th Circuit.