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by Mikalyn Greenzweig (Law Clerk)

Courts sometimes seem to bend over backwards to avoid summary judgment on cosmetic damages issues. That seemed to be the case in Smith v. State Farm Lloyds, where the Western District Court of Texas, Waco Division, found a fact issue as to whether damage to metal roof seams sufficed to avoid a cosmetic damage exclusion.

In Smith, the insured homeowner claimed her roof sustained hail damage to the “seams” of her metal roof, which is the area located between each individual roof panel. Smith, 2026 WL 1954925, at *2. The policy contained a Metal Roof Endorsement that excluded coverage for damage that did not result in an opening that completely penetrated through an individual roof component. See Id. (stating that “the policy only affords metal roof coverage for hail if ‘hail creates an opening that completely penetrates through’ any individual component of the roof”). By this definition, the insurer stated that each metal panel on the roof was an “individual metal component,” and since there was no complete penetration through any individual metal panel, coverage was denied. Id. at *1. The insured disagreed and argued that the insurer relied on its expert’s assumptions in that a “seam” itself is not an individual roof component, and further argued that a hailstone opening a seam qualifies as an “opening that completely penetrates” an individual component of the roof. Id. at *2.

The Court denied summary judgment on the issue, holding that whether damage to the “seams” constitutes an opening that completely penetrates an individual roof component presents a factual question that could not be determined as a matter of law at this stage in the case. Id.

Separately, the insurer moved for summary judgment on the insured’s breach-of-contract and bad-faith claims, arguing that its reliance on the Metal Roof Exclusion and condition of the roof created a bona fide coverage dispute sufficient to bar all of the insured’s claims. Id. The insurer relied on Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins. Co., asserting that it had a reasonable basis for denying coverage. Smith, 2026 WL 1954925, at *2 (quoting Weiser-Brown Operating Co. v. Paul Surplus Lines Ins. Co., which stated that an insurer “will not be faced with a tort suit for challenging a claim of coverage if there was any reasonable basis for denial of that coverage).

The insured, however, argued that a jury could reasonably find bad faith because there were visible holes in the roof and the insurer had photos demonstrating this, which could raise questions as to the functionality of the roof. Id.The insured also argued that under the insurer’s interpretation, only a “ballistic” hail penetration could trigger coverage and this was evidence demonstrating bad faith. Id.

Ultimately, the Court also denied summary judgment on the bad-faith claims, concluding that a jury could find bad faith rather than a bona fide dispute. Id.Notably, the Court held that the insurer’s “ballistic” hail penetration standard for denying coverage was unreasonable. Id.

The Lowdown: This case will come down to a battle of the experts at trial. And given that there was reportedly evidence of punctures and “holes” in the roof at the seams, the insurer’s reliance on the Metal Roof Endorsement and its cosmetic damage exclusion may appear unreasonable to a jury. Insurers should be ready to respond to allegations of damage at all areas of a metal roof, including seams, and should ensure its investigation appropriately details the extent (or lack) of damage and harm caused by hail, even with cosmetic damage exclusions.

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The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.