161 F. Supp. 3d 970
D. Kan.2016Background
- GPV owned five buildings insured by Liberty Mutual under a policy effective Sept. 1, 2012–Sept. 1, 2013 covering "direct physical loss or damage."
- A May 19, 2013 hailstorm caused cosmetic indentations in the standing-seam metal roofs of three buildings (5201, 5252, 5260); insurers' engineers concluded the dents were cosmetic, not functional.
- Liberty Mutual paid $611,883.51 as a partial tender for various damages but did not pay to repair the metal-seam roofs at issue; Liberty Mutual proposed appraisal for the roof dispute, which GPV declined.
- GPV sued seeking a declaratory judgment that the policy covers the cosmetic hail indentations and sought attorneys’ fees under K.S.A. § 40-908.
- The parties disputed whether the policy phrase "physical loss or damage" (Insuring Agreement) unambiguously covers cosmetic dents, and whether the more specific "Coverages"/"covered loss" language limits coverage to functional or financially-detrimental loss.
- The court considered precedent on the meaning of "physical loss or damage," the policy text as a whole, and the pre-suit tender when resolving coverage and fee issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Policy's "physical loss or damage" language covers cosmetic hail indentations | The phrase covers any physical alteration (including cosmetic dents); thus dents are covered | Coverage limited to functional loss—a measurable reduction in usefulness or financial detriment | Insurer must cover cosmetic hail dents: court holds "physical loss or damage" unambiguously includes cosmetic dents |
| Whether the "Coverages" section ("covered loss") limits real property coverage to functional/financial loss | "Covered loss" does not unambiguously restrict the Insuring Agreement; Insuring Agreement governs | The more specific "Coverages" definition of "covered loss" requires functional/financial loss and should control | "Covered loss" does not unambiguously narrow coverage; Insuring Agreement controls; coverage for cosmetic dents stands |
| Whether GPV is entitled to attorneys’ fees under K.S.A. § 40-908 based on the declaratory judgment | GPV contends prevailing on coverage triggers fees under § 40-908 | Liberty Mutual contends pre-suit tender bars fees because tender was made under the policy before suit | Pre-suit tender was effective; declaratory ruling alone did not yield monetary recovery in excess of the tender—fees denied without prejudice |
| Whether GPV must submit to appraisal for the disputed roofs | GPV refused appraisal and sued for declaratory relief | Liberty Mutual requested appraisal; asserted appraisal appropriate for roof valuation/dispute | Court resolved coverage as a matter of law; GPV not compelled to submit to appraisal in this ruling (coverage decided for GPV) |
Key Cases Cited
- Advance Cable Co. v. Cincinnati Ins. Co., 788 F.3d 743 (7th Cir. 2015) (held "physical loss or damage" covers cosmetic hail dents as a physical alteration)
- Port Auth. of N.Y. & N.J. v. Affiliated FM Ins. Co., 311 F.3d 226 (3d Cir. 2002) (describes "physical damage" as a distinct, demonstrable physical alteration)
- American Media, Inc. v. Home Indem. Co., 232 Kan. 737 (Kan. 1983) (principles for interpreting insurance contracts under Kansas law)
- O'Bryan v. Columbia Ins. Grp., 274 Kan. 572 (Kan. 2002) (rules on contract interpretation and ambiguity in insurance policies)