At the time of a wind and rain storm, the plaintiff policyholders were in the process of a DIY roof replacement on their home insured by Farmers Insurance Exchange. Plaintiffs, along with the assistance of friends and neighbors, removed old shingles and tar paper, leaving exposed the plywood deck. Prior to the storm, the plaintiffs installed a new ice and water shield and were in the process of installing the last two rolls of the new underlayment. Storm winds ripped the roof’s underlayment. The rain penetrated the home, causing damage to the structure as well as to the policyholders’ personal property.
The Farmers’ policy provided limited coverage for direct loss to covered property from direct contact with water, which included coverage for rain entering through a roof opening, when the opening is first caused by windstorm damage. The limited water coverage provision also included a temporary roof exception, specifying that a roof does not include temporary coverings. As such, where, for instance, rain entered in a temporary roof, there would not be coverage under the limited water coverage provision, even if the opening in the temporary roof was caused by a windstorm.
Farmers Insurance Exchange denied the plaintiffs’ water damage claim. The policyholders filed their suit — claiming breach of contract, bad faith, fraud, and intentional infliction of emotional distress — in which Farmers prevailed on summary judgment. The lower district court found that, since the policy’s limited water coverage required that the water first enter through a wind-created roof opening, the absence of any roof at all, at the time of the alleged damage, was fatal to the policyholders’ claim. On appeal, the Utah Court of Appeals affirmed.
What Constitutes a “Roof”?
On appeal, the policyholders attempted to convince the court that any part of a structure on top of a structure’s wall is a “roof” for purposes of coverage. Moreover, the policy’s limited water coverage provision said nothing about a roof’s state of completion. Thus, the presence of a roof —regardless of its stage of completion — entitles the policyholders to coverage since the rain entered through an opening in the roof, caused by damage from the direct force of a windstorm. The policyholders further argued that the district court erred in determining the plywood, IWS, and underlayment constituted only a “temporary roof” or “temporary covering,” as the court disregarded evidence that the home was not covered by tarps or other temporary materials during the severe wind and rain storm.
Despite the complex analysis proposed by the plaintiff policyholders, however, the appellate court kept it simple with its finding that a roof means a roof. The court applied Utah’s longstanding principles of insurance contract interpretation, with primary focus on the principle that: only where a crucial term is “fairly susceptible to different interpretations” does a court then construe the policy in favor of coverage. However, in Paulsen, the policyholders did not point to any authority that the term roof is susceptible to different interpretations. The plaintiffs had no evidence that an insured could reasonably believe that the commonly understood meaning of the term roof, when used in an insurance policy, could encompass an incomplete roof that is unable to withstand wind, snow, ice, and water.
While Utah (like most jurisdictions) will construe ambiguities in the insurance policy in the favor of coverage, there must first be an identifiable ambiguity. Roof, however, is not ambiguous, such that the principle of liberal policy interpretation for the benefit of coverage would ever come into play. The Utah Court of Appeals affirmed the lower district court’s ruling that, at the time of the windstorm, the plaintiffs’ house had no roof, as contemplated by the policy, and, therefore, summary judgment in Farmers’ favor was appropriate.
Neither the lower district nor the appeals court directly addressed whether the incomplete roof was a temporary roof such that the policy’s temporary-roof exception (which modified the limited water coverage provision) worked to further exclude the claimed damage. Instead, the district court’s analysis was premised on the fact that, until the roof was complete, there were only individual components and there was not a roof at all. Thus, the complete absence of the roof foreclosed the need for analysis of whether the roof was a temporary roof, making further analysis of the policy’s temporary roof exception moot.
Here, the lower and appellate courts were not persuaded by a policyholder’s attempt to confuse the meaning of otherwise straightforward and plain policy terms. Instead, the courts declined to indulge the unnecessarily complex coverage analysis derived from the term roof, which has nothing more than a plain and straightforward meaning. As a result, the Utah Court of Appeals upheld the simple but accurate finding that roof does, in fact, mean roof. And, without a roof, a policyholder cannot create coverage under a policy provision premised on the existence of a roof.