Failure to Allege Property Damage Within Policy Period Defeats Insured’s Claim

The insured’s inability to determine when water damage occurred meant it could not pursue claims of property damage against the insurers. Creek v. State Farm Fire & Cas. Co., 2022 U.S. Dist. LEXIS 116939 (W.D. Wash. July 1, 2022). 

Gold Creek Condominium complex experienced water damage. The complex was completed in 1982. The owners sued State Farm and Travelers under all-risk policies when tenders for the damage were denied.

In 2017, Creek hired an expert to investigate deterioration due to water intrusion. The expert noted that “water intrusion had been evident in the exterior walls, soffits, terraces, handrails and elevated entry walkways for some time.” Thereafter, Creek tendered claims for property damage to State Farm and to Travelers.

In January 2020, a joint exploratory investigation was conducted with representatives from Creek, State Farm and Travelers participating. Exploratory opening were that the gypsum sheathing could be seen. Only one of the openings did not have water damage to the gypsum and it was in an area that was sheltered from wind-driven rain.

State Farm’s expert found improper construction of the exterior walls and failure to adequately maintain the building enclosure system at the exterior walls led to rainwater infiltrating in during the frequent rainfall. Creek’s expert opined that water intrusion, in the form of rainwater events, including wind-driven rain, was the primary causes of the water damage. At a deposition, Creek’s expert acknowledged that he could not look at deteriorated gypsum sheathing plywood siding or wood framing and develop an opinion as to how long it took to deteriorate. Finally, Travelers’ expert opined that the original construction deficiencies, poorly implemented repairs, inadequate maintenance, and general wear and tear had contributed to ongoing water infiltration at the exterior walls, walkways, and decks. Based on these reports, both State Farm and Travelers denied coverage.

Creek filed suit for breach of contract and all parties moved for summary judgment. The court granted State Farm’s motion based upon the one-year limitations provision of the policy. It stated that no action could be brought unless within one year after the occurrence causing loss or damage. “Occurrence” was defined as “an accident, including continuous or repeated exposure to conditions, which results in property damage. Therefore, Creek had to demonstrate the damage occurred during the policy period of 1989 to 1990, or not more than one year after the wind-driven rain caused the loss. The language of the policy did not depend on when the loss happened but when the “occurrence causing the loss’ happened.” The evidence did not give an reliable date of when the loss or damage occurred, so the policy was not triggered.

Travelers’ motion also argued Creek could not prove that covered physical damage “commenced” during the policy’s effective period. The policy provided that “Travelers will cover loss or damage commencing . . . during the policy period shown in the Declarations.” Creek failed to identify instances of new damage during the Travelers policy’s period to trigger coverage. Therefore, Travelers’ motion also granted.

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