Insured Must Meet Burden or no Coverage

Insured Obligated to Prove Loss Is Due to Covered Peril

Insurance companies have no interest in insuring against losses due to wear and tear or deferred or incompetent maintenance because such losses are not fortuitous. Losses that are caused by the inadequacy of the insured in failing to protect its property is usually, if not always, excluded by a property policy.

In Travelers Property Casualty Company Of America v. Brookwood, LLC, 2:15-cv-01016-KOB, United States District Court For The Northern District Of Alabama Southern Division (September 6, 2017) the USDC was asked to resolve whether a commercial insurance policy covers water damage from a leaking roof.


Brookwood, LLC owns a building that suffered water damage from a leak. The leak damaged the building and a tenant’s property. Brookwood made claims under its insurance policy with Travelers Property Casualty Company of America, and Travelers denied those claims.

Travelers makes three arguments in support of its request for a declaratory judgment:

  1. It asserts that the damages are not covered because the policy excludes coverage for all of the possible causes of the leak.
  2. Its policy does not provide coverage for Brookwood’s economic losses, including repairs to the building and the loss of rental income from its tenant.
  3. Travelers asserts that its policy does not provide coverage for damages to personal property owned by Brookwood’s tenant because the lease between Brookwood and its tenant allocates to the tenant the risk of loss to the tenant’s property, and thus it is not damage Brookwood is legally obligated to pay.


Defendant Brookwood owns the Raymond James building, located at 2900 U.S. Highway 280 in Birmingham, Alabama.

The parties do not dispute that the roof of the Raymond James building leaked, causing damage to the building and to a tenant’s property, on or about November 16, 2014, when the Birmingham area received approximately 2.43 inches of rain and experienced winds of up to 24 miles per hour. Specifically, rain entered the roof through openings in the roof’s EPDM membrane.

On September 19, 2014, prior to the leak, Mr. Tyler Hixson of Hixson Consultants inspected the Raymond James building’s 18-year-old roof and provided a report to Brookwood with his findings and recommendations. The report noted that the EPDM roofing membrane had disbonded in several places, such that “[s]ignificant water entry can occur”; that the EPDM membrane was denatured, patched, and, in multiple locations, open where it met the base flashing; that bridging membrane had been employed; that the ballast had been displaced in some locations, exposing the membrane to accelerated UV deterioration; and that certain areas were unsealed or incompletely sealed.

Brookwood hired Leak Solutions to perform the recommended work. On November 4, 2014, Brookwood’s building engineer, Marlon McElroy, observed Leak Solutions employees using metal shovels to scrape ballast on the roof in the area where the leak at issue in this case later occurred. Upon their departure on November 7, Leak Solutions employees left the EPDM membrane unrepaired and exposed in multiple areas.

On or about November 16, Birmingham received nearly two-and-a-half inches of rain. On November 17, 2014 the roof leaked. The engineer hired by Travelers opined that the removal of the ballast would have made the membrane more susceptible to temperature changes and UV degradation and that UV exposure and wind could have damaged the seams. Further, he stated that shoveling the ballast could have created openings in the membrane through which water entered into the building’s interior.  The engineer testified that that based on his personal experience, “the wind speeds [of up to 24 miles per hour] were not sufficient to have caused any type of uplift on this roof.”

The engineer concluded that Leak Solutions’s substandard repair work enabled rain to enter the building through the EPDM membrane and damage the interior. Based on the engineer’s report and information from Brookwood, Travelers denied Brookwood’s claim under the Property Policy on December 16, 2014.

The insured’s expert testified that Leak Solutions’s using metal shovels to move ballast and then leaving the membrane exposed amounted to a failure of Leak Solutions to perform their work in a manner that’s representative of the industry and the standard of care the industry uses.

After Travelers denied Brookwood’s claim under the Property Policy, Brookwood submitted to Travelers a claim for coverage under the CGL Policy on December 19, 2014.


Exceptions to coverage are interpreted as narrowly as possible to maximize coverage, and are construed strongly against the insurance company that issued the policy. But if there is no ambiguity, courts must enforce insurance contracts as written and cannot defeat express provisions in a policy by making a new contract for the parties.

The Property Policy is an “all-risk” policy, meaning that it provides coverage for all physical damage to covered property unless a cause of loss is specifically excluded or limited.

Travelers points to the Rain Limitation in section D. Limitations 1.c.(1) that excludes coverage for rain damage to the interior of the covered building or personal property unless the building first sustains damage by a covered loss to its roof. The Rain Limitation provides that interior damage caused by rain is covered if “[t]he building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain . . . enters[.]”

Travelers has established that the damage to McWane’s space and property was caused by rain, so the damage is excluded unless Brookwood shows that the interior rain damage was caused by a covered cause.

To the extent faulty workmanship, inadequate maintenance, and/or wear and tear caused the roof damage, they are excluded causes of loss. Leak Solutions’s actions leaving the job site without restoring ballast, may be the primary cause of the roof damage.

Neither faulty workmanship nor inadequate maintenance could have caused either thermal shock or wind. Although a construction defect, itself, is not covered by the policy, if the defect causes (i.e. ‘results in’) a Covered Cause of Loss, and that Covered Cause in turn results in property damage, the resulting property loss is covered.

The mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff. Neither expert investigated wind as a cause of the membrane damage.

Because Brookwood failed to meet its burden to produce evidence on which a jury could find that a covered cause of loss produced the leak through which the rain entered, thus establishing the applicability of an exception to the Rain Limitation, it cannot recover under the Property Policy any damages incurred as a result of the November 16, 2014 roof leak.

Coverage Under CGL Policy

Section 2.j.(1) excludes from coverage property damage to property Brookwood “own[s], rent[s], or occup[ies], including any costs or expenses incurred by [Brookwood], or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another’s property . . . .”

The rental agreement allocates the risk of loss to McWane’s furniture to McWane. Thus, by the terms of the rental contract, Brookwood is not “legally obligated to pay” for damages to McWane’s personal property caused by the leak on or about November 16, 2014.


Because Brookwood has failed to meet its burden to establish that an exception to the Rain Limitation applies, the Property Policy does not provide coverage for damages stemming from the Raymond James building’s roof leak on or about November 16, 2014. Nor does the CGL policy provide coverage for those damages. Given that its Travelers policy does not provide coverage, Brookwood’s counterclaims fail as a matter of law.


Because no one actually reads their insurance policy – even after a loss – they expect every possible loss due to every possible cause to be covered by their insurance policy. As the District Court made clear, that assumption is without a basis in truth. Rather, it is the duty of the insured to provide proof that a covered cause of loss resulted in damage. Brookwood failed in its obligation.

ZALMA-INS-CONSULT © 2017 – Barry Zalma

This article and all of the blog posts on this site digests and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business. Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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