When Hail Damages a Swiss Cheese Roof Coverage is Limited to Damage Done by Hail


The Texas Concurrent Cause Provision Requires Insured to Prove Risks Insured Against and Segregate its Claim from Risks not Insured Against

The Texas Court of Appeal was asked to decide whether an insured that receives a payment from the insurer on its claim is excused from complying with the requirement to segregate covered losses from non-covered losses under the doctrine of concurrent causes if it later brings a suit for breach of contract. In Prime Time Family Entertainment Center, Inc .v. Axis Insurance Company And Andrew Jencks, No. 11-18-00241-CV, State of Texas in the Eleventh Court of Appeals (October 16, 2020) the insured claimed payment of undisputed amount excused requirement to segregate covered from non-covered damage.


Prime Time Family Entertainment Center, Inc., operates a commercial business in Abilene. Prime Time obtained a commercial insurance policy from AXIS Insurance Company. The AXIS policy insured Prime Time’s property against hail damage.

In June 2014 a major hailstorm hit Abilene. Prime Time filed a claim with AXIS for roof damage that Prime Time alleged it had suffered because of the hailstorm. AXIS subsequently began investigating Prime Time’s claim. AXIS did not initially identify significant hail damage to Prime Time’s roof. AXIS also learned about possible preexisting, non-covered damage to Prime Time’s roof during this initial investigation.

In May 2015, an adjuster for AXIS sent a payment letter to Prime Time. The letter notified Prime Time that AXIS was making a payment for hail damage from the June 2014 hailstorm. The letter estimated that Prime Time had suffered repairable hail damage to its roof in the amount of $245,716.16. AXIS enclosed payment for $173,980.35, representing the amount after AXIS deducted Prime Time’s $25,000 deductible and “temporarily subtracted $45,735.81 in recoverable depreciation.”

Rather than repairing the hail damage, Prime Time replaced the entire roof for approximately $750,000. Axis refused to pay full cost of replacement of the roof and Prime Time sued AXIS for wrongfully denying and underpaying Prime Time’s claim.

During discovery, Prime Time produced an e-mail between Prime Time’s agent and Dow Roofing Systems, the company that installed and warranted Prime Time’s original roof. The e-mail was sent in May 2014, one month before the June 2014 hailstorm. In that e-mail, Prime Time described its roof as “Swiss cheese” and requested that Dow replace the entire roof under the warranty agreement. The e-mail included a schematic depicting pervasive roof leaks at Prime Time’s facility. Through third-party discovery, AXIS obtained other documents that showed an extensive history of roof issues and warranty claims by Prime Time from 2008 through the May 2014 “Swiss cheese” e-mail.

The Policy

The AXIS policy provided coverage for perils occurring during a one-year period. Prime Time alleged that its loss was the result of a covered peril occurring during the AXIS policy period. Prime Time alleged that AXIS committed a breach of contract by underpaying Prime Time’s claim because the loss of its roof was attributable to the hailstorm.

AXIS successfully moved for summary judgment. The trial court granted AXIS’s motion for summary judgment.


Prime Time contends that the trial court erred in granting summary judgment on its claim for breach of contract. An insurance policy is a contract that establishes the respective rights and obligations to which an insurer and its insured have mutually agreed. An insured cannot recover under an insurance policy unless facts are pleaded and proved showing that damages are covered by his policy.

The Texas Doctrine of Concurrent Causes

AXIS sought summary judgment under the doctrine of concurrent causes. Under this doctrine, where covered and non-covered perils combine to create a loss, the insured is entitled to recover only that portion of the damage caused solely by the covered peril. The doctrine of concurrent causes is a rule embodying the basic principle that insureds are not entitled to recover under their insurance policies unless they prove their damage is covered by the policy.

When an insurer demonstrates that a non-covered peril could have caused the insured’s loss, the burden shifts to the insured to produce evidence to allow the trier of fact to segregate covered losses from non-covered losses. The failure to segregate covered and non-covered perils is fatal to recovery.

AXIS invoked the doctrine of concurrent causes in its motion for summary judgment by detailing the evidence showing that Prime Time had had problems with the roof for several years prior to the 2014 hailstorm. An insurer can invoke the Texas doctrine of concurrent causes by providing competent summary judgment evidence that a non-covered source could also have caused the claimed damage thereby placing on the insured the burden of establishing evidence to allow the jury to segregate covered losses from non-covered losses.

The Trial Court Proceedings

After the trial court granted AXIS’s motion for summary judgment, Prime Time filed a motion for reconsideration wherein it requested the trial court to consider new evidence in the form of a deposition transcript of AXIS’s representative. Prime Time asserted that the deposition raised fact questions on its claim for breach of contract and its extracontractual claims. Prime Time specifically asserted that AXIS’s representative had admitted that AXIS had failed to pay the $45,735.81 in recoverable depreciation after Prime Time had replaced the roof. The trial court subsequently entered an order accepting Prime Time’s new evidence as a part of the summary judgment evidence in the case. However, the trial court denied Prime Time’s motion for reconsideration.

The Appeal

Prime Time does not assert on appeal that it has evidence allocating its claimed losses between covered and non-covered perils. Prime Time is essentially asserting that AXIS has either waived or is estopped from invoking the doctrine of concurrent causes because it characterized a portion of Prime Time’s claim as undisputed in its 2015 payment letter. Courts have repeatedly refused to apply the doctrines of estoppel and waiver to ‘change, re-write and enlarge the risks covered by a policy.

However, it is axiomatic that the contractual coverage of an insurance policy cannot be expanded by waiver or estoppel on the part of the insurer. AXIS’s payment of a portion of Prime Time’s claim for hail damage, as well as AXIS’s characterization of a portion of Prime Time’s claim as “undisputed,” cannot expand the coverage originally afforded by the insurance policy. AXIS was not, therefore, precluded from invoking the doctrine of concurrent causes. It is inappropriate for an appellate court to hold otherwise would permit Prime Time to expand the coverage provided by the policy by waiver or estoppel on the part of AXIS.

Prime Time’s claim for breach of contract is governed by the terms of the insurance policy, not AXIS’s actions in adjusting a claim made under the policy. Therefore, AXIS properly invoked the doctrine of concurrent causes in its motion for summary judgment.

An insured cannot recover policy benefits as damages for an insurer’s statutory violation of fair claims settlement statutes if the policy does not provide the insured a right to receive those benefits. An insured cannot recover any damages based on an insurer’s statutory violation if the insured had no right to receive benefits under the policy and sustained no injury independent of a right to benefits.

The Court of Appeal concluded that the insurer’s payment of a claim does not excuse the insured from segregating covered losses from non-covered losses in a subsequent breach of contract action on the insurance policy and affirmed the trial court’s summary judgment in favor of Axis.


The Texas version of the concurrent cause doctrine protected the insurer, AXIS, from paying for damages not covered by the policy because the insured would not, and probably could not, delete from its claim the wear and tear problems with the roof that had them demand a new roof under a warranty one month before the hail storm. What neither the parties nor the court dealt with was the fact that the insured, Prime Time, made a claim with knowledge that the roof was a total loss before the hail storm, and fraudulently sued for both damages it should have known it was not entitled to receive plus exemplary damages. A report should have been made to the Texas Department of Insurance for a investigation of potential insurance fraud.

© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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