Daily Development for Monday, December 6, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu

INSURANCE; CLAIMS: Where insurer has an obligation to replace a damaged roof with one of “like kind and quality,” insured may make a claim for full cost of similar, but more expensive roof.

Republic Underwriters Ins. Co. v. Mex-Tex, Inc. , No. 033-0662 (Tex. 11/19/04)

Insured owned a shopping center with a roof that apparently needed replacement. The roof had leaked for a long time and insured had already obtained estimate to replace it. The, the good Lord intervened on insured’s behalf, and the big hailstorm hit. Insured filed its claim. Insurer was still evaluating the claim when it learned that insured had proceeded with construction of a new roof. Insured at first attempted to assert that it was liable only for minor repairs in the range of $22,000, but later agreed that it was responsible for roof replacement. Nevertheless, Insurer insisted that Insured was not entitled to the total cost of the roof it installed because it replace a roof that had been bound to the building by “ballast” (boulders) with a roof that was mechanically tied to the building. The difference in cost exceed $33,000.

The trial court had ruled that Insurer was not limited to replacing the roof in exactly the same style as its predecessor:

“[Insurer] argues that it could not have breached the policy by offering to replace [Insured’s] roof with an identical one and refusing to pay for a more expensive one. But the trial court held that “comparable does not mean “identical,” and found that the roof [Insured] installed was comparable to the one it replaced, differing only in the way it was attached to the building. We agree that the plain language of the policy neither restricted nor required [Insurer] to pay for the cost to replaced the roof with an identical one. The policy clearly allows more leeway that that. There was evidence to support the court’s finding that [Insured’s] new roof was within that leeway.”

In the balance of the opinion, the court found, 5-2, that the insurer was no liable to pay interest on the bulk of the unpaid claim (at 22%) as required by Texas statute, because it had tendered to the insured the cost of a “ballast held roof,” and the circumstances did not suggest that Insured would have created an “accord and satisfaction” had it accepted.

Comment: The editor thinks the case is valuable as a state supreme court ruling that “like kind and quality” does not mean identical, but that the insured has the ability to upgrade a replacement element when given the opportunity to replace it following casualty damage.

WORDS AND PHRASES; “LIKE KIND AND QUALITY: Where insurer has an obligation to replace a damaged roof with one of “like kind and quality,” insured may make a claim for full cost of similar, but more expensive, roof. Republic Underwriters Ins. Co. v. Mex-Tex, Inc., No. 033-0662 (Tex. 11/19/04) discussed under the heading: “Insurance; Claims.”

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