Cosmetic Damage vs Functional Damage – A Magician’s Misdirection?
The vast majority of policies call for coverage from “direct physical loss to Covered Property” on the insured premises. That’s it. There’s no distinction between “cosmetic” or “functional” damage. Keeping in mind that insurance is risk management – a policyholder pays a set amount of money on a regular schedule so that in the event of an occurrence that would cause a large financial loss, a large financial loss is not sustained.
Keeping the above premise in mind, if a vandal spray painted a large, neon pink curse word on your roof that was visible to all of your neighbors, would it be a covered loss under an insurance policy? If an insurer hired a biased engineer, their answer would be along the lines of, “The roof still sheds water and is not leaking. Therefore, no damage occurred.”
The first question that should really be asked is, “Is vandalism covered under the policy?” If that answer is, “Yes”, then the loss from vandalism should clearly be a covered loss. Direct physical loss occurred. The direct physical loss was caused by a covered peril. Coverage should be extended.
By the same token, if hail creates dents in metal roofing, regardless of whether the metal roofing material can still shed water or prevent leaking, direct physical loss has occurred. If hail is a covered peril under that policy, then coverage should be extended. The issue of functional vs cosmetic damage is irrelevant.
Still not convinced? What about an insurance policy on an automobile? If a vehicle is dented by hail, is it cosmetic or functional damage? Can the car still operate? Then surely the damage is not functional. However, the policyholder experiences a loss due to the decreased resale value of the vehicle. Similarly, a homeowner or building owner can experience a drop in property value due to damage caused by hail. Even if the hail damage is not immediately visible, a trained home inspector can spot the damage and a real estate sale can be abandoned or renegotiated due to the damage. A policyholder having to repair or replace a roof is not inconsequential.
“Hey, Fair Claims Group, Inc.! You guys are just biased public adjusters. That’s not what insurance is for! That’s just insurance abuse. It’s causing rates to rise for everyone else!” Everyone buys insurance for different reasons. Since WWII, options for insurance policies have greatly increased. Prior to WWII, most people had the option to buy insurance that only covered fire, lightning, and explosion. Additionally, the insurance only covered the depreciated value of the loss (i.e. if your roof was 20 years old, you were paid the value for a 20-year old roof, not the amount to be able to buy a new roof.) Since that time, insurers have increased the number of perils included in policies to the point where most homeowner policies are “all peril” or “all risk”, meaning that everything is covered (except for a list of specific exclusions.) Insurers have also made replacement cost policies for homeowners insurance the norm (always check your specific policy.) In other words, if your roof is damaged, they’ll pay for a new roof, regardless of how old your roof is.
What that means is, if you have no intention of using your insurance for covered losses that are cosmetic in nature, you have many options to reduce your premiums. The Insurance Services Office (ISO) offers endorsements that exclude cosmetic damage to building materials from hail and wind. Contact your agent to inquire about these options – these endorsements will reduce your premiums.
In our opinion, if you’re paying premiums for specific coverage, the insurers should fulfill their end of the contract and extend coverage. If an insurer, adjuster, or engineer talks about “functional damage”, get a copy of your policy right away. If there’s not an exclusion for cosmetic damage, you might be the victim of a high-level shell game. Give us a call.
info@fair.claims
571-989-FAIR
