By Alyssa E. Chirlin, Smith Jadin Johnson, PLLC
Hail season in Colorado is underway and if recent trends continue, there will be a significant amount of large hail again this year. In 2018, while the total number of severe hail reports was consistent with past years, the percentage of such reports with hail measuring more than 2” in diameter grew substantially. Larger hail means more extensive property damage, both in prevalence and in severity, and insurance companies will want to minimize payments on these increased claims.
One area where insurance companies limit coverage is in denying their obligation to match the replacement of storm-damaged materials to existing materials. When a storm damages only a portion of a building’s exterior and matching material is unavailable, insurance companies may propose a repair with cosmetically inconsistent materials, creating a mismatch with the undamaged exterior. With aesthetics a high priority in many community associations, it is important to know whether a policyholder is entitled to repairs that preserve a building’s uniform appearance and, inextricably, its market value.
Some states have passed legislation requiring insurance companies to reasonably match existing exteriors and even to replace undamaged property when necessary to maintain a structure’s uniform appearance. And some insurance companies specifically offer ancillary coverage to avoid a material mismatch. This option, often called matching siding insurance, reimburses a policyholder for the costs of replacing undamaged siding in order to preserve an insured building’s uniform exterior. But even in states without matching legislation, and in policies without explicit matching coverage, courts are finding matching requirements in common homeowner policy language. The Supreme Court of Minnesota recently ruled that policy language that requires repairs of a “comparable material and quality” in fact requires materials of a “reasonable color match.”
Colorado has no statute or definitive case law regarding an insurance company’s obligation to match repairs to existing materials, although there is persuasive authority that Colorado will follow the same rationale applied in Minnesota. In 2017, the district court in Hamlet Condominium Association v. American Family Mutual Insurance Co. found that an insurance policy that promised repairs “of comparable material and quality” must cover the cost of obtaining reasonable matching. The court further required the insurance company to pay for “skim-coating” to the undamaged exteriors in order to avoid visible repair patches.
In keeping with this finding and with other jurisdictions’ recent decisions, the common policy phrases “comparable material and quality” and the similar “materials of like kind and quality” likely do not demand an exact color match, and may not cover matching for weathered or faded materials, but they probably do at least require replacement materials to reasonably match the color of existing materials. And when damaged materials are no longer manufactured and there is no available reasonable color match, these phrases may further require the replacement of even undamaged materials in order to ensure a building’s uniform appearance.
A cosmetic mismatch among siding or roofing is a “direct, demonstrable, and physical alteration” that can affect a property’s value and consequently the property as a whole can be considered to have sustained a “direct physical loss” when there is no reasonable match to the existing materials. This would trigger coverage under many homeowners policies and allow for the replacement of the entire exterior, even if only a portion of the property has sustained actual, physical damage.
In Colorado, a policyholder’s best claim to trigger this coverage is to gather evidence that, without matching materials, a repair would not result in a reasonably comparable appearance and the mismatch would leave the policyholder in a worse position than before the damage. Expert evidence that a patch repair could not possibly match can be very effective in persuading an insurance company to cover matching.
Ultimately, coverage depends on an individual policy’s specific language. So with hail season here and the potential for property damage high, it is crucial to be prepared and informed about your property insurance. Read your policy, ask questions, and make sure that you are comfortable with the coverage your policy provides and that you are familiar with its exclusions.
And if you do suffer property damage, know that you may not have to settle for repairs that create aesthetic abnormalities. If you have any questions about the coverage that your policy affords, consult an attorney today.
Alyssa E. Chirlin is an attorney at Smith Jadin Johnson, PLLC, a law firm specializing in the representation of HOAs in insurance claim disputes as well as general community association law. If you have insurance coverage questions, please call her at 720-550-7280.