Covered or not covered? You’d better make sure beforehand

By The Record | Jun 11, 2019

Anyone who owns residential or commercial property along the Gulf Coast knows that hurricanes and other wind storms are a perpetual threat and likely has insurance to cover potential damages. The trick, though, is making sure coverage is comprehensive enough.

Being insured against wind damage won’t help if your loss was caused by rain. Conversely, rain coverage won’t protect you against wind damage, and neither one may apply to flood damage.

It’s challenging enough for an ordinary person to interpret his own insurance policy as it relates to his own property and possible damage claims, but imagine being selected for jury duty and having to parse someone else’s contract and settle a dispute about coverage between the carrier and the policy holder.

A Galveston jury recently did just that, after hearing a week of testimony from plaintiff GYB Investors, represented by the Mostyn Law Firm, and three defendant firms: the Texas Windstorm Insurance Association (TWIA), Landmark American Insurance Company, and the Victory Insurance Agency. 

In October 2015, during Hurricane Patricia, the electricity went out at the Galveston Yacht Basin (GYB). When it came on again, a transformer arced and caused significant damage to the entire electrical system.

The owners of the dock, GYB, had a windstorm and hail policy with TWIA and an all-risk commercial property policy with Landmark, both policies purchased through Victory. GYB submitted claims to both TWIA and Landmark and both carriers agreed that the arcing event was caused by rainwater entering the transformers.

Both TWIA and Landmark denied the claim and GYB subsequently filed suit. During the week-long trial last month, TWIA cited the rain exclusion in its policy and Landmark pointed to the windstorm and electrical arcing exclusions in its coverage.

Recognizing that the specified exclusions had been appropriately applied, jurors unanimously concluded that TWIA, Landmark, and Victory had honored the terms of their contracts, and declined to award damages to GYB.

Mostyn attorneys must have studied contracts in law school, but it seems they need to do some brushing up.

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