Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Damage Coverage Archives


In Windridge of Naperville Condo Ass'n v. Philadelphia Indemnity Ins. Co., __ F.3d __,2019 WL 3720876 (7th Cir. 8/7/19), a condominium association sought replacement cost propertycoverage for a direct physical loss to its "buildings or structures" which included completereplacement of all building siding even though only one side of the building was damaged. In thiscase a storm had physically damaged the siding on the south and west sides of the condominiumbuildings. Although the insurer paid for that physical damage, the insurer refused to pay foradditional costs to replace the siding on the building's north and east sides. Matching siding wasno longer available and, in order to return the buildings to their pre-damage condition, it wasnecessary to replace both the damaged and undamaged siding. In reaching its decision, the Courtnoted that the policy provided coverage for direct physical loss to covered property which wasdefined as buildings or structures. The Court found that the language was unclear because the unitof covered property to consider under the policy (each panel of siding vs. each side vs. thebuildings as a whole) was ambiguous as applied to the facts. Therefore, applying Illinois law, the7th Circuit applied the interpretation that led to coverage. Favoring coverage, the Court determinedthat "covered property" in the policy referred to the buildings as a whole as opposed to a sectionof the buildings. In doing so, the Court rejected the insurance company's argument that "the directphysical loss" provisions of the policy required only the damaged siding to be replaced. While theinsurer's position had some supporting case law, the Court determined that the insurer's coverageposition was less reasonable because the association would not be made whole, nor return to itspre-storm status, if the insurer replaced only some portions of the siding. The Court noted that ifa minor section, i.e., a shingle of the building, were damaged, the insurer could pay the insured forthe building's minor decrease in value to make the insured whole again. However, by contrast,the decrease in value would be significant if a building were left with a zebra-striped sidingsituation. In the latter situation, the insured's company would likely choose to pay to replace thesiding rather than compensate the building owner for the reduction in value of the building. 

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