Issue #2004
Cosmetic Damage Exclusion Stirs Controversy

Cosmetic Damage Exclusion Stirs Controversy: Homeowner and Commercial Property Policies Affected

In this E-Edition of Adjusting Today, veteran claims professional and respected author Robert J. Prahl, CPCU, offers insight into the emerging issue of cosmetic damage exclusions in property insurance policies.

Insurance claims for roof damage are on the rise, and as a result insurers are adding cosmetic damage exclusions to both homeowner and commercial property policies. Cosmetic damage includes: marring, denting or pitting that affects the appearance but not the function of the roof. If insurers choose to implement these endorsements, coverage for solely cosmetic damage from wind and hail may be eliminated.

This edition also includes an interesting companion article that addresses another cosmetic damage-type endorsement: “Actual Cash Value Adjustment for Roof Surfacing.” This endorsement provides that if the roof is more than 15 years old and damage to roof surfacing is caused by windstorm or hail, the loss will be adjusted on an actual cash basis with deduction for depreciation. In the absence of this endorsement, damage to the roof would be adjusted on a replacement cost basis subject to the provisions of the replacement cost coverage.

Prahl points out that time will tell how far the industry will go with these endorsements, how they will be received by state regulators, how they ultimately will be accepted by insureds and agents, and how the cosmetic damage exclusion may be interpreted by the courts.