SUPERIOR COURT HANDS DOWN DECISION THAT HELPS INSURERS RESOLVE ?MATCHING? DILEMMA

Matthew C. Lenahan, Esquire
Richard W. DiBella, Esquire
DiBella, Geer, McAllister & Best, P.C.
312 Boulevard of the Allies
Pittsburgh, PA 15222

Richard W. DiBella is a shareholder and Matthew C. Lenahan is an associate at the law firm of DiBella, Geer, McAllister & Best, P.C., a full-service insurance firm located in Pittsburgh.

Once an insurer commits to replace or repair a portion of a damaged building, questions will frequently arise as to the scope of the insurer?s duty to ?match? the new replacement material with the preexisting material; these questions most often arise from claims centering around damaged roofs, vinyl siding and tile floors, where the damaged portion is easily replaced without disturbing the remaining undamaged portion. The ?matching dilemma? arises when an exact match for the siding or the tile cannot be found; does the insurer have an obligation to then replace the entire portion of the building, both damaged and undamaged, in order to achieve an aesthetic ?match? for the insured?

While Pennsylvania Courts have long recognized this dilemma, they have provided little guidance on its resolution. A recent Superior Court decision, however, has been handed down which holds that using replacement materials similar in ?function, color and shape?, though not identical, meets policy requirements for using ?like construction.? While the decision Greene v. USAA, 2007 WL 4110632 (Pa.Super. 2007), is clearly beneficial to insurers faced with the matching dilemma on a claim, it is equally important to recognize the limits of the holding based upon the equities of the case.

In November of 1998, the insureds? upstairs bathroom was damaged when water leaked through a skylight that existed in the roof. During the investigation of the claim it was determined that the seal around the skylight was broken and leaking, and also that the insureds? roof had incurred some storm damage and had lost three shingles from the front slope of the roof. Typical wear and tear was also found on the roof. In March of 1999, USAA approved payment for portions of the insureds? claim, which included a payment of $290.92 for minimal roof repairs. USAA also notified the insureds that typical wear and tear on the 18 year old roof was not covered under the policy. Shortly thereafter, the insureds submitted a second claim, alleging that a wind storm caused additional damage to the same slope of the roof. When USAA went to investigate the additional damage, they discovered that the insureds had already paid for the entire roof to be replaced. Based upon pictures of the additional damage, USAA eventually issued another $1,434.54 in payment for the roof. The insureds sought payment for the entire cost of the roof replacement, based on the fact that matching roof shingles could not be found, but USAA refused to pay the full replacement cost. The insureds filed suit in Montgomery County claiming, inter alia, that USAA breached its insurance contract by not paying full replacement cost of the roof when it knew matching shingles were not available. The Montgomery County trial court awarded the insureds $3,173.37 for damage to their home, and the insureds appealed, contending that the award was insufficient for reasons set forth below.

The insureds appealed the holding of the trial court on several issues, including the issue of matching. The USAA policy in effect stated that they would pay for the ?replacement cost of that part of the building damaged.? The policy went on to state that payment of replacement cost ?will not exceed that necessary for the like construction and use on the same premises?.? The insureds, on appeal, argued that, because the ?part of the building damaged? was the roof, and because the damaged shingles were no longer in production, ?like? construction meant an entirely new roof, as opposed to a roof with mismatched shingles.

The Superior Court began its analysis of this issue by agreeing that the policy clearly and unambiguously requires USAA to pay the replacement cost of the ?part of the building damaged.? However, the Court stated that the insureds? interpretation of the policy language, including interpreting the entire roof as the part of the building damaged, was ?unreasonable and absurd.? At most, the court continued, the part of the building damaged was the one slope of the insureds? multi-sloped roof. Quoting the trial court to highlight the absurdity of the insureds? position, the Court stated that ?[t]o utilize [insureds?] logic would necessitate replacing all siding when one piece of siding is damaged, or an entire door when a door knob is damaged. It defies common sense.?

The Court did not find the insureds? additional argument, respecting the term ?like construction?, any more valid. While it was clear that matching shingles were no longer available, trial testimony indicated that shingles of similar texture and color could have been used. The Court went on to state that the USAA policy provided for:

[L]ike construction, not replacement with the identical item damaged. We are satisfied that the repair of the damaged slope of [the insureds?] roof with shingles similar to the damaged shingles in function, color and shape meets the parameters of ?like construction? as called for by the policy language.

Thus, the Superior Court upheld the ruling of the trial court, affirming that USAA did not need to pay for the replacement of the insureds? entire roof due to non-matching shingles used to repair the same.

Clearly, this is a favorable decision to insurers who are faced with a ?matching dilemma.? The ?similar function, color and shape? test will be a beneficial guidepost when attempting to resolve these claims. However, it is important to be cognizant of the equities in the case which may necessarily limit its holding. There appears to have been very limited damage incurred to the insureds? roof, compared to the large cost of replacing the whole structure; also, the Superior Court hints that the insureds? motive was simply to get a new roof, and notes that the second claim was submitted in March, right when the insureds discovered that wear and tear to the 18 year old roof would not be covered under their first claim. Furthermore, the insureds had their entire roof replaced as soon as they submitted the second claim, and before USAA had the opportunity to inspect the same.

Many carriers have developed matching endorsements and matching limitations. Obviously, when reviewing any claim with a matching or mis-matching issue, it is important to first consider your policy language in relation to the language of the within case.

Should you have any questions, regarding this case, do not hesitate to contact the authors at 412-261-2900.