Not every insurance claim requires expert involvement. However, when a dispute arises, identifying and retaining an expert can be invaluable, not only for final resolution but in keeping a claim open and alive. For example, in Vargas v. State Farm General Insurance Company,1 the Central District of California issued an order denying State Farm’s motion for summary judgment, relying on the well-reasoned and succinctly stated opinions of Plaintiff’s expert, Sandra Watts.
This case involved the notorious “continuous or repeated seepage or leakage of water”2 policy exclusion, along with a policy exclusion for losses caused by “wear, tear, marring, scratching, deterioration, inherent vice, latent defect and mechanical breakdown.” Plaintiffs left their home for a trip and returned to find water damage throughout the house; a water heater and connecting hose appeared to be the culprit. State Farm initially denied covering only the source of the water but told the Plaintiff, Ms. Vargas, that the ensuing water damage was covered. Ms. Vargas insisted State Farm send an adjuster to inspect the property and confirm the scope of work required before incurring costs for demolition and repairs.
After spending only 30 to 60 minutes, the adjuster left the property without speaking to Ms. Vargas. He denied the claim that same day, stating that the predominant cause of loss was wear, tear, marring, scratching, deterioration, inherent vice, latent defect, or mechanical breakdown of the supply line, resulting in a repeated leakage and seepage of water or steam. State Farm contends its denial was proper because damage from those risks is excluded under the policy. Plaintiffs argued there was a genuine dispute about how the water pipe was damaged and whether the water damage was caused by repeated seepage or leakage of water, alternatively arguing they suffered a sudden and accidental loss.
To address the coverage issue in light of summary judgment, the trial court quickly turned to the experts, and notably, highlighted their experience in the order. State Farm’s expert opined:
[T]he extent of [the mitigation contractor’s] claimed dryout, water removal, and extensive muckout / flood loss cleanup is only consistent with a water loss that was a continuous or repeated leakage…[t]he water loss as described – steam and mist from a water heater located outside the home – was not a sudden discharge of water that would cause damage immediately.
To find there was a genuine issue of material fact whether State Farm’s conduct breached the policy, the court relied on Ms. Watts opinion that:
[I]t is clear to [her] that the damages observed and reported by [Ms. Vargas], and the restoration efforts performed by [the mitigation contractor] – including water extraction inside the home, removal of saturated soil in the crawlspace, dehumidification and air movement – are consistent with a sudden and accidental loss, and not with a long term leakage situation as alleged by State Farm.
The court further leaned on the following opinions of Ms. Watts, among others, which preserved Plaintiffs claim for breach of the Covenant of Good Faith and Fair Dealing and punitive damages:
According to Ms. Watts, when [the State Farm Adjuster] inspected the home he failed to (1) interview Ms. Vargas regarding the facts of the loss, (2) attempt to contact the plumber who repaired the supply line, (3) contact [the mitigation contractor] to confirm or discuss the cause of loss, (4) identify any specific indicator of repeated leakage or seepage, or (5) conduct any other investigation to determine or confirm the cause of the loss.
According to Ms. Watts, ‘[i]t is well established that repeated leakage and seepage is generally identified by indicators of a continuing problem – such as deterioration of building components, or wet or dry rot – none of which have been noted or observed at the insured’s home.’
The basis for the court’s analysis in evaluating a summary judgment motion is made crystal clear in an order like the one in Vargas – using a reputable and knowledgeable expert matters. Sandra Watts is a leader in the industry, and I’m extremely fortunate to have learned quite a bit from her directly. Sandra is a claim consultant and expert witness at Resolved SF. She also works for United Policyholders, a non-profit organization that serves as a trustworthy and useful information resource and a respected voice for insurance consumers. Sandra has over 30 years of experience in the industry, previously serving as a claim specialist, an agent, a claim team manager, an owner and general manager of a restoration company, and seemingly everything in between!
A well-balanced and experienced expert should be considered for any insurance claim where a dispute rises.
1 Vargas v. State Farm General Ins. Co., No. CV 20-09935 PA (C.D. Cal. July 19, 2021).
2 For more blogs on this topic, check out: The “Continuous Or Repeated Seepage Or Leakage Of Water” Exclusion, and Absent A Specific Definition, Leakage Generally Refers To Low Volume Or Gradual Event.