Insurance Question: Will Sellers Ins. Cover Hail Damaged Roof?

Question

I am the agent representing the buyer. Inspection showed hail damage on the roof. Roof is in great condition, but is 21 years old - a dinosaur here in Colorado.

If sellers make insurance claim, will insurance cover the hail damage after closing if claim is made before we close?

Mindy Jensen · Answer

Thank you @Jason Bott. I had completely blanked on your name when I posted this or I would have tagged you.

@Richard Bonisa, SUPER helpful to know in general, even if it doesn't pertain to this particular situation exactly.

Thanks for the head's up about declining coverage in older roofs, @Lynn M.

Jason Bott · Answer

I understand.  It's the curse of being an expert of a boring topic LOL

Jason Bott · Answer

@Mindy Jensen there is so many different ways this could go, so here are a few thoughts/comments.

1)  If the seller can identify when the claim happened, then yes, they can.  If they can not identify it, and the damage looks old, there is a good chance it will be declined.

2)  Any claim payout would be made to the name on the insurance policy.   This check/payment can not be assigned to the buyer.

3)  It's possible client already made a claim and pocketed the $.  They are not legally required to fix it.  They lost value in their asset, were compensated, and now will realize the loss when they sell to your buyer.

4) Seller may not have coverage in their policy. If it's just cosmetic, its very common in hail prone areas like CO for there to be an exclusion for cosmetic damage, or you get a credit on your insurance premium if you elect to take the exclusion.

Let me know if you have any other questions on it.

Lydia R. · Answer

@Mindy Jensen I have worked with a lot of investors who have been in this situation and they have the seller file the claim (one guy even paid the sellers deductible), the investor gets one of their roofers to do the roof —usually for much less than the amount the insurance company writes the check for, and the seller gets to keep the difference. Everyone wins. Investor got a new roof for free, seller got some extra money.

Miller Weedn · Answer

I know I am a little late to comment on this, but I'm a roofing contractor in Dallas and we deal with insurance companies all the time for hail claims.  The way the policy is written, the insurance company that held the coverage at the time of the loss (the hail storm) owes for the roof even if the property has been sold.  My mom and I bought 2 houses in 1 year that we had the seller file a claim on,  after we closed on the property and the insurance company paid for the roofs.  The only issue can be that the check will be made out to whomever held the policy at the time.  So you have to make sure the seller will give the check to the buyer or have it put in an escrow account until the work is done.

Richard Bonisa · Answer

@Mindy Jensen  I don't know if this will help or not.

I purchased a property in maybe 2008.  Went to insure it, and I was told it could be insured, but not the roof.

There was or maybe still is something called a CLU report.  The report picked up that the previous owner - the one I was purchasing from, had filed a claim for hail damage (fairly common in the midwest).  It also forced my insurance company to ask for verification, because there had been a payout on the hail damage.  Needed verification the work had been done.  We found out through the process that the work HAD NOT BE COMPLETED.  I simply demanded a new roof be put on so that I could prove or verify with my insurance company.  For me, and the position I was in as a buyer - it was FABULOUS leverage, because the roof looked great.  It passed a certified home inspection.  I'm no novice - I looked at it too.  It was all about insurance claims, settlement, and had the work been done.

I am not sure how to go about finding the info out, or if they still do this.  It was very new in 2008.  Maybe, the question is who carries the insurance and just dig to find out.

I hope this helps in some way.  Not sure if it will.

Lynn McGeein · Answer

Given usual higher deductibles for hail and reduction in coverage for age of roof, insurance likely wouldn't be paying the bulk of the work, anyway.  Can seller escrow their required deductible/co-payment for estimated cost of repair then assign the claim over to the new buyer if work isn't completed before settlement?

Insurance Question: Will Sellers Ins. Cover Hail Damaged Roof?

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