A hailstorm physically damaged the aluminium cladding on the south and west sides of the insured building. The insurer was ordered to replace the cladding on all sides of the building because a matching cladding could not be found. It was held that the obligation to pay for “direct physical loss” to the “covered property” meant the damage caused to the building as a whole which required replacement of property of “comparable material and quality”.
The insurer had agreed to pay the cost of repairing or replacing the lost or damaged property. The court concluded that the building as a whole was damaged and that all of the cladding around the building had to be replaced to ensure matching panels. Payment to replace only the specific panels that were directly hit by hail, leading to a two-tone building was a less reasonable interpretation of the policy and the court favoured an interpretation that led to coverage. Although the policy covered “direct physical loss”, in the context the term “direct” was meant to exclude situations in which an intervening force plays some role in causing the damage and it did not refer only to the parts of the building directly damaged. The building suffered a direct physical loss caused by the hail and windstorm and the insurer had to pay to return the building to its pre-storm status, namely with matching cladding on all sides.
[Windridge of Naperville Condominium Association v Philadelphia Indemnity Insurance Company, US Court of Appeals (Seventh Circuit), case number 1:16-CV-3860)]