Insurance Carriers Often Misapply Their Policies: The Exterior Paint Or Waterproofing Exclusion Does Not Apply To Stucco Surfaces

In Florida, many insureds are still litigating over Hurricane Irma claims. One of the issues that insurance adjusters often fail to pay for is stucco damage to the structure caused by wind. Many policies, including Commercial, Businessowners, and even the Homeowners HO2 policy, include a version of the following exclusion:

Exterior Paint Or Waterproofing Coverage for any building or structure under this Policy excludes loss caused by a Peril Insured Against to paint or waterproofing material, including stain, applied to the exterior of the building or structure.

Hurricane Irma’s winds damaged many tile roofing systems. Relevant to our topic, the displaced tile roofing materials turn into projectiles or wind-borne debris. These tile roofing materials commonly damage the exterior elevations of the surrounding structures. In South Florida, a common construction of a structure includes tile roofs and stucco.

Many adjusters and defense attorneys attempt to apply this exclusion to the stucco surfaces and argue coverage is not owed. On December 27, 2021, FC&S¹ gave its opinion confirming that the interpretation in favor of coverage is correct. As noted by the FC&S editor:

The items listed in this exclusion are ancillary items added as a protectant to the home’s normal construction. Stucco is a structural construction material, and redashing is applied to repair cracks and other damage; therefore the exclusion does not apply and there should be coverage for the redashing of the stucco.

The exclusion is intended to exclude coverage for staining to wood and/or other nonstructural water proofing agents. Insurance carriers are “shrinking” coverage through policy forms, percentage deductibles, and sub-limits of liability. Taking coverage away from policyholders that is owed is obviously wrong. Hopefully, insurance carriers will stop misinterpreting their own policies to pay less, and start putting policyholders over their own profits.
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¹ Insurance Coverage Q&A. FC&S. 12/27/2021. (Article available, with subscription, at:
https://www.nuco.com/fcs/2021/12/27/insurance-coverage-qa-appraisal-and-coverage/?utm_source=email&utm_medium=enl&utm_campaign=coverageinsider&utm_content=20211227&utm_term=fcs)