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In Cannon Falls Area Schools v. Hanover American Insurance Company (2025 WL 2976533 (D. Minn. 2025)), the United States District Court for the District of Minnesota held that a property insurer properly denied coverage pursuant to a cosmetic damage exclusion because hail indentations to roofs affected only their appearance, not their ability to function as barriers against the elements. The Court emphasized the roofs' performance immediately following the loss rather than any speculative future vulnerabilities.
Factual Background
The insured submitted a claim to its property insurer arising out of damage to two of its buildings caused by hail and high winds. Both buildings had metal roofs. It was undisputed that the hailstorm did not puncture the roofs or disengage the seams. Moreover, following the storm, the roofs never leaked.
Following its investigation, the insurer partially denied the claim based on the subject policy's Cosmetic Damage Exclusion that placed limitations on coverage for roof surfaces:
The following applies with respect to loss or damage by wind and/or hail to a building or structure [to which the policy applies]:
[The insurer] will not pay for cosmetic damage to roof surfacing caused by wind and/or hail. For the purpose of this endorsement, cosmetic damage means that the wind and/or hail caused marring, pitting or other superficial damage that altered the appearance of the roof surfacing, but such damage does not prevent the roof from continuing to function as a barrier to entrance of the elements to the same extent as it did before the cosmetic damage occurred.
As the parties disputed coverage under the policy, the insured commenced a lawsuit.
Analysis
The Court evaluated what it meant for the roofs to continue to function as barriers to the elements to the same extent they did before the hailstorm. The insured argued the exclusion did not apply because the roofs were weaker and more susceptible to failure in the event of a future storm. On the other hand, the insurer maintained that as long as the roofs continued to perform their function in the present (i.e., they were not leaking and remained structurally intact), the damage was cosmetic and excluded from coverage.
The Court agreed with the insurer and determined that the Cosmetic Damage Exclusion unambiguously referred to the current ability to keep out the elements, and not possible vulnerabilities that could manifest due to future weather events. There was no dispute that, following the storms, the roofs did not leak or allow elements inside. Thus, the roofs continued to function as required by the policy language. The Court made clear that "marring," "pitting," and "other superficial damage" were inherently surface-level and did not affect function.
Conclusion
Evaluating hail-related damage under property insurance policies can be challenging, as it often involves distinguishing between cosmetic and functional impairments. However, Cannon Falls reinforces the notion that potential future vulnerabilities, without an impact on performance, are typically beyond the scope of coverage.
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