New Mexico Hotel Files Property Damage Insurance Lawsuit for Pipe Burst
Lundquist Law Firm recently filed a bad faith property insurance lawsuit in New Mexico against Mesa Underwriters Specialty Insurance Company on behalf of a large hotel in Ruidoso, New Mexico.
The lawsuit alleges that on December 15, 2022, a pipe began discharging a large amount of water on the first floor of a family-owned hotel shortly before midnight. The ensuing Category 3 water caused direct physical loss to at least 19 of the hotel’s interior rooms, the interior finishes, and a variety of business personal property. As a result, the hotel was largely rendered uninhabitable. The hotel immediately filed a claim under its “all-risk” property and casualty insurance policy.
In response to the claim, Mesa assigned one adjuster to the claim who was inadequate and improperly trained. The adjuster performed a haphazard investigation of the damages and prepared a grossly undervalued estimate of damages to the structure that ignored obvious damages to the property. Additionally, the lawsuit contends that the adjuster failed to engage appropriate, non-biased consultants to evaluate the damage. Moreover, despite there being no dispute as to the cause of the damage, Mesa misrepresented that a host of exclusions applied to the claim when issuing its final coverage determination under the policy. To add insult to injury, the desk adjuster deliberately chose to use the highest possible replacement cost value (RCV) using incorrect variables, rather than what was required by the policy, to impose a massive 47% coinsurance penalty. Had the adjuster determined the correct fair market value of the hotel or relied on any of the third-party valuations submitted by the hotel’s agent, no coinsurance penalty would have applied.
Mesa’s adjuster then elected to invoke the appraisal process under the policy on February 28, 2023. But then immediately after the appraisers’ first onsite inspection, Mesa’s appraiser began communicating with third-parties under the guise of investigating the claim on Mesa’s behalf. To be sure, the only communications regarding the cause and scope of loss stemming from the water damage should have been between both disinterested appraisers, especially given Mesa had previously accepted coverage for the loss. No internal adjuster or carrier representative should ever attempt to steer its designated appraiser in a particular direction or inappropriately inject a newly invented coverage issue into the appraisal process.
Right after receiving the umpire’s invoice and request for a joint inspection with the appraisers, Mesa’s appraiser unilaterally brought the ongoing appraisal process to a complete halt in July on Mesa’s behalf, claiming no further actions could be taken. Mesa’s appraiser even made clear that the insurer would not be paying its share of the umpire’s invoice, a deliberate and calculated decision which forced the ongoing 4.5-month appraisal process into a complete standstill. Three weeks after the appraisal process was inappropriately halted, our client received a letter from the adjuster requesting an Examination Under Oath (“EUO”) of a hotel representative and eight categories of additional documents in conjunction with the EUO—incredibly, eight months after the claim and six months after Mesa’s decision. An EUO is rarely used by insurers—these should be sought very early after a claim is made and are only appropriate in limited situations such as to gather more information, prevent fraud, or allow the insured to clarify their losses. EUOs are always conducted before a carrier makes a formal coverage decision on a claim, never afterwards, since the investigation would be complete.
Hotels and motels are buildings designed to be a safe haven for weary travelers, and an important investment for their owners. Owners of these properties work hard to maintain the properties and attract business. For many in the hospitality industry, it is truly a family business with groups coming together to invest and operate the business. Whether the owners are operating the hotel themselves, or have a third party operator involved, the challenges presented by fire, storm or water damage can be overwhelming.
When an insurance carrier acts in bad faith and wrongfully denies a property damage claim, the consequences to the business can be dire and result in a loss of revenue. With the help of experienced property damage insurance attorneys, hotel and motel owners can fight back against these illegal practices and settle their insurance claim dispute in their favor.
Our Hotel & Motel Property Damage Attorneys have represented various hotel and motel owners all across Texas and around the nation in complex bad faith property insurance cases, and understand how insurance companies function. We can evaluate your claim and can help you determine your best course of action. Our use of industry experts and knowledgeable coverage lawyers allow us to present a comprehensive claim to the insurance carrier and fight for the rights that you paid for when purchasing property insurance.
Lundquist Law Firm has vast experience handling the unique issues of the hospitality industry in Texas and across the nation – contact us today to schedule a free case evaluation.