Insurance – ‘All-Risk’ Insurance Policy – North Carolina Causation Standard

The district court applied the correct North Carolina causation standard for an all-risk policy, the jury’s finding that the snowstorm caused the roof damage was supported by sufficient evidence, and the damages award of $1.1 million on an actual cash value (ACV) basis was adequately substantiated.

We affirmed the district court’s judgment in its entirety.

A jury awarded $1.1 million for roof damage sustained during a 2018 snowstorm. Plaintiff Wake Chapel Church operated a church campus in Raleigh, North Carolina, with two buildings  covered under an “all-risk” insurance policy issued by Defendant Church Mutual Insurance Company (CMIC) from 2016 to 2019. The policy broadly covered “direct physical loss or damage” caused by any covered peril, except for specific exclusions such as rust, corrosion, decay, deterioration, or latent defects. Following the snowstorm, Wake Chapel discovered scrapes and other damage on the Sanctuary’s roof, prompting an engineer hired by the church to conclude that sliding snow and ice had caused the damage. CMIC’s own engineer disagreed, leading CMIC to deny the claim.

Wake Chapel filed suit in North Carolina state court, and CMIC removed the case to federal court on diversity grounds. The amended complaint included claims for declaratory judgment, breach of contract, unfair and deceptive trade practices, and bad faith. CMIC sought summary judgment, arguing that North Carolina law required the covered peril to be the “efficient and predominant” cause of the damage. The district court rejected this, noting that North Carolina law applies a more lenient causation standard for “all-risk” policies, under which coverage is available if the covered cause contributes at least partially to the loss, even if an excluded cause also played a role. The court thus allowed the declaratory judgment and breach-of-contract claims to proceed.

At trial, both parties’ engineers testified regarding the cause of the damage. The jury concluded that the 2018 snowstorm had caused the roof damage and awarded Wake Chapel $1.1 million. CMIC moved for judgment notwithstanding the verdict or a new trial, arguing that the damage was due to inherent defects, pre-existing conditions, or non-fortuitous events, and that the evidence did not support the jury’s findings. The district court denied these motions.

On appeal, CMIC challenged the causation standard, its application, and the sufficiency of evidence for damages. We affirmed, explaining that North Carolina precedent for all-risk policies permits recovery when a covered cause contributes to the loss unless it is entirely caused by an excluded factor. The jury reasonably rejected CMIC’s arguments regarding inherent defects, pre-policy damage, and the fortuitous nature of the snowstorm. Testimony from Wake Chapel’s engineer was sufficiently concrete to support the verdict.

Regarding damages, the jury properly awarded recovery on an ACV basis, supported by evidence of repair costs provided by both parties’ experts. The jury found CMIC’s estimate of $1.1 million reasonable in light of competing estimates. The jury had sufficient evidence to determine both causation and damages and that the district court had not erred in denying CMIC’s post-trial motions.

Affirmed.

Wake Chapel Church Inc. v. Church Mutual Insurance Co. S.I. (Lawyers Weekly No. 001-058-26, 10 pp.) (Per Curiam) Appealed from the U.S. District Court for the Eastern District of North Carolina, at Raleigh (Richard E. Myers, II, C.J.) ON BRIEF: Steven Andrew Bader, Jennifer A. Welch, CRANFILL SUMNER, LLP, Raleigh, North Carolina, for Appellant. David S. Coats, John T. Crook, BAILEY & DIXON, LLP, for Appellee. U.S. Court of Appeals for the Fourth Circuit Unpublished