In Cannon Falls Area Schools, ISD 252 v The Hanover American Insurance Company, No. 25-3315, (8th Cir. July 27, 2026), the Eighth Circuit Court of Appeals issued an Order holding that the cosmetic damage exclusion at issue in the matter did not require the roof to leak water in order to be considered more than just cosmetic damage. Accordingly, damage that reduces the strength of the roof such that the roof withstands less wind or snow load forces is more than cosmetic damage.
The property at issue in this matter has large metal dome roof sections. The parties agreed the metal roofs sustained hail damage and that the damage and that hail damage is generally covered under the Policy. However, the insurance company argued that the damage was only cosmetic and therefore excluded by the Policy’s cosmetic damage exclusion. The cosmetic damage exclusion states that “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 the entrance of the elements to the same extent as it did before the cosmetic damage occurred.”
The insurance company argued that the cosmetic damage exclusion means that so long as the roof does not immediately leak water, the damage is only cosmetic and therefore excluded. According to the insurance company, if the roof did not leak or permit the elements to enter before the damage and it does not let the elements enter immediately after, then the roof continues to function as a barrier to the elements to the same extent. We argued that a reduction of the strength of the roof material is more than a cosmetic change, even if the roof does not permit the elements to enter immediately. An engineering assessment of the roofs showed that they previously withstood a certain amount of wind and snow force, and now they can withstand less before they would fail. We argued that the strength of a roof is part of its function and that its being able to withstand less force is a reduction to the extent in which it serves as a barrier to the elements, especially snow and wind.
The District Court adopted the analysis the insurance company provided. The Court held that the roof was not leaking, not permitting snow to enter the building, and was not permitting wind to enter the building, and therefore it was continuing to serve as a barrier to the entrance of the elements to the same extent as it did before. We appealed the District Court’s decision, contending that this test fails to consider damage that has a functional effect even if it does not entirely fail and permit elemental intrusion.
The U.S. Eighth Circuit Court of Appeals reviewed and overturned the U.S. District Court’s Order. The Court of Appeals reasoned that “roofs have an upper limit to how much load they can bear—this is part of the ‘extent’ to which they serve as a barrier to the elements.” Id. at 4. The Court went on to state “[i]f a hail-damaged roof can no longer bear the same weight of snow or speed of wind, then it does not function as a barrier to snow and wind ‘to the same extent’ as it did before the damage.” Id. The Court concluded that “[i]f the roofs are weaker, it does not matter if they have yet leaked or succumbed to a heavier load—what matters under the policy is that the hail damage has rendered them diminished barriers.” Id. In the broad context, the Court of Appeals determined that the function of the damaged material must be taken into account when considering if that material’s function has been altered. Where the metal on a roof serves only to shed water, such as a vent cap, then its ability to shed water is likely the only consideration necessary. However, when the function of the material is to provide structural support, then the analysis involves varying degrees or levels of functioning rather than a simple yes or no analysis of if it is currently permitting entrance of the elements.
The cometic damage exclusion is becoming more common in insurance policies. The District Court’s application of the exclusion would have permitted the insurer to exclude coverage whenever the roof does not immediately leak or fail, even if the roof is at danger of imminent or likely failure. This is not consistent with what a reasonable person would consider to be merely cosmetic damage. The Court of Appeals clarified that even though a roof does not immediately permit intrusion if the elements damage that weakens the roof is a functional change that warrants insurance coverage.
It is important to note that each insurance policy may contain different terms and different definitions of what is cosmetic damage. Each loss and circumstance must be analyzed in connection with the specific policy at issue. If you are experiencing any issues with your property insurance claim, please reach out to the amazing attorneys at Hellmuth & Johnson.