In a win for QBE Insurance Corporation, a federal judge in Colorado ruled that the insurer properly applied a hail deductible and did not act in bad faith when it paid a homeowners’ association just over $1,500 for roof damage caused by a 2021 hailstorm.
The case arose after a June 2021 hailstorm damaged 86 townhomes in the Players Club Villas community. The association, which held a commercial property policy with QBE, submitted a claim days after the storm. While QBE acknowledged coverage, it issued a payment of only $1,587.05, citing actual cash value calculations and applying a 5% per-building “Hail Deductible” as specified in the policy.
Dissatisfied with the amount, the Homeowners Association of Players Club Villas Townhomes sued QBE, alleging breach of contract, statutory and common law bad faith, and seeking punitive damages. The association claimed QBE had materially underpaid the claim and forfeited the right to apply the deductible.
But US District Judge Nina Y. Wang disagreed, ruling that the deductible was valid and enforceable. “A deductible is neither a penalty nor a benefit,” Judge Wang wrote, calling it “a mechanism for shifting risk from the insurer to the insured.” The court rejected the association’s attempt to equate the deductible with an unenforceable penalty clause, finding the policy language clear and unambiguous.
PCV challenged QBE's right to reduce its payment using the deductible, arguing that QBE's alleged material breach invalidated the deductible provision—likening it to a penalty. The court rejected this argument, emphasizing that:
“A Deductible is calculated separately for, and applies separately to: a. Each building that sustains loss or damage…”
“We will not pay for loss or damage until the amount of loss or damage exceeds the applicable Deductible.”
The court concluded that QBE’s application of the deductible during claim adjustment was proper under the contract, even if breach claims were pending.
The judge also granted summary judgment to QBE on both bad faith claims. While the homeowners association pointed to what it called a “minimal payment” and a failure to timely share an engineering report, the court found these allegations legally insufficient without evidence that QBE’s actions deviated from objective industry standards.
“PCV has simply not come forward with any evidence of the standard that should have governed QBE’s conduct,” the judge wrote, emphasizing that both statutory and common law bad faith claims under Colorado law require proof that an insurer acted unreasonably according to recognized industry norms. The association failed to offer such proof, either through expert testimony or other admissible evidence.
The court also dismissed the claim for punitive damages, citing the plaintiff’s failure to follow Colorado’s statutory requirements, which bar such requests in initial pleadings and require leave of court based on a prima facie showing of willful or wanton conduct.
Only the breach of contract claim remains for trial. While QBE paid a nominal amount based on actual cash value, the homeowners association contends it is entitled to a replacement cost payment of at least $118,159, based on an estimate by QBE’s own litigation expert. The court found that factual disputes—such as whether repairs were completed and whether the replacement cost claim was timely—precluded summary judgment on that issue.
A status conference is scheduled for May 1 to set a trial date.
Case: Homeowners Association of Players Club Villas Townhomes, Inc. v. QBE Insurance Corp.
Court: U.S. District Court for the District of Colorado
Judge: Hon. Nina Y. Wang
Plaintiff’s counsel: Alan T. Dickey
