What is my recourse for an undisclosed hail claim with initial payout?

UPDATED: Oct 1, 2022

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What is my recourse for an undisclosed hail claim with initial payout?

We purchased our first home almost 3 years ago. We knew that there was hail damage to the roof at the time of purchase but went ahead with the purchase because we assumed we would be able to place a hail claim after the next major hail storm. We were unaware that the sellers had opened a hail claim sometime between our initial offer and closing and that they subsequently took the initial payout for replacement. We were aware that a previous set of buyers had backed out because the sellers refused to replace the roof as part of the sale.The disclosure forms the sellers filled out was marked

Asked on April 10, 2019 under Estate Planning, Colorado


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Unfortunately, you would not have a claim because even if the seller did not disclose the damage on the disclosure form, you write that you "knew that there was hail damage to the roof at the time of purchase." A nondisclosure claim is a fraud claim; you can only bring a fraud claim if you reasonably relied on the disclosure you received--that is, if you had no reason to know other than what the disclosure stated; however, you did know of the hail damage, which means that you could not reasonably rely on the disclosure--you knew better. Since you in fact knew of the hail damage, this was not fraud despite the lack of disclosure.
Realtors are not liable for that the sellers do or do not disclose: that is all on the sellers. So even if there had been a fraud claim, you could not bring  it against the realtors. 
The insurer only has to pay out claims as per the terms of the policy and the facts, including the existence of prior claims or damage. Since a prior claim had been submitted but the home not repaired, the insurer is not liable: they don't have to pay out when there was prior damage not remediated.
Bear in mind that, even if you were not thinking of it this way, what you were planning to do actually amounted to a form of insurance fraud: when new hail damage occured, you planned to submit a claim which included older damage occuring before you owned the home--i.e. you were planning to claim for damage where you were not legally entitled to compensation, since someone is not entitled to insurance or other compensation for what happened before they owned the property (and also, you cannot include prior damage in a current claim). What you were planning to do was not proper and would not be allowed if the true state of affairs come out--for example, if you had placed the claim and an adjuster noticed or become aware that some damage was pre-existing and/or pre-dated your ownership. What you should have done, knowing of the damage before the purchase, would have been to negotiate a price reduction with the seller to compensate for it, or else entered into an agreement with him that he would place the claim and turn the proceeds over to you.

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