The Public Adjuster's Guide to Cosmetic Damage Exclusions

If you see hail hits on a soft metal roof, the standard playbook says you have a claim. For years, many claims fights treated altered geometry as strong evidence of direct physical loss.

But recently, carriers have evolved. As hail and wind losses have pressured underwriting, they have introduced endorsements that fundamentally decouple "damage" from "indemnity," leaving policyholders with watertight roofs that are economically stranded.

For Public Adjusters, the Cosmetic Damage Exclusion represents the deciding factor: identify it at intake, and you can build a file based on forensic functionality. Miss it, and you risk walking your client into a denial after months of wasted effort.

This guide covers how to identify the trap in the endorsement stack, the dangerous trend in recent case law, and the specific functional arguments that still hold weight.

1. The Hierarchy Problem: Where the Exclusion Hides

The first challenge with Cosmetic Damage Exclusions is that they rarely appear in the policy jacket. They are almost always attached via endorsement, creating a "silent" override of the standard coverage grant.

While ISO Form CP 10 36 (Limitations on Coverage for Roof Surfacing) is a common commercial endorsement, you must also be vigilant for AAIS forms (more prevalent in the homeowners/residential space) and proprietary carrier endorsements. These forms often sit deep in the stack, far past the Declarations page.

The Takeaway: You cannot rely on a "Special Form" or "All Risk" label. A thorough review of the endorsement stack is required to see if the definition of "damage" has been rewritten. If you miss this hierarchy change, your scope is indefensible.

2. The "Present Tense" Trend: Cannon Falls v. Hanover

To defeat these exclusions, you must understand how courts are interpreting them. The ruling in Cannon Falls Area Schools v. Hanover (D. Minn. Oct. 21, 2025) highlights a harsh "Present Tense" interpretation that is gaining traction.

In this case, the PA's experts argued that widely dented metal panels had "used up" their structural capacity, making them weaker and prone to future failure. Historically, this "reduced life expectancy" argument has been a winner.

The court rejected it. It ruled that the policy language—which defined cosmetic damage as that which "does not prevent the roof from functioning as a barrier"—demands a present-tense inquiry. The court effectively narrowed the battle to this: Does the roof currently let the elements in? If the answer is no, the damage is cosmetic, regardless of future reliability or reduced service life.

The Warning: While this is a District Court ruling, it signals a dangerous shift in how courts are beginning to view "functionality." Do not build your claim solely on "reduced life expectancy." The distinction is shifting; it is no longer between strong roofs and weak roofs, but between roofs that currently fail as a barrier and those that do not.

3. Negotiation Leverage: "Barrier to the Elements"

When "appearance" arguments are off the table, you must pivot entirely to functionality. However, you must be precise. The standard exclusion language typically refers to the roof functioning as a barrier to "the elements" (e.g., water, UV radiation, oxygen, wind uplift), not just rain.

This broader definition opens a narrow tactical lane:

• Granule Loss as Barrier Failure: On asphalt composition roofs, granules are not aesthetic; they are the primary barrier against UV degradation. If hail impact causes granule loss, the "barrier" against the sun has been compromised, accelerating the deterioration of the underlying bitumen.
  • Warning: Check the definition of "Cosmetic Damage" first. If the endorsement explicitly lists "granule loss" as cosmetic (as many proprietary forms do), this argument is dead. This strategy only works on ISO forms or vague definitions where granule loss is not specifically named—and where jurisdictional case law has not already foreclosed the argument.
• Micro-Fissures and Oxidation: On metal roofs, deep dents often cause micro-fissures in the protective galvalume or paint coating. If testing confirms the coating is compromised, the barrier against the chemical element of oxygen has failed, leading to premature decomposition.
  • Note: This is a technical coverage argument designed to create ambiguity around the definition of "elements," rather than an engineering fact.

The Takeaway: Frame your arguments around the specific element the roof can no longer resist. If you can prove the barrier is broken—even if a leak has not yet manifested—you have a defensible path back into coverage.

4. The "Scope Creep" Trap: Windows and Walls

While ISO forms typically target "Roof Surfacing," other rating bureaus are more aggressive. Certain AAIS endorsements, for example, extend the Cosmetic Damage Exclusion to exterior wall surfacing, doors, and windows.

This is a massive exposure for adjusters who stop reading after the roof section. You might correctly identify that the roof is excluded but spend hours scoping hail hits on aluminum siding or expensive window cladding, only to find those are also excluded by a "Cosmetic" endorsement buried elsewhere in the policy.

The Strategy: Always verify the scope of the endorsement. Does it apply to "Roof Surfacing" or strictly "Covered Property"?

5. The "Latent Hail" Pivot

Cosmetic exclusions are often added at renewal to mitigate risk in hail-prone states. This timing creates leverage.

If you can prove via forensic weather data that the damage occurred during a prior policy period—before the exclusion was attached—you may be able to file the claim under the older, broader policy.

The Risk: This strategy fights the "Prompt Notice" clock. This only works if the policy triggers upon "Discovery" rather than "Occurrence," or if the state has a favorable notice-prejudice rule. Otherwise, you trade a Cosmetic denial for a Late Notice denial.

6. The Intake Checklist: 7 Questions in 7 Minutes

Do not wait for the carrier's engineer to tell you coverage is excluded. Run this checklist at intake:

1. Endorsement ID: Is there a CP 10 36 or proprietary "Cosmetic" endorsement?
   • So What: Overrides the practical application of the "Direct Physical Loss" standard and shifts the burden to functionality.
2. Scope Check: Does it apply to "Roof Surfacing" or to all "Covered Property"?
   • So What: If "Covered Property," your window and siding claims are also at risk (more common in AAIS/residential-style forms).
3. Granule Definition: Does the form explicitly list "granule loss" as cosmetic?
   • So What: If yes, the "UV barrier" argument is dead. If silent, you may have leverage—subject to jurisdictional case law.
4. "Elements" Language: Does it define function as a barrier to "the elements" or only to "water"?
   • So What: "Elements" opens the door for UV and Oxygen (oxidation) ambiguity arguments; "water" restricts you to leaks.
5. Trigger Type: Is the policy Occurrence or Discovery based?
   • So What: Determines if you can pivot to a prior policy period (Latent Hail) without triggering a "Late Notice" denial.
6. Surfacing Depth: Does the exclusion apply to "appearance" broadly, or strictly to "pitting and marring"?
   • So What: "Marring" is often ambiguous and may imply abrasion or scuffing—not mere deformation (denting).
7. Impact Threshold: Does the form require the roof to be "penetrated" to trigger coverage?
   • So What: This is the highest burden of proof; it requires immediate breaches, making micro-fissure or degradation arguments irrelevant.

Why This Matters for Policy Analysis

The most dangerous claim isn't the one you lose in court; it's the one you mismanage from the start.

If you sign a client, promise a new roof, and spend months fighting causation—only to have the carrier point to a Cosmetic Exclusion you missed on Day 1—that is a failure of policy analysis.

Frontera is built to surface these hierarchy shifting terms immediately, so you know where the coverage fight actually exists before you ever climb the ladder.