One of my friends had "cosmetic damage" (his roof was leaking into his home) and USAA would not cover it so he had a roofing company come replace his whole roof. This was earlier this year.

Can he retroactively have them pay him back minus his deductible?

Unfortunately, I don't think that's going to be something they will do. I am not an attorney or a licensed adjuster. As such, I cannot say what they should be doing. I feel like this would require legal action to force and since the roof has been replaced, no adjuster can validate the original damage unless you have the photos or USAA will send them to you.

Once the claim is settled, it's tough. Anything is possible I suppose. I'd be curious what the original denial entailed. Was it "cosmetic only and no damage" so the carrier agreed it was fine or did they push a repair that was under the deductible?

It's always best to fight denials up front. I tell everyone "No does not mean NO. No mean...maybe later." I am working on a few denials right now for asphalt roofing for Ags and I have a couple of metal denials from USAA, even after this rule has been retired!

What was the driver for the homeowner to just go ahead and pay for replacement?

I ask because if the carrier said there is no damage that is functionally detrimental to the roof, then no need to replace or repair, so it's a moot point that can be fought potentially. On the other hand, If there is damage enough to warrant them denying coverage then by default the damage is substantial enough to be approved.

That is not to say it would have been, it just means there is a chance. If I can get a carrier to agree there is any damage whatsoever, no matter how small, then my odds of full approval are exponentially better than if they said there is no damage. If I can get my foot wedged in the door, then we can gently ask them to open it.