Maple Ridge Homeowners Ass'n v. Hiscox Ins. Co.

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Maple Ridge Homeowners Association, Appellant, v. Hiscox Insurance Company, Inc., Respondent.

No. A23-0478

Court of Appeals of Minnesota

February 5, 2024

This opinion is nonprecedential except as provided by Minn. R Civ. App. P. 136.01, subd. 1(c).

St Louis County District Court File No. 69DU-CV-21-1378

Alexander M. Jadin, Bradley K. Hammond, Smith Jadin Johnson PLLC, Bloomington, Minnesota (for appellant)

Christopher L. Goodman, Thompson, Coe, Cousins &Irons, L.L.P., St. Paul, Minnesota (for respondent)

Considered and decided by Gaitas, Presiding Judge; Segal, Chief Judge; and Cleary, Judge. ^[*]

OPINION

SEGAL, CHIEF JUDGE

In this insurance-coverage dispute, appellant homeowners association challenges the district court's (1) imposition of a discovery sanction precluding recovery for certain losses, (2) grant of respondent's motion for summary judgment, and (3) denial of appellant's motion to vacate the appraisal award. Because the imposition of the sanction is not supported by the law, we conclude that the sanction order constituted an abuse of discretion. And because summary judgment was premised on the sanction order, we reverse the grant of summary judgment and remand for further proceedings. Finally, because the denial of the motion to vacate the appraisal award appears to have been premised on the sanction that this opinion reverses, we remand for reconsideration of the district court's denial of that motion.

FACTS

The following is a summary of the undisputed facts. Appellant Maple Ridge Homeowners Association is a nonprofit association of owners of condominium units in a 39-building development in Duluth, Minnesota. The buildings are all insured for property damage under a single policy issued to Maple Ridge by respondent Hiscox Insurance Company, Inc. In August 2020 Maple Ridge demanded appraisal of a loss from an August 31, 2018 hailstorm. A few days later, just before expiration of the policy's suit-limitation period, Maple Ridge served Hiscox with a complaint alleging breach of contract and seeking a declaratory judgment regarding coverage.

Hiscox hired a consultant who inspected the buildings and prepared a report dated November 2020. The consultant concluded that there was only minimal damage attributable to the 2018 storm and that much of the "potential hail impacts" were caused by an earlier storm. The consultant estimated the damage to be in an amount less than $1,000. In July 2021, Maple Ridge submitted its sworn proof of loss and two repair estimates. Maple Ridge claimed over $2 million in losses.

Hiscox requested, in a July 21, 2021 letter, the following documents for the period of January 2008 through the present: all of Maple Ridge's board-meeting minutes, management reports, meeting packets, or other documents the property manager submitted to the board; any communication or activity logs or other records from the property manager; any contracts, agreements, work orders, estimates, or invoices Maple Ridge received regarding roof repair, or wind and hail damage; documentation of any repairs or replacements of soft metals and siding; and any insurance claims made for property damage to the exterior of any buildings, along with any documents submitted in connection with any appraisals conducted for wind, hail, or other damage involving the exterior of the property.

On August 20, 2021, Hiscox rejected Maple Ridge's proof of loss, estimating the loss at just under $9,000. On August 30, 2021, Maple Ridge filed a motion to compel appraisal and "stay further litigation."

Hiscox sent Maple Ridge another letter in September 2021, reiterating the request for documents in its July 2021 letter, and also requesting photographs taken by Maple Ridge's consultant, materials invoices showing the manufacturers of the shingles and siding installed on each of the 39 buildings, and an explanation of Maple Ridge's reason for including siding in the estimate. Maple Ridge responded that it was "currently working . . . to obtain the additional information that you have requested in your various letters and [to] cooperate with Hiscox's investigation of the loss." On October 1, Maple Ridge provided documentation of roofing repairs completed on several buildings in 2010, and stated that no "photographs are known excepting those previously produced." Maple Ridge also advised Hiscox that it included siding in its proof of loss because "[r]epairs to the brick flashing requires that some siding be detached and reset as the appropriate means and method of repair." Not satisfied with the response from Maple Ridge, Hiscox reiterated its demands in a letter dated October 4, 2021, and emphasized that it would not schedule an appraisal until it received all information requested.

A hearing on Maple Ridge's motion to compel appraisal and stay further litigation was held on October 14, 2021. The district court issued an order that same day, granting Maple Ridge's motion to compel appraisal and stay discovery on coverage issues. The district court also directed Maple Ridge to produce, by October 28, the information requested in Hiscox's July 21 and October 4, 2021 letters. The order warned Maple Ridge that its failure to make "accurate and complete disclosures" could result in sanctions and that the sanctions "may be monetary or may be in the nature of witness or evidence preclusion." Maple Ridge responded to the order by providing its board-meeting minutes and additional photographs.

Hiscox sent another letter in March 2022, asking Maple Ridge to identify the manufacturer, make, style, and color of the siding and shingles on select buildings. Maple Ridge maintained that it had responded to Hiscox's letters of July 21 and October 4 in compliance with the district court's order, and that it did not have the requested information about siding and shingles because the individual homeowners made their own independent determinations on those materials at the time of installation.

The district court held another informal conference on June 28, 2022. As summarized in a letter from Hiscox's counsel, the district court directed Maple Ridge to "make its best effort to identify the manufacturer, make, style, and color of the shingles and siding on each of the 39 buildings at the Maple Ridge HOA." Hiscox then provided Maple Ridge with a spreadsheet of contractors appearing on permits for each of Maple Ridge's 39 buildings per public-permit records to "assist in [Maple Ridge's] efforts to identify the shingles and siding." On July 7, Maple Ridge provided the district court with a letter stating that it was "in the process of seeking to obtain the requested information from the homeowners," had "reached out to the contractors," but that fulfilling such requests was "not a process that c[ould] occur within a short timeframe or over a holiday weekend."

The district court filed an order on July 8, 2022, directing Maple Ridge to "provide defense counsel with the requested discovery responses" by July 11, 2022, and warning that Maple Ridge "will not be allowed to seek compensation from the appraisers for units within the [association] where pertinent discovery disclosures have not been provided." Maple Ridge provided some additional records along with documentation of all the steps it took to track down the manufacturer information for the shingles and siding.

The appraisal occurred on July 12, 2022. Hiscox's attorney was present and brought the district court's July 8 order to the panel's attention, arguing that because Maple Ridge had failed to provide the ordered information, the appraisal panel needed to exclude certain of the buildings from consideration. Maple Ridge objected, stating that exclusion of the buildings based on the district court order is "a legal question that is outside of this panel, so you guys should not even consider any of that." The appraisal panel appeared to agree, stating it was "here to seek damages in dollars. We are not here to do a legal question, we are not here to do policy, so I don't see how we can do that." Maple Ridge's public adjuster withdrew buildings 36, 37, and 38, stating it was "nothing to do with your panel but an order from the judge." The panel issued its award in August 2022, valuing the total replacement cost of the loss at $487,236.50, not including any valuation of a loss for buildings 36, 37, and 38. Later, upon Hiscox's request, the appraisal panel amended the award to provide a per building breakdown of the $487,236.50 loss valuation because the insurance policy had a per building deductible of $20,000.^[1]

On August 24, 2022, Hiscox filed a motion to enforce the July 8, 2022 order and to impose sanctions against Maple Ridge, claiming that Maple Ridge failed to provide the ordered information by July 11. Hiscox asked the district court to preclude Maple Ridge from seeking indemnity from Hiscox for the amount awarded by the appraisal panel for buildings 14-35 and 39. Neither the motion nor accompanying memorandum identified a legal basis for the requested sanctions, but the reply memorandum referenced Minn. R. Civ. P. 37.02(b)(2), (3), and Maple Ridge's duty of cooperation under the policy. Maple Ridge opposed the motion, arguing that some of the requested information was not available, and asserting that it had complied with the court's orders.

On October 19, 2022, the district court granted the motion, citing Minn. R. Civ. P. 37.02(b) as its authority, stating in its order:

Because [Maple Ridge] has not provided pertinent, timely information as to siding and shingles on Buildings 29, 32, 33, and 35, any award by the appraisers for those items on those buildings is disallowed as a sanction for [Maple Ridge]'s failure to comply with the Court's orders of

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