Meadows of Bloomfield Ass'n v. State Farm Fire & Cas. Co.

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Meadows of Bloomfield Association, Respondent, v. State Farm Fire and Casualty Company, Appellant.

No. A22-1775

Court of Appeals of Minnesota

August 7, 2023

This Opinion is Nonprecedential except as provided by Minn.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

Dakota County District Court File No. 19HA-CV-21-187

Adina R. Bergstrom, Brock P. Alton, Sauro &Bergstrom, PLLC Oakdale, Minnesota (for respondent)

Scott G. Williams, Haws-KM, P.A., St. Paul, Minnesota (for appellant)

Considered and decided by Bjorkman, Presiding Judge; Ross Judge; and Reyes, Judge.

BJORKMAN, JUDGE.

Appellant State Farm Fire and Casualty Company challenges summary judgment confirming an appraisal award in favor of respondent Meadows of Bloomfield Association relating to storm-damaged buildings. State Farm argues that (1) the appraisal panel improperly required it to pay to replace the shingles on all 37 townhomes even though the shingles did not match before the storm and (2) the district court erred by directing entry of judgment before the shingles were replaced. We affirm.

FACTS

Meadows of Bloomfield manages 37 townhome buildings in Rosemount. In early August 2018, a wind and hailstorm damaged the soft metals on all 37 roofs. Repairing the metal portion of each roof required removal and replacement of some shingles.

At the time of the storm, State Farm insured Meadows under a businessowners' insurance policy that covers "direct physical loss" to covered property. The policy's Loss Payment clause describes how State Farm will meet its coverage obligations:

e. Loss Payment

In the event of loss covered by this policy:

(1) At our option, we will either:

(a) Pay the value of lost or damaged property;

The policy further provides that the value of covered property is determined based on replacement cost:

We will determine e. (1)(a) in accordance with the applicable terms of Paragraph e. (4) below .... ....

(4) . . . [W]e will determine the value of Covered Property as follows:

(a) At replacement cost without deduction for depreciation, as of the time of loss, subject to the following:

i. We will pay the cost to repair or replace, after application of the deductible and without deduction for depreciation, but not more than the least of the following amounts: ....

2) The cost to replace, on the described premises, the lost or damaged property with other property of comparable material, quality and used for the same purpose

(Emphasis added.)

After receiving Meadows' storm claim, State Farm hired Donan Engineering to inspect the damage. Donan Engineering concluded that hail had damaged the soft metals on the roofs but did not damage the shingles. Donan's report also stated that some of the roofs had mismatched shingles, revealing a history of prior damage and repairs.

Because the parties were unable to agree on the amount of loss, Meadows demanded an appraisal, as required by the policy. The appraisal panel considered the parties' submissions and arguments and visited the site in October 2020. The appraisers inspected the roofs of a small number of buildings. On December 14, the appraisal panel issued its award. The appraisal panel determined that all 37 buildings sustained direct hail damage to the soft metals on the roofs in the amount of $753,289. The appraisal panel also determined that replacing the metal roof material required that a certain number of shingles be removed and replaced. But because the proposed replacement shingles were not a reasonable match for the existing shingles, the appraisal panel determined that all of the shingles needed to be replaced at a cost of $1,862,000.^[1]

Meadows commenced this action, alleging breach of contract and requesting declaratory relief and damages. State Farm denied the allegations and moved to vacate the appraisal award. Meadows moved to confirm the award and for summary judgment. The district court granted Meadows' motion. After the district court denied State Farm's request for leave to seek reconsideration, State Farm appealed.

Meadows subsequently moved the district court to recover attorney fees and costs. After reviewing the motion, the district court vacated the summary judgment. This court dismissed the appeal. The parties completed additional discovery regarding prior roof repairs and again submitted cross-motions for summary judgment. The district court again entered judgment in favor of Meadows based on the appraisal award. State Farm requested that the district court grant it leave to file a motion for reconsideration, arguing that the judgment improperly required it to pay replacement cost benefits before the work was completed. Meadows submitted a letter opposing the request and attached invoices documenting that the shingles had been replaced. The district court denied State Farm's request and directed entry of judgment, concluding that "[t]he scope of the repairs awarded by the Appraisal Report and confirmed by this Court have now been completed."

State Farm appeals.

DECISION

I. The appraisal panel's award is consistent with the insurance policy and law.

Summary judgment is appropriate when the moving party shows that "there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Minn. R. Civ. P. 56.01. On appeal from summary judgment, we review questions of law, including the interpretation of an insurance policy and its application to undisputed facts, de novo. Com. Bank v. W. Bend Mut. Ins. Co., 870 N.W.2d 770, 773 (Minn. 2015).

When interpreting an insurance policy, we construe the policy as a whole and give unambiguous language its plain and ordinary meaning. Midwest Fam. Mut. Ins. Co. v. Wolters, 831 N.W.2d 628, 636 (Minn. 2013). We construe "any ambiguity regarding coverage . . . in favor of the insured." Am. Fam. Ins. Co. v. Walser, 628 N.W.2d 605, 609 (Minn. 2001). Neither party argues that the provision at issue here is ambiguous.

Generally, an appraisal panel has the "authority to decide the 'amount of loss' but may not construe the policy or decide whether the insurer should pay." Quade v. Secura Ins., 814 N.W.2d 703, 706 (Minn. 2012). But in ascertaining the amount of loss, appraisers may resolve "questions of law or fact, which are involved as mere incidents to a determination of the amount of loss or damage." Id. at 707 (quotation omitted). We defer "to the appraisal panel's factual determination as to the amount of loss" because of Minnesota's public policy favoring appraisals. Cedar Bluff Townhome Condo. Ass'n, Inc. v. Am. Fam. Mut. Ins. Co., 857 N.W.2d 290, 296 (Minn. 2014).

State Farm does not dispute that the 2018 storm caused a covered loss that required replacement of the soft metal portions of all 37 roofs. And State Farm does not dispute that a certain number of shingles must be removed to accommodate that work and that the available replacement shingles do not match the existing shingles. But State Farm contends that the appraisal panel erred by awarding $1,862,000 because the insurance policy does not require it to provide a reasonable match for shingles when, at the time of the loss, the shingles did not match.

The question of an insurer's obligation to ensure that covered property "match" following repair or replacement is not a new one. In Cedar Bluff, a hailstorm damaged all of the roofs and at least one panel of siding on each of 20 buildings. 857 N.W.2d at 291. The color of the 11-year-old siding had faded, and replacement panels were not available in the same color. An appraisal panel awarded the cost of replacing all of the siding. As in this case, the insurance policy provided coverage for the cost of replacing "damaged property with other property . . . [o]f comparable material and quality." Id. (alteration in original). Our supreme court interpreted the phrase "comparable material and quality" to mean "a reasonable color match between new and existing siding when replacing damaged siding." Id. at 294. And the supreme court concluded that the appraisal panel applied the correct legal standard when it determined that there was no reasonable match available for the existing siding and awarded the cost of replacing all of the siding. Id. at 295.

This court answered the question differently based on distinct policy language in Pleasure Creek Townhomes Homeowners' Ass'n v. Am. Fam. Ins. Co., No. A19-0662, 2019 WL 6284263 (Minn.App. Nov. 25, 2019), rev. denied (Minn. Feb. 18, 2020).^[2] In Pleasure Creek, a 2017 hailstorm damaged siding on 14 covered buildings. 2019 WL 6284263, at *1. An appraisal panel determined that the replacement siding did not reasonably match the existing siding, so it awarded the cost of replacing all of the siding. Id. at *2. American Family declined to pay the cost to replace siding that was not hail damaged based on its matching exclusion. The exclusion provided, in relevant part, that "[w]e will not pay to repair or replace undamaged material due to mismatch between undamaged material and new material used to repair or replace damaged material." This court concluded that the exclusion was enforceable. Id. at *5.

State Farm concedes that its policy does not contain a matching exclusion but contends that Cedar Bluff is inapposite because the item to be matched-shingles-was not uniform in appearance at the time of the loss. This argument is unavailing. Cedar Bluff did not focus its analysis on the condition of the siding prior to the storm. Rather, the supreme court interpreted "comparable material and quality" to include matching siding and deferred to the appraisal panel's conclusion that no reasonable siding match was available. Cedar Bluff 857 N.W.2d at 294-95. This makes sense because replacementcost coverage is not tied to the...