Noonan v. Am. Family Mut. Ins. Co.

924 F.3d 1026

Thomas P. NOONAN ; Annette M. Noonan, Plaintiffs - Appellees

v.AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant - Appellant

No. 18-1393

United States Court of Appeals, Eighth Circuit.

Submitted: March 12, 2019

Filed: May 24, 2019

Rehearing Denied July 5, 2019^*

Edward E. Beckmann, Jason Scott Raether, HELLMUTH & JOHNSON, Edina, MN, for Plaintiffs - Appellees.

Deborah Ann Ellingboe, Jeffrey Justman, Aaron Daniel Van Oort, FAEGRE & BAKER, Minneapolis, MN, Mark K. Hellie, Washington, DC, for Defendant - Appellant.

Before SHEPHERD, ARNOLD, and KOBES, Circuit Judges.

ARNOLD, Circuit Judge.

This case involves what people in the roofing business call a mismatch problem. It often happens that when a part of a roof is damaged, matching replacement shingles are not available and so replacing only the damaged shingles will result in a roof with shingles that do not match. Homeowners quite reasonably do not like how this looks, and so they ask their insurer to replace the entire roof.

After hail and wind from a Minnesota thunderstorm damaged part of the roof on Thomas and Annette Noonan's home, their insurer, American Family Mutual Insurance Company, inspected the roof and determined that it had suffered about $ 12,000 in damage. The Noonans disputed the amount and demanded, as their policy allowed, that appraisers be called upon to provide a binding estimate of the amount of loss. An American Family adjuster asked the appraisers to divide their estimate into two categories—one for replacing damaged shingles and another for replacing undamaged shingles that would not match those needed to replace the damaged ones. The appraisers did not perform the requested apportionment: They instead found that replacing the entire roof would cost $ 141,000 and simply noted on the appraisal form that "This is a matching issue[.] Alternative products do not match current shing[l]e on the roof."

The adjuster notified the Noonans that their insurance policy did not cover the cost of replacing shingles on the undamaged portion of the roof. Of the $ 141,000 needed to replace the entire roof, the adjuster estimated that $ 87,232.98 was due to the cost of matching. When the Noonans sued in Minnesota state court for breach of contract and for confirmation of the appraisal award, American Family removed the case to federal district court.

The district court remanded the case to the appraisers to clarify the award by differentiating the costs attributable to actual roof damage from those attributable to shingle matching. The appraisers clarified the award and reported that actual damages were $ 66,619, meaning that $ 74,381 was attributable to matching. American Family apparently paid the Noonans the amount of actual damages, less the deductible, but it refused to pay the rest. (We have diversity jurisdiction because the amount in controversy at the time of removal exceeded $ 75,000, even though the amount now in dispute is less. See Schubert v. Auto Owners Ins. Co. , 649 F.3d 817, 821–23 (8th Cir. 2011).)

A brief review of the relevant policy provisions is in order. The full name of the insurance policy the Noonans had with American Family was the Gold Star Special Deluxe Form, which we will simply call the Form. In 1999 American Family added a Gold Star Homeowners Amendatory Endorsement, we will call it the Gold Star Endorsement, which deleted and replaced the part of the Form titled "Loss Value Determination." In 2013 American Family again amended the Form by adding the Minnesota Amendatory Homeowners Endorsement, which we will call the Minnesota Endorsement. As relevant here, the Minnesota Endorsement changed the Form by stating that American Family would "not pay to repair or replace undamaged property due to mismatch between undamaged material and new material used to repair or replace damaged material."

American Family argued before the district court that this "matching exclusion" unambiguously absolves it from responsibility to pay for the amount the appraisers attributed to matching. The district court disagreed and denied American Family's motion for summary judgment. It instead granted summary judgment for the Noonans and confirmed the arbitration award. The district court did not quarrel with American Family's reading of the matching exclusion; rather, it held that the matching exclusion simply did not apply to the Noonans' policy. It explained that the matching exclusion said that it applied to the Form but did not say that it applied to the Gold Star Endorsement, which the Noonans' policy contained. The district court reasoned this omission was intentional because an earlier provision in the Minnesota Endorsement expressly said that it amended the Gold Star Endorsement. The district court provided an alternative justification for its holding: Since the Gold Star Endorsement deleted and replaced the Loss Value Determination portion of the Form, and the...