Auto-Owners Insurance Co. v. Summit Park Townhome Ass'n
100 F. Supp. 3d 1099
D. Colo.2015Background
- Auto-Owners issued a property policy to Summit Park HOA covering direct physical loss from Mar. 1, 2013–Mar. 1, 2014; a September 2013 hailstorm prompted Summit Park’s claim.
- Auto-Owners investigated and made partial payment (~$245,000); Summit Park demanded appraisal, asserting much larger damage.
- Policy appraisal clause permits either party to demand appraisal of the “value of the property or the amount of loss,” with each side selecting an appraiser and the appraisers selecting an umpire.
- Auto-Owners filed for declaratory judgment, arguing some alleged damage predated the policy or resulted from excluded causes (e.g., defective workmanship), and that replacement of undamaged property for matching is not covered.
- Summit Park moved to compel appraisal and to stay litigation pending appraisal; Auto-Owners argued appraisal cannot resolve causation or coverage questions.
- The court reserved jurisdiction to resolve appraisal-process disputes and to appoint an umpire if needed, and ordered the parties to complete appraisal and stayed the case.
Issues
| Issue | Plaintiff's Argument (Auto-Owners) | Defendant's Argument (Summit Park) | Held |
|---|---|---|---|
| Whether appraisal can determine causation for "amount of loss" | Appraisers cannot decide causation; coverage is a judicial question, so appraisal is limited to valuation after causation is judicially determined | "Amount of loss" necessarily includes causation; appraisal can and should allocate damages between covered and uncovered causes | Court: appraisal may address causation as part of determining amount of loss; policy unambiguously permits appraisal to decide factual causation issues |
| Whether appraisal can determine coverage for replacing undamaged property for matching | Replacement of undamaged property to achieve visual consistency is a coverage/legal question for the court, not appraisers | Appraisal can resolve whether replacement of undamaged property is required/costs associated with matching | Court: appraisal should not decide coverage questions; appraisers may calculate costs but legal coverage determinations remain for the court |
| Scope/detail of appraisal award | Appraisal should be narrow and not address contested legal issues | Appraisers should identify and quantify disputed costs (e.g., matching) so the court can rule on coverage | Court: appraisers must make factual, itemized calculations (including costs for matching) but not legal conclusions; counsel should collaborate to supply sufficient detail |
| Whether litigation should be stayed pending appraisal | Appraisal is unnecessary for coverage resolution; litigation should proceed | Staying the case pending appraisal conserves resources and may resolve key factual disputes | Court: Stay granted — appraisal may resolve dispositive factual issues and reduce discovery; court retains jurisdiction for appraisal disputes and umpire selection |
Key Cases Cited
- Essex Ins. Co. v. Vincent, 52 F.3d 894 (10th Cir.) (federal court applies state substantive law on insurance coverage)
- Cary v. United of Omaha Life Ins. Co., 108 P.3d 288 (Colo.) (policy construed as written absent ambiguity)
- CIGNA Ins. Co. v. Didimoi Prop. Holdings, N.V., 110 F. Supp. 2d 259 (D. Del.) (definition of “amount of loss” incorporates causation; appraisal can address causation)
- State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex.) (appraisal necessarily includes a causation element when allocating damages to a specific event)
- State Farm Fire & Cas. Co. v. Licea, 685 So.2d 1285 (Fla.) (assessment of amount of loss may include determinations whether damage was caused by covered or excluded perils)
- Cedar Bluff Townhome Condo Ass’n, Inc. v. Am. Family Mut. Ins. Co., 857 N.W.2d 290 (Minn.) (appraisal panel’s factual conclusions about replacement-for-matching can be reviewed de novo by court; appraisers cannot make legal determinations)