Cedar Bluff Townhome Condominium Association, Inc. v. American Family Mutual Insurance Company
2014 Minn. LEXIS 661
Minn.2014Background
- Cedar Bluff’s 20 townhome buildings sustained hail damage to roofs and at least one 15-sq-ft siding panel per building; original siding was ~11 years old and faded. Replacement panels with same specs were available but not in the original color.
- Cedar Bluff claimed the policy’s replacement-cost language (replace with property “of comparable material and quality”) required replacing all siding on each building to achieve a color match; American Family offered to pay only for the damaged panels and declined to replace undamaged siding.
- Parties invoked the policy’s appraisal clause; an appraisal panel inspected the property, heard evidence, and awarded $361,108 for total siding replacement because no reasonable color match existed for the existing siding.
- District court refused to confirm the appraisal award, granting summary judgment to American Family, reasoning the insurer need not pay to replace undamaged property and the policy did not require a “color match.”
- The court of appeals reversed; the Minnesota Supreme Court granted review to decide whether “comparable material and quality” requires a reasonable color match and whether the appraisal panel’s award should be confirmed.
Issues
| Issue | Plaintiff's Argument (Cedar Bluff) | Defendant's Argument (American Family) | Held |
|---|---|---|---|
| Meaning of “comparable material and quality” | Requires a color match between new and existing siding | Means similar/equivalent, not identical; does not require replacing undamaged siding for perfect match | "Comparable" requires a reasonable color match (less than identical but more than no match) |
| Did the appraisal panel apply correct legal standard? | Panel properly considered whether a reasonable match existed and awarded replacement cost accordingly | Panel effectively required an "exact" color match and exceeded authority by making coverage determinations | Appraisal panel applied the correct legal standard (reasonable match) and its factual findings are entitled to deference |
| Does inability to match color make undamaged siding “direct physical loss or damage”? | Color mismatch is a demonstrable physical alteration warranting replacement of entire siding to achieve comparability | Color difference is not direct physical damage to undamaged panels; insurer not obligated to replace undamaged property | Court concluded the color mismatch constituted a covered loss here and deferred to the appraisal panel’s factual determination |
| Enforceability of appraisal award | Appraisal award should be confirmed | Appraisal panel exceeded authority; award not binding on coverage | Confirmed appraisal award; district court erred in refusing confirmation |
Key Cases Cited
- Quade v. Secura Ins., 814 N.W.2d 703 (Minn. 2012) (appraisal panels cannot decide coverage but may resolve fact issues incidental to amount of loss)
- Midwest Family Mut. Ins. Co. v. Wolters, 831 N.W.2d 628 (Minn. 2013) (insurance-policy interpretation follows ordinary-meaning and reasonable-insured tests)
- Itasca Paper Co. v. Niagara Fire Ins. Co., 220 N.W. 425 (Minn. 1928) (appraisal may resolve facts incidental to amount of loss)
- Republic Underwriters Ins. Co. v. Mex-Tex, Inc., 150 S.W.3d 423 (Tex. 2004) ("comparable material and quality" allows more leeway than "identical")
- Farmers Auto. Ins. Ass’n v. Union Pac. Ry. Co., 756 N.W.2d 461 (Wis. Ct. App. 2008) ("like kind and quality" does not require brick-by-brick identical replacement)