262 F. Supp. 3d 599
N.D. Ill.2017Background
- Runaway Bay Condominium Assn. (insured) submitted storm-damage claims after storms on Aug 2, 2015 and Feb 19, 2016; Runaway Bay’s loss estimate is $2,597,144.28, Philadelphia Indemnity’s estimate is $33,353.87.
- Runaway Bay sought to invoke the Policy’s appraisal clause to resolve the valuation dispute; Philadelphia refused to participate, arguing appraisal is limited to valuation and certain coverage questions require judicial resolution.
- Philadelphia identified five coverage issues: causation, matching (replacement of undamaged property for visual consistency), existence/extent of physical damage, inclusion of overhead and profit, and adequacy/timeliness of notice.
- The court analyzed each issue to decide whether it is appropriate for appraisal under the Policy.
- The court granted Runaway Bay’s motion to compel appraisal, but excluded the discrete legal question whether the Policy requires replacing undamaged siding to achieve matching.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether causation (what caused damage) is for appraisal | Appraisal may determine cause as part of determining amount of loss | Causation is a coverage question for the court, not appraisers | Appraisers may address causation; causation is inherent to valuing loss. |
| Whether Policy requires replacement of undamaged siding to match repairs (matching) | Matching is necessary to achieve comparable material/quality and thus recoverable | Whether matching is required is a legal interpretation of policy terms for the court | Matching is a legal contract-interpretation issue and is excluded from appraisal. |
| Whether disputed extent of "physical loss or damage" is for appraisal | Extent of physical damage is factual and tied to valuation, so appraisal is appropriate | Whether there was "physical damage" implicates coverage and should be judicially decided | Extent of physical damage is appropriate for appraisal. |
| Whether overhead and profit (O&P) and contractor necessity are part of loss | O&P is recoverable if a general contractor is required; factual determination suits appraisal | Inclusion of O&P is a coverage issue for the court | Whether O&P applies (i.e., whether a contractor is needed) is a factual valuation matter for appraisal. |
| Whether notice was timely (prompt notice) | Insured timely notified (not contested as to one storm) | Timeliness is a coverage defense that defeats appraisal if genuine | Timeliness is a legal question but insurer failed to show a genuine deficiency or prejudice; not a bar to appraisal. |
Key Cases Cited
- Amerex Grp., Inc. v. Lexington Ins. Co., 678 F.3d 193 (2d Cir. 2012) (apportioning damage causation is factual and appropriate for appraisal)
- Travelers Indem. Co. of Am. v. Bon-Beck Parker, LLC, 223 F. Supp. 3d 1155 (D. Colo. 2016) (appraisers may determine causation)
- Lundy v. Farmers Group, 760 N.E.2d 314 (Ill. App. Ct. 2001) (interpretation of "like kind and quality" is a legal question not for appraisal)
- Taco Bell Corp. v. Continental Cas. Co., 388 F.3d 1069 (7th Cir. 2004) (insurer must show prejudice from delay to rely on notice defense)
- Spearman Indus., Inc. v. St. Paul Fire & Marine Ins. Co., 109 F. Supp. 2d 905 (N.D. Ill. 2000) (court held causation not for appraisal in that case)