Walnut Creek Townhome Association v. Depositors Insurance Company
16-0121
| Iowa Ct. App. | Jul 19, 2017Background
- Walnut Creek Townhome Association submitted an insurance claim after an August 8, 2012 hailstorm; Depositors paid a small amount for soft-metal dents but denied most of the claim.
- Appraisal was requested under the parties’ policy; appraisal panel (two appraisers + umpire) awarded $1,467,830 for roofing, matching roofing, siding/gutters/fascia, and air conditioners; the award disclaimed rulings on coverage or relative causation.
- District court declined to treat the appraisal as binding, found no recoverable loss for roofing (attributing damage in part to preexisting CertainTeed New Horizon shingle defects and other causes), and dismissed Walnut Creek’s breach and declaratory-judgment claims.
- On appeal the Iowa Court of Appeals reviewed whether appraisers may decide causation/amount-of-loss and whether the appraisal award should be set aside for fraud, mistake, or for exceeding scope.
- The majority held the appraisal’s determinations on causation and amount of loss were binding (no evidence of fraud/mistake/malfeasance) and reversed the district court, directing judgment consistent with the appraisal except as to uncovered air-conditioner damage and replacement-cost payments for unrepaired soft metals.
- Judge McDonald dissented, arguing appraisal should be limited to valuation (not causation), that the district court’s factual findings that preexisting defects and multiple causes barred coverage were supported by substantial evidence, and would have affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of appraisal — may appraisers determine causation as part of “amount of loss”? | Walnut Creek: appraisers can and did determine causation as an integral part of amount of loss; appraisal panel’s causation findings are binding absent fraud/mistake. | Depositors: causation/coverage are legal questions for the court; appraisal limited to valuation. | Majority: Appraisers may make causation determinations incidental to amount-of-loss and those findings are binding unless impeached; appraisal binding here. Dissent: disagreed. |
| Whether the appraisal award should be set aside (fraud, mistake, or exceeded scope) | Walnut Creek: no evidence of fraud/mistake/malfeasance; award valid. | Depositors: appraisal went beyond scope, umpire/appraisers lacked appropriate expertise; award not conclusive. | Majority: No record of fraud/mistake/malfeasance or improper scope; award sustained. |
| Coverage — did policy exclusions (defect, negligent work, wear and tear, anticoncurrent clause) bar recovery for roofing? | Walnut Creek: appraisal establishes hail as cause; policy exclusions not proven by Depositors to apply. | Depositors: preexisting manufacturer defect and other causes trigger exclusions and anticoncurrent clause. | Majority: Because appraisal’s causation findings are binding, exclusions do not bar recovery; judgment reversed for breach consistent with appraisal (except air conditioners, and replacement-cost limits). Dissent would have affirmed district court. |
| Replacement-cost payment for unrepaired "soft metals" (siding/gutters/fascia) | Walnut Creek: seeks difference between appraisal replacement-cost award and amount already paid. | Depositors: policy requires actual repair/replacement before replacement-cost payment. | Held: Walnut Creek not entitled to additional replacement-cost payment absent proof repairs/replacements completed; district court affirmed on this point. |
Key Cases Cited
- Cent. Life Ins. Co. v. Aetna Cas. & Sur. Co., 466 N.W.2d 257 (Iowa 1991) (appraisal clauses are valid; awards binding absent fraud, mistake, or malfeasance)
- North Glenn Homeowners Ass’n v. State Farm Fire & Cas. Co., 854 N.W.2d 67 (Iowa Ct. App. 2014) (appraisers may make initial causation determinations as part of amount-of-loss; court may review for fraud/mistake)
- Amish Connection, Inc. v. State Farm Fire & Cas. Co., 861 N.W.2d 230 (Iowa 2015) (anticoncurrent-cause clauses enforceable)
- Ales v. Anderson, Gabelmann, Lower & Whitlow, P.C., 728 N.W.2d 832 (Iowa 2007) (in arbitration context, courts do not reweigh arbitrator’s factual determinations)
- Moorman, 338 U.S. 457 (U.S. 1950) (arbitral findings conclusive absent fraud or gross mistake)
- Quade v. Secura Ins., 814 N.W.2d 703 (Minn. 2012) (distinguishing appraisal’s role from court’s coverage determinations)
- Jupiter Aluminum Corp. v. Home Ins. Co., 52 F. Supp. 2d 885 (N.D. Ill. 1999) (parties who submit to appraisal are bound by award absent exceptional circumstances)