Walnut Creek Townhome Association v. Depositors Insurance Company
913 N.W.2d 80
Iowa2018Background
- Walnut Creek Townhome Association had roofs with allegedly defective CertainTeed shingles installed 2004–2006 and was pursuing a warranty claim when an August 8, 2012 hailstorm occurred.
- Depositors Insurance paid for hail damage to metal gutters/fascia but denied shingle coverage, attributing shingle problems to preexisting manufacturing defects and deterioration and relying on policy exclusions (including an anticoncurrent-cause provision and exclusions for defective materials/ workmanship).
- Walnut Creek demanded appraisal under the policy; a three-person appraisal panel issued an award (2–1) valuing hail-related loss at ~$1.467M, expressly limiting the award to the amount of loss from the August 8, 2012 storm and disclaiming coverage or exclusion determinations.
- Depositors reserved the right to litigate coverage and then the district court held a bench trial, rejected the appraisal award, found no hail damage to shingles, applied the defective-material/deterioration exclusions, and entered judgment for Depositors (while awarding Walnut Creek earlier payment for soft metals only).
- The Iowa Court of Appeals reversed, holding the appraisal award as to amount and causation was binding; the Supreme Court granted further review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an appraisal panel may determine factual causation of property damage when fixing the amount of loss | Appraisal may and did determine hail caused shingle damage; award on amount (including causation as fact) is binding absent fraud | Causation and coverage are for courts; appraisal cannot resolve cause when multiple potential causes (e.g., defect + hail) exist | Appraisers may decide factual causation relevant to amount of loss; appraisal award on amount is presumptively binding absent fraud or disqualifying conflict |
| Whether district court erred by rejecting the appraisal award | The court should enforce the appraisal award for hail-related shingle loss and then adjudicate coverage defenses | The court properly rejected the appraisal because coverage exclusions/ concurrent causes required judicial determination | District court erred to ignore the appraisal’s factual finding of hail damage; must accept appraisal amount for hail loss and then resolve coverage exclusions on remand |
| Whether coverage exclusions (anticoncurrent-cause, defective materials) can be resolved by appraisal | N/A (Walnut Creek argued coverage still owed after appraisal) | Coverage exclusions are legal issues for the court and can negate recovery even if appraisal finds loss amount | Coverage questions (including anticoncurrent-cause and defective-material exclusions) are for the court to decide on remand; appraisal does not resolve them |
| Whether Walnut Creek may recover additional replacement-cost payment for soft metals before repair | Appraisal awarded replacement cost; Walnut Creek sought payment | Policy conditions require actual repair before full replacement-cost payment | Court affirmed district court: Walnut Creek not entitled to additional soft-metal replacement-costs absent proof repairs completed |
Key Cases Cited
- Central Life Ins. Co. v. Aetna Cas. & Sur. Co., 466 N.W.2d 257 (Iowa 1991) (appraisal awards are presumptively binding and will be set aside only for fraud, mistake, or misfeasance)
- Quade v. Secura Ins., 814 N.W.2d 703 (Minn. 2012) (determination of amount of loss under appraisal clause necessarily includes causation; coverage issues reserved for courts)
- North Glenn Homeowners Ass’n v. State Farm Fire & Cas. Co., 854 N.W.2d 67 (Iowa Ct. App. 2014) (appraisers must consider causation when determining amount of loss; whether award is conclusive depends on nature of damage and award structure)
- Amish Connection, Inc. v. State Farm Fire & Cas. Co., 861 N.W.2d 230 (Iowa 2015) (anti-concurrent-cause provisions are enforceable under Iowa law)