The phrase "amount of loss," as it relates to an appraiser's authority, unambiguously permits the appraiser to determine the cause of loss.
According to the Supreme Court of Minnesota, an appraisal to determine the amount of loss caused by a storm, rather than loss from deterioration, is a condition precedent to judicial determination of an insurer's liability.
On July 10, 2008, a windstorm caused widespread damage to buildings on David and Melinda Quade's farm. Secura Insurance insured the Quades under a "special farmowners protector policy." The policy notably excluded damage caused by faulty or "inadequate maintenance of the property." It provided that if the Quades and Secura could not agree on the amount of loss, either could demand an appraisal of the loss.
Following the storm, the Quades submitted a claim to Secura. Secura paid for some of the damages, but determined that damage to the roofs of three buildings arose from continual deterioration over a period of time rather than a specific storm occurrence. As such, Secura denied the claim for damage to the roofs based on the inadequate maintenance of the property provision. Additionally, Secura informed the Quades that if they disagreed with the denial of the claim, they should initiate an appraisal pursuant to the policy.
The Quades, however, initiated a breach of contract claim, arguing that the appraisal clause did not apply to their claim. They argued that their claim for damage to the roofs disputed whether damage to the roofs was covered by the policy, not the cost of repairing the roofs. The district court granted summary judgment to Secura. The court of appeals reversed, finding that the resolution of the Quades' claim "require(d) the determination of legal questions concerning the meaning and application of contract clauses, causation, and liability."
On appeal, the Minnesota Supreme Court was asked to decide whether a party may demand an appraisal when the parties fail to agree on the amount of loss, even if there are remaining coverage questions. Finding that the primary issue was the meaning of the phrase "amount of loss," the Minnesota Supreme Court determined that "an appraiser's duty to determine the 'amount of loss' requires an appraiser to determine causation." As such, the court determined that the causation question involved separate loss due to a covered event from a property's preexisting condition. The Supreme Court of Minnesota reversed the decision of the court of appeals and remanded the case to the district court for further proceedings. [The Minnesota Court of Appeals decision was previously reported in "Cases in Brief," Fall 2011.]
Quade v. Secura Insurance
Supreme Court of Minnesota
June 12, 2012
2012 WL 2121235
I would like to acknowledge the contributions of my research assistant, Michael Brain, in the preparation of this column.
Alan M. Weinberger, JD, has been a professor at St. Louis University School of Law since 1987. Previously, he practiced for twelve years with law firms in Detroit and Washington, DC, where he specialized in real estate transfer, finance, and development. Weinberger graduated magna cum laude from the University of Michigan Law School. He has published articles and chapters in the fields of real estate finance, partnership, and property law. He is coauthor of Property Law Cases, Materials and Problems, 3rd ed., published by West Group. Contact: email@example.com