Recently the Iowa Court of Appeals reversed the district court and upheld an approximate $1.4 million dollar appraisal award entered for the Walnut Creek Townhome Association.1
Walnut Creek’s thirty-six buildings had been damaged by a hail storm in August, 2012. Prior to that, however, the board had investigated issues with the shingles which turned out to be CertainTeed New Horizon shingles, known to have defects which caused cracking and crazing in the shingle applique and cause significant granular loss. Within a week of the hail storm, the association had the roofer conduct an inspection. The roofer concluded that he observed no hail impacts significant enough to warrant an insurance claim. Thereafter, the association had another roofer inspect the roof who concluded the roofs had hail damage and found eight to twelve hits per square. Ultimately, the association retained a public adjuster who similarly concluded the buildings had sustained hail damage and observed nine to eleven hits per square. Conversely, the insurer’s experts from Haag Engineering found that the damage observed was not consistent with hail damage and observed that the roofs were in poor condition. Depositors Insurance denied Walnut Creeks claim, excluding payment for the soft metals. Walnut Creek filed suit.
The court concluded that the parties could fully litigate whether all of the loss to the property resulted from a covered hail storm, but also stated that the appraisers and umpire must consider what damage was caused by hail and what was not. The appraisal proceeded and an award was entered for Walnut Creek in the approximate amount of $1.4 million. A couple of weeks later, a bench trial was held and the district court concluded that the appraisal was not binding or conclusive and dismissed Walnut Creek’s claims.
On appeal, the Iowa Court of Appeals concluded there was no reason to reject the appraisal award. Specifically, there was no reason to reject the appraisal panel’s determination of damage and possible causes. The structure of the appraisal award did not suggest fraud, mistake or malfeasance. As such, the court accepted the appraisal panel’s conclusions as to the amount of the loss and causation as binding.
The appellate court also concluded the district court erred in its application of the policy in light of the appraisal panel’s conclusion. In particular, the appellate court rejected the district court’s conclusion that the shingles contained a product defect that triggered deterioration—coverage excluded under (B)(2)—as it was inconsistent with the binding conclusion of the appraisal panel, which had specifically found that hail caused the damage. The court therefore reversed the judgment and ordered the district court to enter judgment in favor of Walnut Creek consistent with the appraisal panel’s award.
1 Walnut Creek Townhome Association v. Depositors Ins. Co., 2017 WL 3077916 (Ct. App. Iowa, July 19, 2017).., 2017 WL 3077916 (Ct. App. Iowa, July 19, 2017).