Causation can be determined by an appraisal panel in Minnesota. The controversy involved a hailstorm where the insurance company denied that any damage was caused by the hailstorm. The insurance company refused to go to appraisal and filed a lawsuit seeking a declaration of no coverage. The policyholder countersued seeking the court to compel appraisal to determine the amount of damage caused by the hailstorm.

The federal trial court framed the disputed issue as follows:1

Axis asserts that the appraisal provision has not been triggered because this is a coverage dispute and not a disagreement over the ‘amount of loss.’ Condor argues that, under Minnesota law, an appraisal to determine amount of loss necessarily and properly includes a determination of the cause of the loss. If the appraisal concludes that a storm outside the policy period caused the damage, it will determine that the amount of loss is $0.

The trial court then found that Minnesota law required the controversy be resolved through appraisal:

The Minnesota Supreme Court determined that appraisal is appropriate even when coverage issues surrounding the cause of loss exist because ‘an appraiser’s assessment of the ‘amount of loss’ necessarily includes a determination of the cause of loss, and the amount it would cost to repair that loss.’ …The parties in Quade agreed that a covered occurrence — a wind storm — caused some damage, but disagreed as to the extent of the damage caused by the covered occurrence….Where a case involves both questions of coverage and the amount of loss, the court concluded that it is appropriate for appraisers to ‘allocate damages between covered and excluded perils,’ and to examine the cause of damage in order to ‘separate loss due to a covered event from a property’s preexisting condition….’

Courts in this district have relied on Quade in compelling appraisal even where there is a dispute as to whether any damage was caused by a covered occurrence. See, e.g., Condominiums of Shenandoah Place v. Secura Ins., No. 15-cv-165, 2016 WL 614381 (D. Minn. Feb. 16, 2016) (compelling appraisal where the parties disputed whether wind and hail damage to buildings was caused by a storm within the covered policy period). Similarly, here, the parties do not dispute that there is hail damage to the roofs of some buildings at Promenade Oaks. Rather, the dispute centers on whether that damage existed before the claimed loss date, and thus whether it was caused by a storm that occurred within the covered policy period. As such, the court finds that Quade applies and it is appropriate to allow an appraiser to ‘separate [any] loss due to a covered event from [the] property’s preexisting condition.

On appeal, the federal appellate court upheld the lower court’s ruling:2

The insurance policy in this case says that, whenever Axis and Condor ‘disagree on … the amount of loss, either may make written demand for an appraisal of the loss.’ The focus here is ‘on the meaning of the phrase ‘amount of loss.’ ’ Quade v. Secura Ins., 814 N.W.2d 703, 706 (Minn. 2012).

The Minnesota Supreme Court interpreted this exact phrase nearly a decade ago in Quade, except there the disagreement was over how much damage a windstorm had caused. Id. at 704–05. The duty to resolve the dispute fell upon the appraiser because, ‘in the insurance context, [the] appraiser’s assessment of the ‘amount of loss’ necessarily includes a determination of the cause of the loss.’

Just like in Quade, the dispute here is over the ‘amount of loss.’ If the earlier storm caused the damage, as Axis claims, then the amount of loss will be zero because the insurer would have no ‘liability’ under the contract…. If, on the other hand, a storm within the policy period caused the damage, as Condor argues, then Axis’s ‘liability’ will be greater than zero.

This recent case solidified previous Minnesota state law indicating that causation can be determined by an appraisal panel. For those wishing to further study this topic, Merlin Law Group attorney Ashley Harris has written extensively on this subject as noted in Ashley Harris Cited by Iowa Supreme Court Regarding Causation Issues in Appraisal Proceedings.

Thought For The Day

When I played at Minnesota, Green Bay, those northern cities, Buffalo, they wanted to have those championship games at home. It was going to be an advantage to be there with their fans and the cold weather and all that. But when you’ve got a Super Bowl, and it’s the two best teams, you want ideal conditions. You want to play a great game.
—Tony Dungy
1 Axis Surplus Ins. Co. v. Condor Corp., No. 20-789, 2020 WL 7974330 (D. Minn. Oct. 8, 2020).
2 Axis Surplus Ins. Co. v. Condor Corp., No. 21-1022, — F.4th —, 2021 WL 5774499 (8th Cir. Dec. 7, 2021).