Tred R. Eyerly | Insurance Law Hawaii
The federal district court determined that an appraisal can include causation issues when determining the amount of loss. B&D Inv. Grp., LLC v. Mid-Century Ins. Co., 2021 U.S. Dist. LEXIS 246853 (N.D. Ill. Dec. 28, 2021).
B&D commercial building was damaged by hail. B&D submitted a claim to Mid-Century, but the parties disagreed as to the damage. Mid-Century found there was hail damage to metal vents on the roof and estimated the repair costs to be $4,271.95. Mid-Century found no hail damage to the roof itself. B&D disagreed and insisted that there was additional damage to the property, specifically the roof.
B&D requested an appraisal, but Mid-Century denied the request. Mid-Century found that the condition of the roof was due to wear and tear and therefore constituted an excluded cause under the policy. B&D filed suit seeking a declaratory judgment compelling the parties to proceed with an appraisal.
The policy authorized an appraisal if the parties disagreed as to the “amount of loss.” B&D argued that when an insurer admitted there was a covered loss, determining the extent and causation of the damage was part of the “amount of loss” determination and subject to the appraisal clause, and not a coverage dispute. Mid-Century, on the other hand, framed the dispute as whether damage to the roof was caused by hail or by wear and tear and deterioration.
The policy did not define “amount of loss.” The parties agreed there was a covered hail loss to the metal vents on the roof. Because Mid-Century maintained any additional damage to the roof was due to wear and tear and deterioration, a disagreement existed as to whether the damage to the roof was caused by hail or by wear and tear. The court agreed with B&D that because damage to the roof was also caused by hail, an appraisal should be conducted to resolve the disagreement as to the “amount of loss” from the hail.
The initial determination by Mid-Century found that the amount of loss to the roof vents was based on the fact that the damage was due to hail. Mid-Century then ruled out any loss for the roof itself based on its view that the damage to the roof was caused by wear and tear and deterioration. This analysis inherently involved causation determinations. It logically followed that the causation for all of the damage would be part of the amount of loss analysis by an appraiser.
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