Christina Phillips | Property Insurance Coverage Law Blog | December 3, 2017
Following a loss, the issue of replacement with “like kind and quality” often arises whether it be with the replacement of personal property or building materials. The phrase “like kind and quality” is typically not defined in an insurance policy, so whether construction is of “like kind and quality” can easily become a dispute. But is this dispute subject to appraisal?
In Taven Apartments Limited Partnership v. State Farm Fire & Casualty Company,1 the trial court was recently faced with this issue. Following a loss which destroyed an apartment building, Taven submitted a claim to State Farm for which it made partial payment. Taven went forward and reconstructed the destroyed building and demanded that State Farm proceed with appraisal. State Farm denied the request asserting that the structure built to replace Taven Apartments was not “like kind and quality.”
State Farm disputed the claim on the basis that the replacement structure had different dimensions and amenities. Taven disputed the contentions and submitted construction drawings prepared to conform to the design of the destroyed building, re-using the existing foundations and concrete slab for the original building. Taven also moved to compel State Farm to appraisal, asserting that determining whether the replacement structure is of “like kind and quality” is within the appraisers’ purview and expertise which would include a determination of what the proper replacement cost or value is, and whether the rebuilt building was of the same size as the destroyed building, and used materials of like kind and quality. State Farm alleged that the dispute centered on the “extent of coverage” for the replacement building.
The United States District Court of the Eastern District of Missouri ultimately concluded that “like kind and quality” was not a coverage issue, but was a valuation matter. Specifically, the court concluded that the dispute related to valuation and cost of damages, repairs, and construction constituted a “disagree[ment] on the value or the amount of the loss” which was subject to appraisal. In this jurisdiction, it is likely that future disputes involving issues of what constitutes “like kind and quality” will be subject to the appraisal process.
1 Taven Apartments Limited Partnership v. State Farm Fire & Cas. Co., No. 1:17-cv-00083, 2017 WL 4778580 (E.D. Mo. Oct. 23, 2017).