Appraisers May Determine Cause of Damage

In Walnut Creek Townhome Association v. Depositors Insurance Co., No. 16-0121 (Iowa, June 1, 2018), the Iowa Supreme Court held that the factual cause of damage to insured property may be determined by appraisal.

Facts

This case involved alleged damage by hail to shingle roofs in a residential complex. There was also a question of whether the shingles were defective, and, notably, the policy had anti-concurrent causation language with regard to certain exclusions, including those for “deterioration,” “latent defect,” and “faulty workmanship.” The insurer denied the claim for the roof but paid for hail damage to “soft metals.” The insured demanded appraisal and also filed a lawsuit demanding appraisal. In the appraisal, an award was entered, setting the amount of loss from hail at $1,467,830. In a bench trial, the court determined the policy excluded the damage to the roofs and held the appraisal award was not binding or conclusive on the parties.

Analysis

The Iowa Supreme Court disagreed, finding that appraisers may “decide the factual cause of damage to insured property to determine the amount of loss,” and that, while the court decides coverage questions, “the appraisers’ determination of the factual cause and monetary amount of the insured loss is binding on the parties absent fraud or other grounds to overcome a presumption of validity.” Therefore, the district court could not disregard the appraisers’ factual determination that hail damaged the shingles. Further, the appraisal award was binding on the parties as to the amount of loss from hail, but that amount remained subject to the anti-concurrent causation provision and exclusions, the applicability of which the court would decide. A new trial was ordered in which the court must accept the appraisal award as to the hail damage but would adjudicate the coverage defenses to determine what amount, if any, the insurer owed under the policy.

Learning Point: Under Iowa law, factual determinations made by an appraiser, such as cause of loss, are binding on the parties and the court in coverage actions absent fraud or other grounds to overcome a presumption of validity.