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Walnut Creek Townhome Association v. Depositors Insurance Co.

Court of Appeals of Iowa

July 19, 2017


         Appeal from the Iowa District Court for Polk County, Robert B. Hanson, Judge.

         Walnut Creek appeals the district court's rejection of an appraisal report. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

          Timothy D. Johnson of Roeder Smith Jadin, P.L.L.C., Bloomington, Minnesota, and Anthony R. Epping of Epping Law Office, P.C., Des Moines, for appellant.

          Apryl M. Delange and Jeff M. Margolin of Hopkins & Huebner, P.C., Des Moines, for appellee.

          Heard by Mullins, P.J., and Bower and McDonald, JJ.

          BOWER, Judge.

         In August 2012, a hailstorm struck the Walnut Creek Townhome Association ("Walnut Creek" or "the association"), a housing community located in Urbandale. The association submitted an insurance claim to its insurer, Depositors Insurance, which denied most of the claim. Walnut Creek subsequently brought an action against Depositors for breach of contract and to seek a declaratory judgment. Before trial, the parties went before an appraisal panel. The panel found the association sustained approximately $1.4 million in damages as a result of the August 2012 hailstorm. The district court, however, concluded the association was not entitled to any relief. Walnut Creek now appeals.


         As of August 2012, Walnut Creek contained thirty-six multi-family buildings. Buildings in the association were constructed between 2004 and 2006. The association is governed by a board of directors.

         In 2011, the board had discussions about the necessity of repairing roofs in the association. It hired a roof inspector, Marcus Harbert, to review the association's buildings. Harbert noticed issues with the shingles of the roofs he inspected. The shingles Walnut Creek primarily used were known as CertainTeed New Horizon shingles. New Horizon shingles, several experts testified, are known to have a manufacturer's defect that causes cracking and crazing in the shingle appliqué, and significant granule loss in the shingle.[1] At a board meeting in June 2012, a representative from Harbert's employer told the board the shingles "could possibly be faulty." In response, the board formed a roofing committee.

         On August 8, 2012, a hailstorm hit Urbandale and the surrounding area, including the association. The hail in the neighborhood was reported to be "pea size" to "dime size." Association members reported leaking roofs, loose shingles, and grit or grain coming off the roofs after the storm.

         In August 2012, "within a week" of the storm, Harbert inspected the roofs again. He did not observe any hail impacts significant enough to warrant an insurance claim. Harbert recommended the association follow through with a warranty claim for the defective shingles. Coincidentally, Harbert lived in Walnut Creek for a year, and testified another storm in September 2013 blew shingles off roofs. Harbert also observed the roofs again in May 2015 and concluded the roofs had sustained two to three hail hits per square, [2] but that the only reason to replace the roofs was the manufacturer's defect.

         In September 2012, Walnut Creek had a roofing renovator, Nick Waterman, inspect the roofs. He concluded the roofing "definitely" had hail damage, noting "anywhere from eight to twelve hits" per square. Waterman testified his standard practice was to ignore hail hits to the appliqué because such damage is "not accepted in the insurance-related field." He would, in certain circumstances, double the size of the area he sampled to make up for the fact the appliqué accounted for roughly half the area of the individual shingle. In this case, he testified he "voided" the appliqué because he was aware of the manufacturer's defect. Waterman also testified he observed hail damage to the "soft metal, fascia, gutters, air conditioner units, [and] window screens."

         Two engineers from Haag Engineering testified: Robert Danielson and Richard Herzog. Haag Engineering was retained by Depositors to inspect the association buildings in December 2012. The firm prepared a report on its findings. Danielson noted there were nine "hail events" in the Urbandale area between 2006 and September 2012. Danielson also noted one building, Building 19, did not have the New Horizon shingle. The Haag Engineering report states the appliqué shingles were "generally in poor condition" but the "three-tab shingles [on Building 19] were generally in good to fair condition with respect to weathering." Danielson testified he looked for fractures, punctures, ruptures, bruises, or holes to conclude a roof was damaged by hail. He did not see signs of that. He did observe granular loss in the shingles. Herzog testified, given the weight of the shingles, the hail in the community would have been of insufficient size to cause damage.[3] The Haag Engineering report further stated, of nineteen fractures and punctures on the vinyl siding, most were either not consistent with hail damage or not caused by the most recent hail event. Only one, the report concluded, was consistent with recent hail impact "as noted by the coincident spatter mark and on an elevation that was consistent with the most recent hailstorm event."

         In 2013, a public adjuster, Timothy Barthelemy, assessed the thirty-six Walnut Creek buildings and made conclusions similar to Waterman's. Generally, his conclusion was that hail caused damage to the properties. His team of inspectors observed nine to eleven hits per square in the area assessed. He also excluded the appliqué from his assessment. Barthelemy had conducted "probably 400" appraisals. Barthelemy testified sometimes hail damage takes "a winter" to show up in a shingle. Barthelemy also testified he discussed the damage with Danielson. In Barthelemy's view, fracture or not, damage existed. According to Barthelemy, the policy covers "physical damage or physical loss. So I'm looking for something that the shingle is physically damaged, and that would be cosmetic damage." Danielson agreed cosmetic damage is physical damage. The Haag Engineering report concluded "[d]ents in the gutters, downspouts, fascia and trim, window cladding, window screens, and flue caps related to hail fall were a cosmetic condition that would not functionally alter the material."

         Depositors denied most of Walnut Creek's claim on February 13, 2013. Depositors agreed to pay $124, 656.79 based on small dents to the "soft metal" items, including fascia, gutters, and downspouts. Depositors stated damage to windows and air conditioning units was not covered under the policy. In August 2013, Walnut Creek filed suit for breach of contract and a declaratory judgment.

         The parties' insurance policy provides for appraisal. Walnut Creek requested appraisal. In July 2014, Walnut Creek moved for summary judgment and asked the district court to approve language to be used on the appraisal form. In its summary judgment ruling in October 2014, the court declined to approve any language, but sought to "clarify what issues in this case are determinable by appraisers and which issues are properly saved for litigation." The court concluded "[t]he parties may fully litigate whether all of the loss to the property was a result of a covered event (here, the hail storm)-in other words, whether the cause of the damage is covered under the policy." The court also stated "[t]he appraisers and umpire must consider what damage was caused by hail, what damage was not, or damage with which they are unconcerned, such as normal wear and tear." The appraisal took place May 5, 2015, only a few weeks before trial.

         Depositors' appraiser, Eric Howell, a property adjuster, also testified. Howell testified he had concerns about the appraisal umpire, Larry Roth, because Roth's experience was, in Howell's view, with fire and water losses, not hail damage. However, Howell agreed to use Roth as the umpire because, Howell testified, he believed Roth would be bringing "an independent engineer experienced in assessing hail damage" with him. No such person was present at the appraisal. Howell testified he did not sign off on the appraisal award form because he "disagreed with what was being presented as a final number." Howell testified he was reluctant to stop the appraisal because it had been rescheduled "a couple times" due to weather and trial was "right around the corner."

         Waterman, Barthelemy, and Danielson were all present at the appraisal. Roth served as the umpire on the panel. Walnut Creek selected James Pierce as its appraiser and Howell served as Depositors' appraiser. Evidence was presented to the appraisal panel, including the Haag Engineering report. Five buildings were inspected as part of the appraisal. The appraisal panel was aware of Walnut Creek's warranty option.

         The appraisal award begins with a declaration of competence and disinterest signed by both appraisers. It next contains this statement:

The Appraisers and Umpire above-referenced hereby agree and stipulate that the appraisal herein is limited in scope to the amount of loss and damage as a result of a hail and windstorm that occurred on or about August 8, 2012. The award does not include an evaluation or determination of coverage, policy exclusions or the relative causation of the same.

         The award section contains four itemized awards. Each is listed with a description of the property damaged, a replacement cost, a depreciation percentage, a depreciation amount, and an actual cash value. The four items listed are "direct physical loss roofing, " "matching roofing (additional), " "siding, gutters, fascia, " and "air conditioners." The appraisal concludes with this: "We, the undersigned, pursuant to our appointment, certify that we have truly, conscientiously and impartially performed the duties assigned us and have appraised and determined and do hereby award the following amount of loss. Minimum of two signatures required." Pierce and Roth signed the appraisal award. The combined amount of loss is $1, 467, 830, representing the total replacement cost for the four property items listed.

         A bench trial was held May 27 and 28, 2015. The district court concluded the appraisal was not binding or conclusive and dismissed Walnut Creek's claims. This appeal followed.


         Depositors challenges the timeliness of Walnut Creek's appeal. A party has thirty days to appeal a final judgment. See Iowa R. App. P. 6.101(1)(b). Judgment herein was entered August 19, 2015. Walnut Creek filed a post-judgment motion on September 3. The post-judgment motion requested enlargement or amendment pursuant to Iowa Rule of Civil Procedure 1.904(2) and a new trial pursuant to rule 1.1004. Such motions may toll the appeal period. See id. The district court denied those motions in an order issued December 21. Walnut Creek's notice of appeal followed within thirty days of that order.

         Depositors asserts Walnut Creek's appeal is untimely because the 1.904(2) motion was improper. Our supreme court has repeatedly held only "proper" 1.904(2) motions toll the appeal period. See, e.g., Hedlund v. State, 875 N.W.2d 720, 725 (Iowa 2016). Depositors asserts Walnut Creek's 1.904(2) motion was simply an improper "rehash" of previous arguments. See Bellach v. IMT Ins. Co., 573 N.W.2d 903, 905 (Iowa 1998). We disagree. In its ruling on the motions, the district court issued a "clarification" on burden-shifting that amounts to an amendment or enlargement of its previous ruling. Cf. McKee v. Isle of Capri Casinos, Inc., 864 N.W.2d 518, 526 (Iowa 2015) ("The district court in fact modified [one] aspect of its original ruling when it acted on McKee's motion."). Therefore, the 1.904(2) motion was a proper one and the appeal is timely.

         Additionally, Walnut Creek also brought a motion for new trial. We are aware of no rule requiring a motion for new trial to conform to the same propriety requirement as a 1.904(2) motion. Where the case law refers to a "proper" motion for new trial, the term "proper" unfailingly either (a) refers to timeliness or (b) appears in dicta with citations to 1.904(2) cases. See, e.g., Union Tr. & Sav.Bank v. Stanwood Feed & Grain, Inc., 158 N.W.2d 1, 3 (Iowa 1968) (equating "improper" with "untimely"); In re J.L., 868 N.W.2d 462, 465 (Iowa Ct. App. 2015) (citing string of 1.904(2) cases). If we were to conclude a motion for new trial must be "proper" to toll the appeal period, we might find it need only identify some enumerated basis for new trial. See Iowa R. Civ. P. 1.1004(1)-(9). The district court here found two ...

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