review from the Iowa Court of Appeals. Appeal from the Iowa
District Court for Polk County, Robert B. Hanson, Judge.
insurer seeks further review of court of appeals decision
that reversed district court judgment rejecting appraisal
award. COURT OF APPEALS DECISION VACATED; DISTRICT COURT
JUDGMENT AFFIRMED IN PART, REVERSED IN PART, AND REMANDED
Timothy D. Johnson of Roeder Smith Jadin, PLLC, Bloomington,
Minnesota, and Anthony R. Epping of Epping Law Office, P.C.,
Des Moines, for appellant.
M. Margolin and Apryl M. DeLange of Hopkins and Huebner,
P.C., Des Moines, for appellee.
appeal, we must decide whether the district court erred by
rejecting an insurance appraisal award for hail damage to
roofing shingles. This case presents a question of first
impression in Iowa that has divided the courts of other
jurisdictions: whether the appraisers may determine the
cause of the loss. The insured townhome association
was already investigating a warranty claim against the
manufacturer seeking replacement of allegedly defective
shingles when the hailstorm occurred. The property insurer
paid for damage to metal gutters and fascia but disputed
whether the hail caused damage to the asphalt shingles and
denied coverage based on the preexisting manufacturing
defect. The Association sued the insurer for breach of
contract and invoked the appraisal provision of the property
insurance policy to ascertain the amount of the loss from the
hailstorm. The appraisal panel considered conflicting expert
opinions and, in a two-to-one decision, valued the
hail-damage loss at approximately $1.4 million. The district
court held a bench trial, rejected the appraisal award, found
no shingle damage from hail, applied an exclusion for
defective materials, and entered judgment in favor of the
insurer. The Association appealed, and we transferred the
case to the court of appeals.
court of appeals held the district court erred by rejecting
the appraisal award for shingle damage and remanded for entry
of judgment on the appraisal award, excluding amounts for air
conditioners not owned by the insured. A dissenting judge
would have affirmed the district court judgment against the
insured, concluding the district court was not bound by the
appraiser's determination of the cause of the loss. We
granted the insurer's application for further review.
the district court erred by disregarding the appraisal
award's determination of the amount of the loss for
shingles damaged by the hailstorm. We are persuaded by the
court's holding that appraisers may determine the factual
cause of damage to insured property to ascertain the amount
of the loss. Coverage questions, however, are to be resolved
by the court. The appraisal did not address the extent of
preexisting shingle damage excluded from coverage through the
insurance policy's anticoncurrent-cause provision. That
issue must be decided by the court on remand. We therefore
vacate the decision of the court of appeals and remand the
case for further proceedings consistent with this opinion.
Background Facts and Proceedings.
Creek Townhome Association (Walnut Creek or the Association)
is a residential common interest community in Urbandale. The
thirty-six multifamily buildings at Walnut Creek were built
between 2004 and 2006. Walnut Creek is governed by a board of
directors. In 2011, the board began investigating the need to
replace the shingles on the roofs installed during the
original construction. The type of shingle- New Horizon
manufactured by CertainTeed-was regarded by roofing
professionals to be defective.
Harbert, a professional roofer for Hedberg & Son Roofing,
evaluated the life expectancy of the roofs in the spring or
summer of 2011. He inspected the roofs of three buildings.
Harbert observed "[c]racking, crazing of appliques,
[and] significant granule loss throughout the whole shingle
itself." CertainTeed shingles carry a twenty-five-year
warranty, but Harbert recommended to Mike Gooding,
Hedberg's residential salesperson, that the shingles be
replaced within five years. Gooding relayed this information
to the Association's board. Minutes of the board meetings
in 2011 and 2012 show the board was preparing to replace the
August 8, 2012, a severe wind and hailstorm hit Walnut Creek.
One resident described the hail as "pea size" and
"dime size" and noted that it covered his entire
deck. Within a week after the storm, Harbert inspected the
roofs at Walnut Creek again, this time for hail damage. He
concluded the hail impacts were not significant enough
"to warrant calling for an insurance claim."
However, Harbert recommended to Gooding that Walnut Creek
follow through with the CertainTeed warranty claim.
September, Walnut Creek asked Nicholas Waterman, a roofing
renovator with GreenGuard Construction, to inspect the roofs
for hail damage. Waterman found between eight to twelve hits
per ten-by-ten-foot square and concluded that "[t]he
roofing definitely had hail damage." Waterman testified
that his standard practice was to ignore hits to the applique
because damage to this area is "not accepted in the
insurance-related field." He acknowledged that he will
sometimes examine an area twice as large as the usual
ten-by-ten-foot square to make up for the applique area that
is ignored. Walnut Creek is insured by Depositors Insurance
Company (Depositors). The insurance policy provides,
We will pay for direct physical loss of or damage to Covered
Property at the described premises in the Declarations caused
by or resulting from any Covered Cause of Loss.
policy defines "Specified Causes of Loss" to
include a "windstorm or hail." The policy sets
forth exclusions and limitations:
COVERED CAUSES OF LOSS
This Coverage Form insures against Risks Of Direct Physical
Loss unless the loss is:
a. Excluded in Section B. EXCLUSIONS;
b. Limited in paragraph A.4. LIMITATIONS in this section; or
c. Limited or excluded in Section E. PROPERTY LOSS CONDITIONS
or Section F. PROPERTY GENERAL CONDITIONS.
section on exclusions includes an anticoncurrent-cause
provision which states,
1. We will not pay for loss or damage caused directly or
indirectly by any of the following. Such loss or damage is
excluded regardless of any other cause or event that
contributes concurrently or in any sequence to the loss.
These exclusions apply whether or not the loss event results
in widespread damage or affects a substantial area.
section continues, "2. We will not pay for loss or
damage caused by or resulting from any of the following . . .
[r]ust or other corrosion, decay, deterioration, hidden or
latent defect or any quality in property that causes it to
damage or destroy itself."
section on exclusions also provides,
3. We will not pay for loss or damage caused by or resulting
from any of the following
. . . .
c. Negligent Work.
Faulty, inadequate, or defective:
. . . .
(2) Design, specifications, workmanship, work methods,
repair, construction, renovation, remodeling, grading,
compaction, failure to protect the property;
(3) Materials used in repair, construction, renovation or
remodeling . . . .
Creek submitted an insurance claim to Depositors, alleging
that the August 8 storm caused damage to the roofs, gutters,
siding, soffits, and air conditioning units and that the
policy covered such damage. Depositors retained Haag
Engineering to conduct a hail damage inspection. Two
engineers-Robert Danielson and Richard Herzog- inspected the
roofs on December 12 to 14. They prepared a report dated
January 18, 2013. In the report, Danielson noted that there
were nine hail events in the Urbandale area between 2006 and
September 2012. The report concluded, "There was no
hail-caused damage to shingles on the Walnut Creek Townhome
Association property roofs."
Barthelemy, a public adjuster, assessed the buildings for
Walnut Creek in 2013. Barthelemy observed nine to eleven hits
per ten-by-ten-foot square. Barthelemy concluded that the
hail caused damage to the buildings. Barthelemy inspected the
roofs with a representative of Haag Engineering and Jason
Johnson, the adjuster for Depositors.
February 13, Depositors sent Walnut Creek a
reservation-of-rights letter, noting its "investigation
reveal[ed] no hail damage to the composition shingle roof
covering of the subject buildings" at Walnut Creek.
Depositors denied most of Walnut Creek's claim but payed
Walnut Creek $124, 656.79 for hail ...