Gibbs v. SECURA Insurance Company

Background

A hailstorm on May 11, 2022, damaged buildings on a farm owned by Jeff and Christine Gibbs. The property was insured under a policy issued by SECURA Insurance Company. The parties disagreed about the amount of the loss and whether some losses were covered.

SECURA produced loss estimates in July, August, and October 2022. According to the Gibbses’ adjuster, those estimates totaled $717,150.25. SECURA asserted that it had paid the Gibbses $171,933.28. The Gibbses submitted their own loss estimates in March 2023, totaling $2,198,755.83. Their estimates and SECURA’s estimates differed concerning the existence, extent, and nature of damage and the scope and cost of repairs.

The policy stated that either party could demand an appraisal if the parties failed to agree on the amount of loss. The Gibbses demanded appraisal, but SECURA refused, arguing that the demand raised coverage questions that had to be decided before appraisal. The Gibbses then filed this case, and they moved to compel appraisal.

Legal standard

The court treated the motion to compel appraisal as a motion for partial summary judgment seeking specific performance. Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law.

Applying Minnesota law, the court explained that a motion to compel appraisal must be granted when undisputed facts show that: (1) the parties made a valid agreement; (2) the party seeking appraisal satisfied the required conditions; and (3) the opposing party breached the agreement. SECURA did not challenge the validity of the policy. The dispute concerned whether the appraisal provision had been triggered.

Analysis

The court relied on the Minnesota Supreme Court’s decision in Quade v. Secura Ins. Under that rule, an appraisal panel may determine the amount of loss, including the cause of the loss and the cost of repairing it. The panel’s liability-related determinations are not final and conclusive, and an appraisal award does not prevent the insurer from later asking a court to decide its liability under the policy. Questions solely involving policy interpretation remain for the court. Questions requiring separation of covered damage from non-covered or excluded damage are initially appropriate for the appraiser.

The court found this case fell within the appraisal category. SECURA disputed whether some buildings were damaged, the extent of damage to other buildings, the scope of necessary repairs, and whether some damage was covered functional damage or non-covered cosmetic damage. Resolving those disputes would require a fact-intensive, building-by-building inquiry into the cause, extent, and nature of the loss and the cost of repair. The court concluded that these disagreements caused the parties to fail to agree on the amount of loss and were therefore questions for the appraisal panel.

The court rejected SECURA’s argument that a policy provision requiring proof of certain repairs or replacements within 365 days was a condition precedent to appraisal. The appraisal provision identified failure to agree on the amount of loss as its condition, and neither provision referred to the other. The court stated that the repair-and-replacement provision might affect SECURA’s liability depending on the appraisal award and any later proceedings, but it did not prevent appraisal at this stage.

The court also rejected SECURA’s argument that the Gibbses had not shown a failure to agree because they had not specifically contested SECURA’s assertion that much of the loss was cosmetic and not covered. Unlike the situation described in the cited Minnesota Court of Appeals decision, the Gibbses had provided loss estimates and correspondence that stated their position. Those materials gave the parties enough information to compare their positions and showed that they disagreed about the amount of loss.

Disposition

Judge Eric C. Tostrud ordered that the Plaintiffs’ Motion to Compel Appraisal was GRANTED. The opinion stated that, depending on the appraisal panel’s answers, SECURA could return to court to have its liability under the policy judicially determined.