Harmony East Condominium Association v. Falls Lake Fire and Casualty Company

Background

Harmony East Condominium Association manages a community of 176 townhome units within 25 buildings. It purchased an all-risk insurance policy from Falls Lake, effective May 1, 2022. Harmony alleged that a storm around May 11, 2022, damaged its property. Its public adjusting firm estimated the replacement cost of the claimed damage at $2,382,132.10.

Falls Lake inspected the property, sent a reservation-of-rights letter identifying possible policy exclusions, and denied the claim on November 23, 2022. Falls Lake stated that there was no evidence of hail damage to the shingles, that some metal damage occurred before the policy period, and that damage to siding, windows, or screens either occurred before the policy period or resulted from ordinary wear and tear.

Harmony demanded appraisal on July 17, 2023. Falls Lake named its own appraiser but challenged the demand and requested additional information. Falls Lake later asserted that any lawsuit was time-barred, while continuing to communicate with Harmony about the claim and requested information. It sent a notice of claim denial and file closure on March 19, 2024. Harmony sued in state court on May 2, 2024, seeking declarations about the parties’ rights and obligations, an order requiring appraisal, relief concerning the time limit, changes to the policy to comply with Minnesota law, and damages for breach of contract. Falls Lake removed the case to federal court.

Motion to Dismiss

Falls Lake moved to dismiss under the pleading standard requiring a complaint to allege enough facts to make relief reasonably plausible. Falls Lake argued that the policy’s “Suit Against Company” provision required any lawsuit to be filed within one year after the loss.

The court rejected Harmony’s argument that Minnesota’s standard fire-insurance statute automatically changed the policy’s deadline to two years. That statute applies to fire losses, and Harmony did not allege fire losses. The court also rejected Falls Lake’s argument that Minnesota’s hail-insurance statute required a one-year limit for this all-risk policy. The court interpreted that statute as applying to hail-specific policies, not all-risk policies.

The court relied instead on Minnesota Rule 2700.0300, which prohibits accepting a casualty-insurance policy form that limits the time to sue the insurer to less than two years. Because the rule did not conflict with the hail statute, the court held that the rule had the force and effect of law. Under the policy’s language requiring the shortest lawful time limit, the court held that the applicable limitation period was two years and that Harmony’s lawsuit was not time-barred.

The court gave three additional reasons why dismissal would be improper even if a one-year period were permissible. First, Harmony plausibly alleged that the one-year limit was unreasonable under the facts because the parties continued dealing with the claim and Harmony alleged that it did not have the information needed for its claim to mature until after the deadline. Second, Harmony plausibly alleged that Falls Lake waived the time limit by failing to raise it until September 2023 and continuing to work on the claim afterward. Third, Harmony plausibly alleged equitable estoppel, meaning that Falls Lake’s conduct induced Harmony to delay suing and that Harmony would be harmed if Falls Lake could enforce the deadline. The court therefore denied Falls Lake’s Motion to Dismiss.

Motion to Compel Appraisal

The court treated Harmony’s Motion to Compel Appraisal and Appoint an Umpire as a request 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 as a matter of law.

The policy’s appraisal provision required appraisal when the parties failed to agree on the amount of loss and either party made a written demand within 60 days after Falls Lake received proof of loss. Falls Lake did not dispute that the policy was a valid agreement or that it refused to participate in appraisal. It argued that Harmony had not satisfied a separate policy provision requiring the named insured to cooperate and provide requested information.

The court held that the cooperation provision was a condition precedent to payment of a loss, not to appraisal. It did not refer to the appraisal provision, and the appraisal provision did not refer to it. The court also explained that appraisal generally addresses the amount of loss, while coverage questions—including whether the insured fulfilled its duties—are reserved for the courts.

The court found no genuine dispute that the parties disagreed about the amount of loss. Harmony supported its claim with a specific estimate, while Falls Lake concluded that the storm caused no covered loss. The court also found no suggestion that Harmony acted in bad faith by failing to provide all requested information. It therefore granted Harmony’s Motion to Compel Appraisal and Appoint an Umpire, granted partial summary judgment on the appraisal issue, and compelled Falls Lake to participate in the appraisal process. The policy expressly preserved Falls Lake’s right to deny the claim after appraisal.

Umpire and Final Order

Although the appraisers had previously failed to agree on an umpire, the court gave them another opportunity because Falls Lake was being compelled to participate in appraisal. The court ordered the appraisers to meet and confer and select a competent and disinterested umpire by Monday, January 13, 2025. If they could not agree, the parties were required to submit preferred-umpire lists and supporting information to the court by Friday, January 24, 2025.

The final order states that: (1) Falls Lake’s Motion to Dismiss is DENIED; (2) Harmony’s Motion to Compel Appraisal and Appoint an Umpire is GRANTED; (3) Falls Lake is compelled to participate in the appraisal process described in the policy; and (4) the appraisers must meet and confer regarding an umpire by the stated deadline.