Multi Star Hotels, LLC v. West Bend Mutual Insurance Company

Background

Plaintiff Multi Star Hotels, LLC owns a hotel in Shakopee, Minnesota. It claims the hotel sustained damage from heavy wind and hail on May 11, 2022. After Plaintiff notified Defendant West Bend Mutual Insurance Company of the damage, Defendant denied coverage on September 12, 2023, attributing the damage to wear and tear — an excluded cause under the policy — rather than the storm. Plaintiff filed suit, and the Amended Complaint asserts a single breach of contract claim.

The Appraisal Provision

Minnesota law (Minn. Stat. § 65A.26) requires every insurance policy covering hail damage to include an appraisal clause for disputes over the amount of loss. The policy's appraisal clause mirrors the statutory language: if the parties disagree on the value of the property or the amount of loss, either side may demand appraisal. Each party selects a competent and impartial appraiser; the two appraisers then select an umpire (or, if they cannot agree, a court judge may appoint one). A decision agreed to by any two of the three participants is binding.

Defendant notified Plaintiff of its intent to invoke appraisal in March 2025. According to Defendant, no appraisal took place because Plaintiff objected to using an out-of-state umpire. Defendant then filed this motion to compel appraisal and to stay (pause) the litigation while appraisal proceeded.

Legal Analysis

Coverage vs. Amount-of-Loss Dispute

The parties agreed that the appraisal right is triggered by disputes over actual cash value or the amount of loss, as set out in Minn. Stat. § 65A.01. Plaintiff argued that because Defendant denied coverage entirely — asserting the damage was due to wear and tear, not the storm — there was no 'amount of loss' to appraise, making this a pure legal question for the court. Defendant countered that the real dispute is over how much of the damage is attributable to the covered storm versus preexisting conditions, which is an amount-of-loss question subject to appraisal.

Judge Magnuson applied the Eighth Circuit's framework from Axis Surplus Insurance Co. v. Condor Corp., 19 F.4th 1062 (8th Cir. 2021). In Axis, the Eighth Circuit drew a distinction between (1) purely legal coverage questions — such as whether a particular peril is covered or excluded — which courts decide, and (2) factual damage-separation questions — such as how to separate loss caused by a covered storm from damage attributable to preexisting conditions — which fall to appraisers. The court found this case fits the second category: the key question is whether the hotel's damage was caused by preexisting conditions or the May 2022 storm, a factual separation question appropriate for appraisal.

Timeliness of the Appraisal Demand

Plaintiff also argued that Defendant's appraisal demand was untimely under state law. The court rejected this argument by relying on the Minnesota Court of Appeals' recent decision in Ariel, Inc. v. State Farm Fire & Casualty Co., 15 N.W.3d 673 (Minn. Ct. App. 2024). In Ariel, the court held that the two-year limitations period in Minn. Stat. § 65A.01, subd. 3, does not bar an appraisal demand as long as the insured commenced a timely lawsuit — even when the demand itself comes after the two-year period has lapsed. Judge Magnuson found the situation here analogous: Plaintiff filed suit within the limitations period, preserving the right to seek redress, and Defendant's subsequent move to compel appraisal was therefore appropriate.

Stay of Litigation

Defendant also asked the court to stay the case pending appraisal. Plaintiff opposed a stay, noting that Defendant filed the motion more than a month after the close of discovery and that a stay would delay a proceeding scheduled to be trial-ready by November 1, 2025. Defendant's counsel submitted a declaration indicating that appraisals were being scheduled for August and September 2025, which would not conflict with the November 1 date, and noted that no trial date has yet been formally set.

Judge Magnuson denied the stay request. The court determined that keeping the case moving toward the November 1 trial-ready deadline was the more efficient approach, and that because no delay would result, Plaintiff would not be prejudiced by proceeding with appraisal alongside the litigation.

Disposition

The court granted the motion to compel appraisal and denied the request to stay the case. The court further ordered that any appraisal be completed on or around October 1, 2025, and that any umpire selected must be from Minnesota.