Rose Hill Villas Owners Association v. American Family Mutual Insurance Company

Background

Rose Hill is a nonprofit common-interest community consisting of homeowners of 10 multi-unit residential townhome buildings in Inver Grove Heights, Minnesota. The property sustained wind and hail damage on September 24, 2019. American Family insured the property under a business-owners policy that covered, among other things, wind and hail damage.

American Family determined that roof metals, including valley metal and vents, were damaged. Its repair estimates called for replacing the damaged metal components and the shingles around them. Rose Hill disagreed, stating that the existing Atlas Franklin old-style Pinnacle Pristine shingles had been discontinued and that the current Pinnacle Pristine shingles differed in shape, size, and exposure. Rose Hill argued that patching would not work and that the roofs needed full shingle replacement.

Because the parties disagreed about the scope and amount of the loss, Rose Hill demanded an appraisal under the insurance policy and Minnesota law. The appraisal panel consisted of an appraiser chosen by each party and an umpire selected by those appraisers. Rose Hill’s appraiser disagreed with the proposal to patch the roofs. The other appraiser and the umpire concluded that reasonable matching shingles were available and that full replacement was not warranted. The umpire and the other appraiser signed an August 11, 2020 appraisal award; Rose Hill’s appraiser did not sign it.

Arguments and issue

Rose Hill moved for summary judgment, a ruling without a trial when no genuine dispute of important fact exists and the moving party is entitled to judgment under the law. Rose Hill asked the court to vacate, or set aside, the appraisal award. Rose Hill argued that the umpire and the other appraiser based the award on personal knowledge and experience while excluding pertinent evidence that patching would violate installation instructions, a warranty, or the building code.

American Family also moved for summary judgment and asked the court to confirm the appraisal award. It argued that Rose Hill had an opportunity to present evidence during the appraisal, that the panel considered the submitted evidence, and that the appraisers were entitled to use their experience in evaluating the dispute.

The court stated that the issue was not whether the panel correctly decided that the roofs could be patched. The issue was whether Rose Hill had a reasonable opportunity to be heard and present evidence and whether the panel based its decision on personal knowledge while excluding pertinent evidence.

Court’s analysis

Under Minnesota law, an appraisal award is presumed valid and should generally be upheld. A party seeking to vacate an award must show that the appraisal panel exceeded its authority. The court explained that appraisers may use their professional experience, but they may not base an award on personal knowledge to the exclusion of pertinent evidence offered by the parties.

The court found that Rose Hill knew before the appraisal that American Family relied on an ITEL report identifying an Atlas Roofing Castlebrook shingle as a match with the same physical dimensions and characteristics as the roof shingles. Rose Hill therefore had an opportunity at the appraisal to present evidence that the Castlebrook shingle, or another shingle with the same dimensions, could not be used for patching, would not create a watertight seal, or would violate installation instructions, a warranty, or the building code. The court found that Rose Hill did not use that opportunity to present such evidence.

The court also found no evidence that the panel disregarded the documents or testimony presented at the appraisal. The appraisers testified that they considered the submitted materials, and the umpire testified that he did not gather or consider evidence outside the proceedings. The court concluded that the panel relied on the ITEL report and its professional experience, rather than improperly excluding pertinent evidence.

The court distinguished a case in which appraisers prevented witnesses from testifying and conducted an investigation outside the record. Rose Hill did not allege that the panel prevented any witness from testifying or contacted witnesses outside the appraisal. The court therefore concluded that Rose Hill had not met its burden to show a due-process violation or a basis for vacating the award.

Disposition

The court denied Rose Hill’s Motion for Summary Judgment, granted American Family’s Motion for Summary Judgment, and confirmed the August 11, 2020 appraisal award. The court directed that judgment be entered accordingly.