AXIS Surplus Insurance Company v. Condor Corporation

Background

Condor Corporation owns the Promenade Oaks apartment complex in Eagan, Minnesota. Axis Surplus Insurance Company issued first-party commercial property insurance policies covering the complex. The policies included an appraisal provision for disagreements about the property’s value or the amount of loss, as well as replacement-cost coverage.

Condor reported hail damage to the roofs that it alleged occurred on May 29, 2018. Axis denied coverage, concluding that the damage occurred outside the policy period. After Axis again denied the claim in February 2020, Condor demanded an appraisal. Condor later successfully moved to compel appraisal.

The appraisal panel found that the loss was covered under the policy. It calculated the actual cash value at $568,302.81 and the replacement-cost value using July 2022 prices at $2,094,396.03. Axis paid the actual cash value but refused to pay the replacement-cost value because Condor had not yet replaced the roofs.

Parties’ Positions

Condor moved for summary judgment and a declaratory judgment requiring Axis to pay the full replacement-cost amount. Condor acknowledged that it had not yet completed the policy’s conditions for receiving replacement-cost payment, but argued that it was entitled to a ruling that Axis had to pay the replacement-cost value so it could begin replacing the roofs.

Axis argued that Condor could not recover replacement costs because it had not replaced the roofs “as soon as reasonably possible after the loss or damage,” as required by the policy. Axis contended that Condor should have replaced the roofs soon after Axis completed its investigation in October 2019.

Court’s Analysis

The court held that “as soon as reasonably possible” required a case-specific review of the facts and circumstances. It rejected Axis’s proposed deadline because Axis had persistently denied coverage, including through this lawsuit and a related appeal.

The court concluded that Condor reasonably waited for the coverage dispute to be resolved before committing to more than $2 million in replacement work. After the appraisal award, Condor requested assurances that Axis would pay the replacement-cost value. When Axis refused, Condor filed the motion. The court ruled that these circumstances did not show that Condor was unable to meet the policy’s conditions or barred from recovering replacement costs.

The court also ruled that the July 2022 replacement-cost value applied rather than the value calculated as of the May 2018 loss date. It reasoned that replacement-cost coverage is intended to allow the insured to replace damaged property using current or nearly current prices, and that using the earlier date would be unfair given the delays in the dispute.

Disposition

The court granted Condor’s motion for summary judgment and declaratory judgment. It ordered Axis to pay the July 2022 replacement-cost value of $2,094,396.03 after Condor completes the roof replacements. The court stated that Condor must replace the roofs as soon as practicable given Minnesota weather and would keep the case open for any future dispute about the timing of that work.

The court also denied Condor’s separate motion to amend the pleadings to add a claim under Minnesota Statutes section 604.18.