Cincinnati Insurance Company v. Rymer Companies, LLC

Background

A 2018 storm damaged the roof of the Cannon Falls Mall. The Mall’s owners—Rymer Companies, LLC, and Cannon Falls Mall, Inc., referred to together as “Rymer”—submitted an insurance claim to Cincinnati Insurance Company seeking more than $1.7 million for roof replacement. Cincinnati offered just under $11,000, asserting that the storm did not cause all of the claimed damage.

An appraisal panel awarded Rymer $23,226 for “Mall roof repair,” listing the same amount as both replacement cost and actual cash value. The award did not explain the extent of the repair or identify the damage supporting the amount. Afterward, members of the appraisal panel sent statements describing the award, including one statement referring to repairs to the roof’s cap flashing and extending 10 feet into the roof field.

Rymer applied for a building permit to repair the identified cap-flashing damage. Goodhue County denied the application because the applicable Minnesota Building Code provision did not permit localized repairs to a roof in the Mall’s condition and instead required replacement of the entire roof. Rymer contended that the insurance policy’s Ordinance or Law provision therefore required Cincinnati to pay the additional replacement costs.

Earlier proceedings and motions

In the earlier round of the case, the District Court granted Cincinnati summary judgment and denied Rymer’s cross-motion on whether the storm caused enforcement of the Building Code. The Eighth Circuit reversed, holding that the tornado was a but-for cause of the county’s enforcement of the ordinance and that the policy covered the cost of replacing the Mall’s roof. It remanded for further proceedings, including any necessary fact-finding.

After limited discovery on remand, Rymer moved for partial summary judgment. Rymer argued that the appellate decision required roof replacement and that another appraisal should determine the additional costs required by the Building Code. Cincinnati moved for summary judgment, arguing that the evidence showed the original appraisal award covered no roof repair that would trigger enforcement of the Building Code.

Court’s analysis

The court explained that Minnesota courts have generally applied principles used to review arbitration awards when interpreting insurance-appraisal awards. It also discussed a Minnesota Supreme Court decision holding that the Minnesota Uniform Arbitration Act’s procedures do not necessarily govern insurance appraisals. The court concluded that, at least when determining whether an appraisal award is ambiguous and how to resolve that ambiguity, the longstanding principles favoring deference to appraisal awards continue to apply.

Under those principles, an ambiguous award should be returned to the appraisal panel for clarification rather than summarily affirmed. The award generally must be interpreted from its language, and after-the-fact statements by appraisers cannot be used to vary or add to the award’s terms. The court therefore would not rely on the panel members’ later statements to resolve the dispute.

The court found the award ambiguous because it stated only a loss amount and did not specify what was damaged or how the damage was to be repaired. The amount awarded was substantially more than the cost of replacing only the metal cap flashing, suggesting that other roof-related work might have been included. The Eighth Circuit’s prior holding and the disagreement about the scope of the repairs also contributed to the ambiguity.

Disposition

The court denied Defendants’ Motion for Partial Summary Judgment and denied Cincinnati’s Motion for Summary Judgment. It directed the parties to submit the matter to the appraisal panel to clarify whether the original loss included repair or involvement of the roof itself. If repairing the flashing required work on the roof surface that constituted a “roof recover” under the Building Code, the panel was also directed to determine the cost of replacing the roof as required by that code.

The court stayed the case pending the appraisal panel’s determination. It required the parties to submit a joint status report within three months of the order and every three months afterward.