Maplebrook Estates Homeowner's Association v. Hartford Fire Insurance Company

Background

A hail and windstorm on August 5, 2019 damaged 89 of Maplebrook’s buildings. Hartford insured the buildings under a policy covering direct physical loss or damage caused by covered causes, including windstorm or hail. The policy used replacement-cost coverage but limited payment to the least of the insurance limit, the cost to replace the property with comparable material and quality, or the amount Maplebrook actually and reasonably spent on repairs. The policy also stated that Hartford would pay actual cash value until the property was repaired, rebuilt, or replaced.

Hartford initially paid Maplebrook $3,442,778.08 in actual cash value and later made additional payments. Hartford’s estimates assumed that undamaged siding could be “harvested” from some buildings for spot repairs on buildings with less damage. Maplebrook instead replaced the siding with new materials and discarded the removed siding. An appraisal panel later issued an award that separated direct hail damage from costs for matching siding and related electrical work. After the Court requested clarification, the panel stated that the award for direct hail damage had a replacement-cost value of $7,917,925.19, while matching siding and related electrical repairs had a separate replacement-cost value of $1,921,071.11. The panel stated that it had not decided whether the policy covered the matching work.

Maplebrook sought payment of the replacement-cost award and additional interest. Hartford argued that it had paid what the policy and award required, that Maplebrook’s disposal of the siding violated the policy and prejudiced Hartford, that Maplebrook should face evidence-destruction sanctions, and that 2019 rather than 2020 construction costs applied. Hartford also challenged a December 13, 2021 invoice for $11,038,810.89, arguing that Maplebrook had not shown what additional covered work it had actually paid for.

Rulings on the Summary-Judgment Motions

The Court granted in part and denied in part Hartford’s motion for summary judgment and granted in part and denied in part Maplebrook’s cross-motion for summary judgment.

Matching siding and policy coverage. The Court treated the appraisal panel’s clarification as a factual finding that no reasonable matching siding of like kind and quality was available, including through harvesting. The panel had authority to determine the amount of loss, while the Court had authority to decide policy coverage. Interpreting the policy under Minnesota law, the Court held that the policy’s requirement for property of “comparable material and quality” covered full replacement of all siding with new matching siding when reasonable matching replacement siding was unavailable. The Court granted Maplebrook’s motion and denied Hartford’s motion on this issue.

Policy-protection requirement. Hartford argued that Maplebrook breached the policy by failing to preserve the removed siding and that the policy excluded losses resulting from neglect to preserve property. The Court held that “property” was ambiguous in this context and construed it in favor of coverage, excluding the removed siding materials from the policy’s protection requirement. The Court further held that Hartford had notice of the claim, inspected the buildings before the siding was removed, knew Maplebrook opposed harvesting, and had opportunities to obtain samples or request preservation. The Court concluded that Maplebrook did not violate the policy and denied Hartford’s motion on this basis.

Spoliation. Spoliation means the destruction of evidence relevant to a dispute. Because this diversity case was in federal court, the Court applied the federal standard, which requires intentional destruction showing a desire to suppress the truth before imposing a sanction. The Court found that the evidence did not support that inference. Hartford had opportunities to obtain siding samples or request their preservation, and it did not expressly request preservation until September 28, 2020. The Court denied Hartford’s motion for summary judgment seeking spoliation sanctions.

2019 versus 2020 construction costs. The Court held that the appraisal panel had calculated amounts using both 2019 and 2020 pricing but had left the coverage question to the Court. The policy stated that the value of covered property would be determined at the amount spent to repair or replace it “as of the time of the loss or damage.” The Court found that language clear and held that 2019, the year of the storm, supplied the applicable pricing. The Court denied Maplebrook’s motion and granted Hartford’s motion on this issue.

Pre-award interest and offsets. The Court held that Maplebrook’s October 2, 2019 communication to Hartford was sufficient written notice of a claim to begin statutory pre-award interest. The Court therefore granted Maplebrook’s motion to use October 2, 2019 as the starting date. But because Hartford had made substantial payments before the appraisal award, the Court held that those payments must offset the amount on which interest accrued and granted Hartford’s motion on that issue.

Post-award interest. The Court held that Maplebrook was entitled to post-award interest on the unpaid amount for matching siding. Interest would run at 10 percent per year from the appraisal award until judgment on the unpaid matching-siding balance. Any post-judgment interest would be calculated under federal law. The Court granted in part and denied in part Maplebrook’s motion on post-award interest.

December 13, 2021 invoice. The policy limited replacement-cost payment to the least of the insurance limit, the replacement cost for equivalent construction and use, or the amount actually spent on covered repairs. The Court found that the invoice contained almost no information about the work allegedly performed, and the witnesses could not identify the specific work or expenditures it represented. The Court held that the evidence was legally insufficient to create a genuine dispute about Maplebrook’s expenditures. It denied Maplebrook’s motion and granted Hartford’s motion concerning the invoice.

Disposition

The Court ordered that Hartford’s motion for summary judgment be granted in part and denied in part, and that Maplebrook’s motion for summary judgment be granted in part and denied in part. Judgment was ordered to be entered accordingly.