An Indianapolis condo complex cannot seek more than $1 million in damages on a loan it took out to replace the shingles on its buildings, the 7th Circuit Court of Appeals ruled Friday.
A storm that passed over the Villas at Winding Ridge condominium complex in 2013 resulted in minor hail damage, but the damage wasn’t discovered until nearly one year later during an inspection of the roofs.
After performing an inspection on all 33 buildings in the complex, State Farm, Winding Ridge’s insurer, concluded there was “minimal hail damage.” The insurer ultimately prepared a replacement cost estimate for hail damage totaling $65,713.54, not including repairs to any roofing shingles.
Winding Ridge disagreed with State Farm’s estimate, hired a public adjuster for a competing estimate and concluded it was owed an estimated replacement cost of $1,975,264. Its estimate included full replacement for all shingles, decking, metal vents, flashing, caps, gutters and downspouts on all 33 buildings.
Winding Ridge later sought an appraisal under the insurance policy, but neither party could come to an agreement on an estimate. Both were unable to move forward with their disagreement as to whether all shingles needed to be replaced on 13 buildings. An independent umpire selected pursuant to the policy’s appraisal provision then proposed an award totaling $154,391.77, finding “very little if any hail damage to the shingles observed.”
State Farm made that payment to Winding Ridge, but the condo complex sued for breach of contract, bad faith and promissory estoppel. While its claim was pending, Winding Ridge independently took out a $1.5 million loan to replace the shingles on all 33 buildings, ultimately seeking damages on the loan, plus interest and prejudgment interest.
The U.S. District Court for the Southern District of Indiana granted State Farm’s motion for summary judgement, granted in part and denied in part Winding Ridge’s motion for partial summary judgment, and denied as moot State farm’s motion to preclude expert testimony.
The 7th Circuit Court of Appeals affirmed in Villas at Winding Ridge v. State Farm Fire and Casualty, 19-1731, finding that the policy’s appraisal provision was unambiguous and that State Farm did not breach the policy by declining to pay for new roofs on all of the buildings.
“Further, the appraisal award plainly resolved the entire claim, not just the damage to 13 buildings as Winding Ridge contends,” Circuit Judge Amy St. Eve wrote for the panel. “The parties submitted the disputed loss to the umpire, and that disputed loss did not include the replacement of the shingles on all buildings. The umpire resolved the parties’ dispute.”
The 7th Circuit further found that Winding Ridge’s decision to independently replace the shingles on its buildings while its claim was still pending did not obligate State Farm under the policy and did not mean the insurer breached the policy.
Finally, the 7th Circuit concluded State Farm did not act in bad faith and did not make an unfounded refusal to pay policy proceeds to Winding Ridge.
“Nor is there any evidence that State Farm acted with a culpable state of mind. The mere fact that State Farm’s initial estimate was less than the award does not suggest culpability,” the 7th Circuit concluded. “At best, it may suggest that State Farm’s first inspection was inadequate. But this alone does not constitute bad faith.”