Insurance coverage decision requires all siding be replaced, even panels not damaged by storm

The Minnesota Supreme Court recently issued a decision in the continuing saga of disputes between property owners and insurance companies. The dispute — as chronicled in Cedar Bluff Townhome Condo. Ass’n, Inc. v. Am. Family Mut. Ins. Co., 857 N.W.2d 290, 293 (Minn. 2014) — began following a hail storm at the Association in October 2011. The Association filed a claim with its insurer, American Family, alleging that all 20 of the townhome buildings sustained some damage. All of the buildings’ roofs needed to be replaced, and at least one siding panel on each building was damaged. Replacement panels were available from the same manufacturer with the same specifications but not in the same color.

According to Cedar Bluff, all of the buildings’ siding therefore had to be replaced to avoid a color mismatch. American Family did not dispute that the storm damaged at least one siding panel on each building, but it claimed that the policy required replacement of the damaged panels only.

Cedar Bluff demanded an appraisal, and after a hearing the appraisal panel awarded $361,000 for total replacement of the siding. American Family refused to pay, and Cedar Bluff filed suit in district court to confirm the appraisal award. The district court agreed with American Family but was reversed by the state court of appeals.

The Minnesota Supreme Court determined that the policy’s provision for replacements of “comparable material and quality” required a reasonable color match between new and existing siding. And because just the hail damaged panels could not be replaced without creating a color mismatch, the buildings had sustained a “distinct, demonstrable, and physical alteration.” In sum, the Court held that Cedar Bluff was entitled to have all of the siding panels on each of its 20 buildings replaced due to a color mismatch, even though not all of the panels had sustained storm damage.

Lommen Abdo’s Construction and Real Estate Litigation Section litigates disputes involving construction defect claims, professional negligence, real estate contracts, commercial loan transactions, mechanics’ liens, indemnity issues of subcontractors, insurance coverage, boundary disputes, environmental matters, zoning and land use, mortgage foreclosures, cancellation of contract for deed proceedings, real property tax disputes and title insurance disputes.