The federal district court in Tennessee granted the insured’s motion for summary judgment finding the appraisal award was properly determined despite the insurer’s argument that the appraisal panel considered causation of the loss. Nashville Communications, Inc. v. Auto-Owners (Mutual) Ins. Co., 2025 U.S. Dist. LEXIS 223455 (M.D. Tenn. Nov. 13, 2025)

A windstorm struck and damaged the building owned and insured by Nashville Communications (NashComm). A claim was submitted to the insurer, Auto-Owners, for damage to the roof and interior water leakage. Auto-Owners acknowledged that there was some amount of wind damage to the building from the wind event.

Auto-Owners’ engineer determined that any “water intrusion through the roof was due to general aging of the roof membrane and failing sealant, which resulted in widespread deterioration-related opening throughout the roof surface and was not attributable to wind or hail.” Auto-Owners estimated the amount of loss caused by the wind event was $2,204.75. Auto-Owners offered coverage to NashComm based upon its estimate of the actual cash value of the loss.

NashComm disagreed with Auto-Owners as to the “amount of loss” and invoked the policy’s appraisal provision. Auto-Owners responded, stating that the only observable wind damage was to “approx. 120 of membrane cap on the parapet will which is reparable,” that there was no other “wind/hail/tree or other damage” to the roof from a ‘covered cause of loss,’ and that Auto-Owners’ position retained unchanged.

Each side selected an appraiser, and an umpire was chosen. Auto-Owners’ appraiser agreed that the amount of the loss was $2,204.75. NashComm’s appraiser disagreed and had a much higher figure. The umpire agreed with NashComm’s appraiser and the Arbitration Award for $187,469.10, which included the cost to replace the entire roof of the building, was issued.

Auto-Owners’ appraiser believed that the damage to the parapet was “not integral to the roof system itself,” and did not believe that replacement of the roof as a whole was warranted.

Auto-Owners declined to pay for a full roof replacement, arguing that the umpire exceeded his authority by “improperly considering causation of the loss in determining the award.” Auto-Owners stated,

The policy . . . requires first an opening in the roof or exterior elevations created by a “covered cause of loss” for coverage to extend to the interior of the structure for water damage. Here, unfortunately, it seems the appraisal panel improperly evaluated causation based on thermal imaging that showed some water present in the roof structure. There is no evidence that the presence of water was caused by a “covered cause of loss” as required by the policy.

Auto-Owners’ rule 30 (b) (6) witness conceded during his deposition that he could not point to any “coverage or causation determinations that were made in the appraisal award.”

NashComm filed suit asserting claims for breach of contract and bad faith. Each party filed motions for partial summary judgment. Auto-Owners argued it was not bound by the Appraisal Award because the panel exceed the scope of its authority by making “determinations of means and methods, scope of repair and causation.” Auto-Owners contended that no damage to the roof causing leaks was caused by the wind event and damage to the parapet did not cause water incursion in other parts of the roof.

Case law determined that courts universally agreed that appraisal panels charged with assessing the amount of loss were authorized to decide the appropriate means and methods for repairing damages and the scope of work required. The questions of whether damage to the roof required replacement or repair was well within an appraisal panel’s purview.

The umpire noted that the wet areas around the damaged area established that replacement of the roof as a whole was required in order to effectively address the damage to the parapet. He considered nothing other than damage to the area of the roof that Auto-Owners agreed had been caused by the wind event.

The court noted that it was well within an appraisal panel’s job description to assess the appropriate manner and means of repair in appraising the cost to repair a loss. The parties agreed that the parapet wall was damaged and disagreed as to the appropriate manner and means of repairing that damage. The umpire asserted that his determination of the loss was based on only the scope of damage that Auto-Owners agreed had sustained damage and determined the necessary means and methods of repairing the same.

Regarding Auto-Owners’ argument about the condition of the roof, wear and tear was part of the consideration an appraisal panel took into account in appraising a loss.

Therefore, NashComm’s motion for partial summary judgment was granted, thus setting the amount of the loss as a matter of law.

As to the bad faith claim against Auto-Owners, the only disputed element of the bad faith claim was whether Auto-Owners’ refusal to pay was in bad faith. The court found there was insufficient evidence of bad faith. Auto-Owners had legal grounds for arguing that the panel exceeded its authority in assessing damages by improperly considering causation. The evidence in the record, including that Auto-Owners’ denial letter asserted limitations and exclusions that did not apply, was not sufficient to permit a reasonable jury to conclude that Auto-Owners acted in bad faith in objecting to the Appraisal Award. Auto-Owners’ motion for partial summary judgment on the bad faith claim was granted.