The Minnesota Supreme Court held that the phrase "amount of loss" permits the appraiser to determine not only the cost but also the cause of the loss. Quade v. Secura Ins., 2012 Minn. LEXIS 244 (Minn. June 13, 2012).
The insureds suffered extensive damage to buildings on their farm due to a windstorm. They were insured by Secura Insurance under a "special farmowners protector policy" for loss to property caused by windstorms. The policy excluded damage caused by faulty or inadequate maintenance of the property. An appraisal clause stated that if the parties failed to agree on "the amount of loss," either could demand an appraisal.
The insureds submitted their claim to Secura. Secura paid for some of the loss, but determined the damage to the roofs of three buildings resulted from continual deterioration and not a specific wind storm. Secura advised the insureds that they should initiate an appraisal if they disagreed with the denial of the claim.
Instead, the insureds filed a breach of contract action. The district court concluded that determining the amount of loss under the appraisal clause included "a causation element." The court ordered the parties to participate in the appraisal process.
The Court of Appeals reversed and the insureds appealed to the Minnesota Supreme Court. The insureds argued that the appraisal provision required the appraisers to set the amount of loss but did not empower them to determine the "cause" of loss. Secura argued its partial denial of coverage challenged the extent of the wind damage, which was a question concerning the amount of loss and was appropriately determined in the appraisal process.
The Supreme Court reversed the Court of Appeals. An appraiser's assessment of the "amount of loss" necessarily included a determination of the cause of the loss, and the amount it would cost to repair the loss. Where there was a disagreement as to whether the damage was caused by wind or deterioration, a determination of the amount of loss under the appraisal clause required a determination of causation. The appraiser's conclusions on causation could be reviewed by the trial court.
