The court granted the insurer's motion for summary judgment agreeing that the "increased Cost of Construction" provision limited the amount the appraisers could award. Bigfoot Co-Op A, Inc. v. Nationwide Mut. Ins. Co., Case No. 3:24-cv-00022-SMR-WPK (S.D Iowa April 21, 2025).
A hailstorm damaged five apartment buildings owned by insured Bigfoot Co-Op A, Inc. (Bigfoot) Nationwide insured the property. When the parties could not agree on the amount payable for the loss, they invoked the policy's appraisal provision.
The appraisers first issued an initial award valuing the replacement cost at $478,116.42 and actual cash value at $430,043.66. This determination noted that the "decking condition" would be "determined/verified later" pending confirmation from local authorities about applicable building code requirements.
After receiving documentation confirming the city had adopted the 2021 International Building Code, which mandated specific standards for roof sheathing, the appraisers issued their final award. The Final Appraisal Award divided the loss into two components: (1) Buildings/Appraisal Estimate: $455,137.49 (replacement cost)/$447,943.08 (Actual Cash Value); and (2) Code per Appraisal Estimate: $189,380.02 (both replacement cost and actual cash value).
Nationwide paid Bigfoot $505,137.49, representing the full "Buildings" component ($455,137.49) plus $50,000 for the "Code" component. The $50,000 figure reflected $10,000 for each of the five damaged buildings, which Nationwide contended was the maximum allowable under the policy's Increased Cost of Construction provision.
Bigfoot filed suit against Nationwide alleging breach of the policy by failing to pay the full $189,380.02 "Code" component of the Final Appraisal Award. Bigfoot also asserted a claim for first-party bad faith. Nationwide moved for summary judgment on both claims.
The court first considered whether Nationwide properly applied the policy's Increased Cost of Construction (ICC) provision to limit its liability for the "Code" component of the Final Appraisal Award to $50,000. The provision provided:
If a damaged building is covered under a blanket Limit of Insurance which applies to more than one building or item of property, then the most we will pay under this Additional Coverage, for that damaged building, is the lesser of $10,000 or 5% times the value of the damaged building as of the time of loss times the applicable Coinsurance percentage.
This language unambiguously limited Nationwide's liability for increased costs incurred to comply with building code requirements to $10,000 per building. Because the life apartment buildings at issue were covered under a blanket limit of insurance, the maximum recovery for code compliance costs was $50,000.
The $189,380.02 "Code" component of the Final Appraisal Award fell within the scope of the ICC provision. The application of the ICC provision to the "Code" component of the Final Appraisal Award presented no genuine dispute of material fact. The policy unambiguously limited coverage for increased costs of construction to $10,000 per building. The Final Appraisal Award specifically identified these code-related costs in a separate "Code" component totaling $189,380.02. Nationwide properly applied the policy's limitation and paid the maximum allowable amount of $50,000 for this component, in addition to fully satisfying its obligation for the $455,137.49 "Buildings" component. Bigfoot had not demonstrated any basis for disregarding the policy's clear limitation or invalidating the structure of the Final Appraisal Award. Accordingly, Nationwide was entitled to judgment as a matter of law on the breach of contract claim.
The bad faith claim also failed. The court's determination that Nationwide correctly applied the policy's ICC provision to limit its liability for code-related costs necessarily defeated Bigfoot's bad faith claim. Nationwide's interpretation and application of the policy was not merely reasonable - it was correct.