Savanna Grove Coach Homeowners' Ass'n v. Auto-Owners Ins. Co.
| Decision Date | 29 January 2020 |
| Docket Number | File No. 19-cv-1513 (ECT/TNL) |
| Parties | Savanna Grove Coach Homeowners' Association, Plaintiff, v. Auto-Owners Insurance Company, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Adina R. Bergstrom, Brenda M. Sauro, and Kayla M. Cottier, Sauro & Bergstrom, PLLC, Oakdale, MN, for Plaintiff Savanna Grove Coach Homeowners' Association.
Bradley J. Ayers, Eric G. Nasstrom, and Nathaniel R. Greene, Morrison Sund PLLC, Minnetonka, MN, for Defendant Auto-Owners Insurance Company.
Plaintiff Savanna Grove Coach Homeowners' Association, the corporate representative of a townhome community in Blaine, Minnesota, that suffered significant property damage in a June 2017 storm, brought this case against its insurer, Auto-Owners, to recover policy benefits it claims Auto-Owners must pay for the storm damage and additional amounts. Before this case was filed, the Parties participated in an appraisal process to resolve their disagreement over the replacement-cost value of Savanna Grove's storm-damage claim. That process, authorized by Minnesota law and the policy, yielded an appraisal award in Savanna Grove's favor of $2,614,624.35. Of that amount, $941,809.83 remains unpaid.
Savanna Grove has filed a motion seeking confirmation of the appraisal award and entry of a judgment in its favor that would include the unpaid amount of the appraisal award, interest of three types, and attorneys' fees and costs. Savanna Grove says it has triggered Auto-Owners' obligation to pay the unpaid amount of the appraisal award as a matter of law by submitting evidence showing that it has incurred repair and replacement costs greater than the appraisal award. Auto-Owners accepts the appraisal award but argues that judgment cannot be entered because Savanna Grove's evidence is insufficient and does not eliminate fact questions concerning the legitimacy of its general contractor's invoices. Savanna Grove's motion will be granted. Savanna Grove has done what the law and policy require to show that it spent an amount greater than the appraisal award to repair or replace its property, and Auto-Owners' allegations and authorities do not justify the denial of Savanna Grove's motion.
The storm occurred on June 11, 2017, included hail and high winds, and caused severe property damage to buildings in Savanna Grove's community. Compl. ¶ 5 [ECF No. 1]; Answer and Countercl. ¶ 5 [ECF No. 6]. At the time, the buildings were insured under an Auto-Owners policy that covered the replacement cost of this type of loss. Compl. ¶ 8; Answer ¶ 8; Bergstrom Decl., Ex. A [ECF Nos. 21-1, 21-2]. Savanna Grove, through its management company, Associa, provided written notice of a claim to Auto-Owners the day of the storm. Compl. ¶ 18; Answer ¶ 18; Bergstrom Decl., Ex. B. [ECF No. 21-3 at 2]. Savanna Grove promptly hired three contractors to mitigate the storm damage: Solar Midwest, TC Deck, and Lincoln Hancock Restoration. Compl. ¶ 6; see also Mem. in Supp.at 5 [ECF No. 20]. Savanna Grove subsequently hired Lincoln Hancock as general contractor to repair the damage. Compl. ¶ 7; Answer ¶ 7.
Under the policy, Auto-Owners was required to process Savanna Grove's claim for replacement costs in two steps. First, it was to have estimated and then issued payment for the actual cash value of the loss—that is, the replacement cost value minus some amount for depreciation. Second, after repairs were complete, Auto-Owners was to have issued the amount withheld for depreciation, called the "recoverable depreciation" or "depreciation holdback." Compl. ¶ 21; Answer ¶ 21; see also Mem. in Supp. at 4. The policy caps the amount Auto-Owners must pay at either "[t]he cost to replace, on the same premises, the lost or damaged property with other property . . . [o]f comparable material and quality; and . . . [u]sed for the same purpose" or "[t]he amount you actually spend that is necessary to repair or replace the lost or damaged property," whichever is less. Bergstrom Decl., Ex. A [ECF No. 21-2 at 76].
On July 1, 2017, Auto-Owners sent a "catastrophe adjuster" to inspect the damage at Savanna Grove. Bergstrom Decl., Ex. D at 1 [ECF No. 21-3 at 8]. The adjuster estimated the replacement cost to be $1,798,793.06, which included an actual cash value of $1,237,252.19, and recoverable depreciation of $561,540.87. Id. at 108 [ECF No. 21-3 at 115]. Lincoln Hancock inspected the buildings and found additional damage not included in the adjuster's estimate. Compl. ¶ 23; Answer ¶ 23; see also Mem. in Supp. at 6. On October 11, 2017, Auto-Owners issued a revised estimate, which valued the replacement cost at $2,138,328.11; this amount included $1,354,868.83 in actual cash value and $783,459.28 in recoverable depreciation. Bergstrom Decl., Ex. G at 128 [ECF No. 21-5 at144]. After it began performing repairs, Lincoln Hancock discovered still more damage from the storm. Compl. ¶ 28; Answer ¶ 28; see also Mem. in Supp. at 6-7. Auto-Owners refused to pay additional costs to repair the newly discovered damage. Compl. ¶ 29-31; Answer ¶ 30-31; see also Mem. in Supp. at 7.1
On June 15, 2018, Savanna Grove made a written demand for appraisal pursuant to the policy to resolve the Parties' dispute about the amount of loss. Bergstrom Decl., Ex. H [ECF No. 21-5 at 181]; see id., Ex. A [ECF No. 21-2 at 74]. The Parties named their appraisers, the appraisers selected an umpire, and an appraisal hearing was scheduled for February 2019. Id., Ex. I [ECF No. 21-5 at 182-203]; Mem. in Supp. at 7. Before the appraisal hearing, in October 2018, Lincoln Hancock audited Auto-Owners' $2,138,328.11 revised estimate. Bergstrom Decl., Ex. G [ECF No. 21-5 at 150-177]. Lincoln Hancock determined that Auto-Owners' revised estimate should be increased by $496,092.12 to reflect changes in the pricing of labor and materials. Id. [ECF No. 21-5 at 151]. Lincoln Hancock also prepared its own estimate of the cost to repair the additional damage it discovered that was not included in Auto-Owners' prior estimates. Id. [ECF No. 21-5 at 174]; see id., Ex. C at 1 [ECF No. 21-3 at 4]. Lincoln Hancock's estimate also included $73,029.60 for its project management or "supervisory fees." Id., Ex. G [ECF No. 21-5 at173]. Lincoln Hancock's estimate produced a replacement cost value of $3,153,434.00, or an amount $1,015,105.89 greater than Auto-Owners' revised estimate. See Def. Br. at 4 [ECF No. 12], Auto-Owners Ins. Co v. Savanna Grove Coach Homeowners' Assoc. (Savanna Grove I), No. 19-cv-0220 (PJS/KMM) (D. Minn. Apr. 22, 2019); Bergstrom Decl., Ex. C.
On January 30, 2019, Auto-Owners filed suit in federal district court seeking a declaration that it was not required to pay the $496,092.12 in updated costs and $73,029.60 in supervisory fees in Lincoln Hancock's October 2018 estimate on the ground that Savanna Grove had not actually and necessarily incurred those expenses. See First Am. Compl. [ECF No. 9], Savanna Grove I. Savanna Grove moved to dismiss the case under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). See Def.'s Mot. to Dismiss [ECF No. 10], Savanna Grove I. Judge Patrick J. Schiltz granted Savanna Grove's motion, finding that Auto-Owners' claims were "not ripe for judicial determination" because the Parties were obligated to go to appraisal to determine the amount of loss. Order [ECF No. 24], Savanna Grove I. Judge Schiltz reasoned that the primary contention underlying Auto-Owners' case—that Savanna Grove had not shown it incurred the updated costs or supervisory fees—did not allow Auto-Owners to circumvent the appraisal process because the policy permitted Auto-Owners to pay the lesser of the appraisal award or the insured's actual incurred costs. See Tr. of Mot. Hr'g [ECF No. 29], Savanna Grove I.
An appraisal hearing was held on May 28, 2019. Compl. ¶ 52; Answer ¶¶ 51-52; see Bergstrom Decl., Ex. C. As of the hearing, Lincoln had completed its repairs to Savanna Grove's buildings. Bergstrom Decl., Ex. L. [ECF No. 21-5 at 214-15]. The dayafter the hearing, the appraisal panel issued a unanimous award of $2,614,624.35, of which $1,699,505.95 was actual cash value and $915,118.40 was recoverable depreciation. Id., Ex. K [ECF No. 21-5 at 210-12]. The appraisal panel made clear that the award was "subject to all policy terms and conditions including, but not limited to, the deductible(s) and replacement cost provisions." Id. Subtracting Auto-Owners' previous payments from the total appraisal award, $1,277,854.56 of the award remained unpaid.
Savanna Grove provided Auto-Owners with all final invoices for the project, which totaled $2,654,377.94, an amount greater than the appraisal award. See id., Ex. O [ECF No. 21-5 at 223-24]; Bergstrom Supp. Decl., Ex. W [ECF No. 55-1 at 2-17]. After attempting unsuccessfully to persuade Auto-Owners to pay the outstanding amount of the appraisal award, see id., Exs. A, M [ECF No. 21-2 at 74; ECF No. 21-5 at 217], Savanna Grove filed this action. Auto-Owners responded with counterclaims seeking declarations that it has no obligation to pay Savanna Grove for the updated costs and supervisory fees that it alleges Savanna Grove has not proven it incurred. Counter Cl. ¶¶ 22-31. Auto-Owners made two additional payments to Savanna Grove after this case was filed. On June 12, 2019, Auto-Owners issued a payment in the amount of $333,736.16. Bergstrom Decl., Ex. N [ECF No. 21-5 at 221]. On August 22, 2019, Auto-Owners issued a check to Savanna Grove for $2,308.57 for recoverable depreciation for deck repairs made by TC Deck. Id., Ex. T [ECF No. 21-5 at 244]; see also id., Ex. P [ECF No. 21-5 at 226-228].Auto-Owners has made no further payments, leaving $941,809.83 of the appraisal award unpaid.2
There is subject-matter jurisdiction over this case based on diversity. 28 U.S.C. § 1332(a). Savanna Grove is a Minnesota nonprofit corporation with its principal place of business in Minnesota. See Office of the Minnesota Secretary of State, Savanna Grove Homeowners'...
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