In a courtroom conflict that would’ve began on a authorized drama known as Legislation & Roofing Order, Bigfoot Co-op took on large Nationwide in a hailstorm roofing dispute that needed to do much less with climate and extra about plywood sheathing and the positive print of insurance coverage insurance policies. This roofing dispute was over the valuation of storm harm, code upgrades, the finality of appraisal awards, and the which means of “elevated value of development” sub-limits of protection. The case gives classes on how appraisal awards are considered in Iowa, code compliance, and the necessity to concentrate to the positive print relating to protection quantities.
The Iowa federal court docket granted abstract judgment in favor of Nationwide in a dispute that examined the boundaries of “Elevated Value of Development” (ICC) protection underneath a industrial property coverage. 1 The center of the dispute centered on how one can interpret and apply the ICC provision throughout the insurance coverage coverage.
After the hailstorm struck the insured property in Burlington, Iowa, the Metropolis adopted the 2021 Worldwide Constructing Code (IBC), which imposed new requirements for roof sheathing. The events went to appraisal, and the ultimate award itemized damages into two parts: roughly $455,137.49 for the buildings and $189,380.02 for code-related upgrades. Nationwide paid the complete “constructing” quantity and $50,000 for code compliance. Nationwide paid code compliance protection of $10,000 per constructing, citing the coverage’s cap underneath the ICC provision.
The coverage’s ICC clause acknowledged:
Within the occasion of harm by a Lined Explanation for Loss to a constructing that’s Lined Property, we can pay the elevated prices incurred to adjust to the minimal requirements of an ordinance or regulation in the midst of restore, rebuilding or alternative of broken elements of that property, topic to the constraints acknowledged in e.(3) by e.(9) of this Further Protection.
Below part e.(6), it additional restricted restoration:
If a broken constructing is roofed underneath a blanket Restrict of Insurance coverage which applies to a couple of constructing or merchandise of property, then essentially the most we can pay underneath this Further Protection, for that broken constructing, is the lesser of $10,000 or 5% instances the worth of the broken constructing as of the time of loss instances the relevant Coinsurance share.
Bigfoot argued {that a} portion of the code-related estimate didn’t characterize “elevated” prices of development however merely mirrored the alternative worth of sheathing that was already put in and compliant with earlier codes. 2 In different phrases, they contended that solely the incremental distinction between the previous and new code-compliant sheathing, roughly $80,593.48, ought to be topic to the ICC cap. The remaining, they claimed, fell underneath commonplace alternative value protection and may have been totally reimbursed outdoors the ICC limitation.
Nonetheless, the court docket was unpersuaded. It held that the coverage language was unambiguous and that Nationwide appropriately utilized the ICC restrict. The court docket emphasised that the “Code” line merchandise within the appraisal awards was distinct from the “Buildings” portion and clearly represented bills tied to compliance with the 2021 IBC.
The policyholder’s failure to supply particular proof displaying that the pre-existing sheathing was straight broken by the storm proved deadly to their argument. An affidavit from their contractor merely confirmed that the sheathing was changed to fulfill the brand new code, not due to identifiable storm harm. Furthermore, the appraisal award itself made no effort to distinguish between the 2 classes of sheathing work. Thus, the court docket concluded that the complete $189,380.02 for code compliance fell squarely underneath the ICC clause and was due to this fact restricted to $10,000 per constructing.
The policyholders additionally claimed that the appraisers had exceeded their authority by making a separate “Code” class within the appraisal award, arguing that this improperly created new protection not outlined within the coverage. The court docket disagreed, reiterating a core precept underneath Iowa regulation: appraisers decide the quantity of loss, not questions of protection. The appraisers’ separation of code and constructing prices was a facilitation gadget, permitting the insurer and court docket to find out later which elements of the loss have been lined and underneath what provisions. The appraisal award even included a disclaimer noting it didn’t interpret or apply coverage provisions, additional undermining the argument that the appraisers overstepped.
For what it’s price, my understanding from quite a few appraisal seminars is that the appraisal panel did exactly what is usually taught. They listed a separate merchandise for the constructing alternative and a separate quantity for the code difficulty. Nationwide then utilized the sub-limit because the panel’s valuation for the Code gadgets was better than the protection limits.
The court docket’s ruling additionally dispatched the policyholder’s unhealthy religion declare. Below Iowa regulation, unhealthy religion requires displaying that the insurer lacked an inexpensive foundation for denying the declare and knew or recklessly disregarded that reality. Since Nationwide’s interpretation of the ICC provision was not solely affordable however appropriate, the unhealthy religion argument collapsed. The court docket discovered that even when the coverage have been someway ambiguous, the dispute would nonetheless have been “pretty debatable,” which shields an insurer from unhealthy religion legal responsibility.
A number of vital classes emerge from this case. First, policyholders and public adjusters should have a agency grasp of ICC provisions. These clauses typically include strict sublimits, significantly underneath blanket insurance policies protecting a number of buildings. Right here, the coverage’s language was crystal clear—$10,000 per constructing—and this cover was enforceable even when the code-compliance work appeared associated to storm harm. Figuring out precisely what the ICC clause covers and what it doesn’t is important when estimating restoration potential.
Second, proof is every little thing. If the policyholder supposed to argue that a part of the code-compliance work was really storm harm topic to full alternative value, it wanted clear, credible proof. My suggestion is to win that argument within the appraisal panel valuation. Imprecise affidavits or post-hoc interpretations won’t carry the day in court docket. Detailed documentation of storm-related harm to particular parts, particularly when coping with areas that additionally fall underneath constructing code upgrades, is important.
Third, the construction and terminology utilized in appraisal awards matter. Even when the policyholder believes that appraisers shouldn’t distinguish between code and non-code gadgets, courts will deal with clearly itemized awards as legitimate instruments for making use of coverage limits. The Bigfoot court docket made it clear that separating damages into classes doesn’t create new protection; it merely clarifies the loss valuation for later authorized determinations.
Lastly, this determination is a cautionary story for pursuing unhealthy religion claims with no strong basis. Courts won’t penalize insurers that observe unambiguous coverage language. On this case, Nationwide not solely adopted the phrases of the coverage however went additional by paying precisely what the contract required. When the information don’t help improper conduct, courts received’t manufacture it.
For property insurance coverage professionals and adjusters navigating post-storm claims, the message is evident: precision, documentation, and a cautious studying of coverage phrases are the surest path to correct conduct and restoration.
Thought For The Day
“In idea, there isn’t any distinction between idea and apply. In apply, there’s.”
—Yogi Berra
1 Bigfoot Co-Op A v. Nationwide Mut. Ins. Co., No 3:24-cv-00022 (S.D. Iowa Apr. 21, 2025).
2 Bigfoot Co-Op A v. Nationwide Mut. Ins. Co., No 3:24-cv-00022 [Doc. #30 Policyholders’ Brief in Support of Response In Opposition to Defendant’s Motion for Summary Judgment] (S.D. Iowa).
