               IN THE SUPREME COURT OF IOWA
                                  No. 16–0121

                             Filed June 1, 2018


WALNUT CREEK TOWNHOME ASSOCIATION,

      Appellant,

vs.

DEPOSITORS INSURANCE COMPANY,

      Appellee.


      On review from the Iowa Court of Appeals.



      Appeal from the Iowa District Court for Polk County, Robert B.

Hanson, Judge.



      Property insurer seeks further review of court of appeals decision

that reversed district court judgment rejecting appraisal award. COURT

OF APPEALS DECISION VACATED; DISTRICT COURT JUDGMENT

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH
INSTRUCTIONS.



      Timothy D. Johnson of Roeder Smith Jadin, PLLC, Bloomington,

Minnesota, and Anthony R. Epping of Epping Law Office, P.C.,

Des Moines, for appellant.



      Jeff M. Margolin and Apryl M. DeLange of Hopkins and Huebner,

P.C., Des Moines, for appellee.
                                    2

WATERMAN, Justice.

      In this appeal, we must decide whether the district court erred by

rejecting an insurance appraisal award for hail damage to roofing

shingles. This case presents a question of first impression in Iowa that

has divided the courts of other jurisdictions: whether the appraisers may

determine the cause of the loss. The insured townhome association was

already investigating a warranty claim against the manufacturer seeking

replacement of allegedly defective shingles when the hailstorm occurred.

The property insurer paid for damage to metal gutters and fascia but

disputed whether the hail caused damage to the asphalt shingles and

denied coverage based on the preexisting manufacturing defect.         The

Association sued the insurer for breach of contract and invoked the

appraisal provision of the property insurance policy to ascertain the

amount of the loss from the hailstorm. The appraisal panel considered

conflicting expert opinions and, in a two-to-one decision, valued the hail-

damage loss at approximately $1.4 million.      The district court held a

bench trial, rejected the appraisal award, found no shingle damage from

hail, applied an exclusion for defective materials, and entered judgment

in favor of the insurer. The Association appealed, and we transferred the

case to the court of appeals.

      The court of appeals held the district court erred by rejecting the

appraisal award for shingle damage and remanded for entry of judgment

on the appraisal award, excluding amounts for air conditioners not

owned by the insured.      A dissenting judge would have affirmed the

district court judgment against the insured, concluding the district court

was not bound by the appraiser’s determination of the cause of the loss.

We granted the insurer’s application for further review.
                                          3

        We hold the district court erred by disregarding the appraisal

award’s determination of the amount of the loss for shingles damaged by

the hailstorm. We are persuaded by the courts holding that appraisers

may determine the factual cause of damage to insured property to

ascertain the amount of the loss. Coverage questions, however, are to be

resolved by the court.         The appraisal did not address the extent of

preexisting    shingle    damage     excluded     from     coverage    through     the

insurance policy’s anticoncurrent-cause provision. That issue must be

decided by the court on remand. We therefore vacate the decision of the

court of appeals and remand the case for further proceedings consistent

with this opinion.

        I. Background Facts and Proceedings.

        Walnut Creek Townhome Association (Walnut Creek or the

Association) is a residential common interest community in Urbandale.

The thirty-six multifamily buildings at Walnut Creek were built between

2004 and 2006. Walnut Creek is governed by a board of directors. In

2011, the board began investigating the need to replace the shingles on

the roofs installed during the original construction. The type of shingle—

New Horizon manufactured by CertainTeed—was regarded by roofing

professionals to be defective.

        Marcus Harbert, a professional roofer for Hedberg & Son Roofing,

evaluated the life expectancy of the roofs in the spring or summer of

2011.     He inspected the roofs of three buildings.             Harbert observed

“[c]racking,    crazing   of   appliques,[1]   [and]     significant   granule    loss


        1According  to a professional engineer who testified for Depositors, “craze
cracking” means “the cracks in the asphalt are meandering in different directions,” and
the phenomenon is “a result of . . . unreinforced asphalt shrinking as it weathers. And
as it weathers and shrinks, the cracks form, and granules displace around them.”
                                              4

throughout the whole shingle itself.”                 CertainTeed shingles carry a

twenty-five-year warranty, but Harbert recommended to Mike Gooding,

Hedberg’s residential salesperson, that the shingles be replaced within

five years. Gooding relayed this information to the Association’s board.

Minutes of the board meetings in 2011 and 2012 show the board was

preparing to replace the roofs.

       On August 8, 2012, a severe wind and hailstorm hit Walnut Creek.

One resident described the hail as “pea size” and “dime size” and noted

that it covered his entire deck. Within a week after the storm, Harbert

inspected the roofs at Walnut Creek again, this time for hail damage. He

concluded the hail impacts were not significant enough “to warrant

calling for an insurance claim.”              However, Harbert recommended to

Gooding that Walnut Creek follow through with the CertainTeed

warranty claim.

       In September, Walnut Creek asked Nicholas Waterman, a roofing

renovator with GreenGuard Construction, to inspect the roofs for hail

damage. Waterman found between eight to twelve hits per ten-by-ten-

foot square and concluded that “[t]he roofing definitely had hail damage.”

Waterman testified that his standard practice was to ignore hits to the

applique because damage to this area is “not accepted in the insurance-

related field.” He acknowledged that he will sometimes examine an area

twice as large as the usual ten-by-ten-foot square to make up for the

applique area that is ignored.

       Walnut Creek is insured by Depositors Insurance Company

(Depositors). The insurance policy provides,

_______________________
       An expert for Walnut Creek testified that the applique is “a second layer of
granules . . . basically glued onto the base layer . . . [to] add[] a dimensional look to it.”
                                      5
      A. COVERAGES
         We will pay for direct physical loss of or damage to
         Covered Property at the described premises in the
         Declarations caused by or resulting from any Covered
         Cause of Loss.

The policy defines “Specified Causes of Loss” to include a “windstorm or

hail.” The policy sets forth exclusions and limitations:

         3. COVERED CAUSES OF LOSS
            This Coverage Form insures against Risks Of Direct
            Physical Loss unless the loss is:
            a. Excluded in Section B. EXCLUSIONS;
            b. Limited in paragraph A.4. LIMITATIONS in this
               section; or
            c. Limited or excluded in Section E. PROPERTY LOSS
               CONDITIONS or Section F. PROPERTY GENERAL
               CONDITIONS.

The section on exclusions includes an anticoncurrent-cause provision

which states,

         1. We will not pay for loss or damage caused directly or
            indirectly by any of the following. Such loss or damage
            is excluded regardless of any other cause or event that
            contributes concurrently or in any sequence to the
            loss. These exclusions apply whether or not the loss
            event results in widespread damage or affects a
            substantial area.
The section continues, “2. We will not pay for loss or damage caused by

or resulting from any of the following . . . [r]ust or other corrosion, decay,

deterioration, hidden or latent defect or any quality in property that

causes it to damage or destroy itself.”

      The section on exclusions also provides,

         3. We will not pay for loss or damage caused by or
            resulting from any of the following
            ....
            c. Negligent Work.
                Faulty, inadequate, or defective:
                ....
                                    6
               (2) Design, specifications, workmanship, work
                   methods, repair, construction, renovation,
                   remodeling, grading, compaction, failure to
                   protect the property;
               (3) Materials   used   in    repair,   construction,
                   renovation or remodeling . . . .

      Walnut Creek submitted an insurance claim to Depositors, alleging

that the August 8 storm caused damage to the roofs, gutters, siding,

soffits, and air conditioning units and that the policy covered such

damage. Depositors retained Haag Engineering to conduct a hail damage

inspection.   Two engineers—Robert Danielson and Richard Herzog—

inspected the roofs on December 12 to 14. They prepared a report dated

January 18, 2013. In the report, Danielson noted that there were nine

hail events in the Urbandale area between 2006 and September 2012.

The report concluded, “There was no hail-caused damage to shingles on

the Walnut Creek Townhome Association property roofs.”

      Timothy Barthelemy, a public adjuster, assessed the buildings for

Walnut Creek in 2013. Barthelemy observed nine to eleven hits per ten-

by-ten-foot square. Barthelemy concluded that the hail caused damage

to the buildings. Barthelemy inspected the roofs with a representative of

Haag Engineering and Jason Johnson, the adjuster for Depositors.

      On February 13, Depositors sent Walnut Creek a reservation-of-

rights letter, noting its “investigation reveal[ed] no hail damage to the

composition shingle roof covering of the subject buildings” at Walnut

Creek.   Depositors denied most of Walnut Creek’s claim but payed

Walnut Creek $124,656.79 for hail damage to the “soft metals” (such as

the gutters, downspouts, and fascia).

      Walnut Creek exercised its right to an appraisal under the parties’

insurance policy. The policy provides,
                                     7
            If we and you disagree on the amount of loss, either
            may make written demand for an appraisal of the loss.
            In this event, each party will select a competent and
            impartial appraiser after receiving a written request
            from the other, and will advise the other party of the
            name of such appraiser within 20 days. The two
            appraisers will select an umpire. If appraisers cannot
            agree, either may request that selection be made by a
            judge of a court having jurisdiction. The appraisers
            will state separately the value of property and the
            amount of loss. If they fail to agree, they will submit
            their differences to the umpire. A decision agreed to
            by any two will be binding. Each party will:
            a. Pay its chosen appraiser; and
            b. Bear the other expenses of the appraisal and
               umpire equally.
            If there is an appraisal, we will still retain our right to
            deny the claim.

Walnut Creek and Depositors each named an appraiser, and their

appraisers selected an umpire.     Before the appraisal occurred, Walnut

Creek filed a civil action against Depositors in district court for breach of

contract and sought a declaratory judgment “that the appraisal award

form specify the amount of the covered loss.”

      In July 2014, Walnut Creek filed a motion for summary judgment,

requesting the court order an appraisal, “identify any issues of coverage

or causation related to coverage issues or exclusions,” and approve an

appraisal award form. Depositors resisted and filed a cross-motion for

partial summary judgment to dismiss Walnut Creek’s declaratory

judgment claim. After a hearing, the court denied Walnut Creek’s motion

for summary judgment. The court granted Depositors’ cross-motion for

partial summary judgment and dismissed Walnut Creek’s claim for

declaratory judgment. The court set the bench trial for April 27, 2015,

but later continued the trial to May 27.

      The appraisal took place on May 5, 2015. Depositors participated

in the appraisal, subject to an explicit reservation of the right to
                                      8

challenge coverage after completion of the appraisal.       Walnut Creek

selected James Pierce as its appraiser, while Depositor selected Eric

Howell. Pierce and Howell selected Larry Roth as the umpire. Howell, a

property adjuster, testified that he worked with Roth on one other

appraisal when Roth served as the umpire.         Howell testified that he

approved Roth as the umpire because Howell believed Roth “would be

bringing an independent engineer experienced in assessing hail damage

to the inspection to consult with.”

      Roth did not bring an expert on hail damage to the appraisal. The

appraisers inspected five buildings.      Harbert, Waterman, Barthelemy,

and Danielson all attended the appraisal. Harbert, who had inspected

Walnut Creek’s roofs again in the spring of that year, concluded that the

roofs needed to be replaced solely because of the manufacturer’s defect.

Harbert mentioned the CertainTeed warranty, so the appraisal panel was

aware of the Association’s warranty option. Danielson presented to the

appraisal panel his opinion that hail did not cause the damage to the

shingles.

      Waterman, however, took the position that “everything [they] were

looking at was bona fide hail damage” and explained his opinion to the

appraisers and umpire. Barthelemy agreed that the damage was caused

by the August 8, 2012 storm.      On May 5, the appraisers and umpire

issued a written award. The appraisal award stated,

      The Appraisers and Umpire above-referenced hereby agree
      and stipulate that the appraisal herein is limited in scope to
      the amount of loss and damage as a result of a hail and
      windstorm that occurred on or about August 8, 2012. The
      award does not include an evaluation or determination of
      coverage, policy exclusions or the relative causation of the
      same.
                                           9

The award continued,

       We, the undersigned, pursuant to our appointment, certify
       that we have truly, conscientiously and impartially
       performed the duties assigned us and have appraised and
       determined and do hereby award the following amount of
       loss. Minimum of two signatures required.

The appraisal award set the amount of loss at $1,467,830. 2 Only Pierce

and Roth signed the award; Howell did not sign because he disagreed

with the final number.

       Depositors disputed whether there was coverage for the loss, and

the case proceeded to a bench trial, as scheduled. At trial, Walnut Creek

argued that Depositors breached the insurance contract by denying

coverage for the damage caused to Walnut Creek’s roofs by the August 8,

2012 wind and hailstorm.            Walnut Creek also sought a declaratory

judgment enforcing the appraisal award. Depositors claimed there was

no breach of contract because the roof damage was due to multiple

concurrent causes, and such damage is excluded from coverage by the

policy’s anticoncurrent-cause provision. Depositors also argued that the

air conditioning units included in the appraisal award were not covered

because the units were owned by individual residents rather than the

insured Association. Depositors claimed the appraisal award is neither

binding nor conclusive, and alternatively, if coverage existed, any liability

should be reduced by the amount of any warranty negotiated with

CertainTeed, the manufacturer of the defective shingles.

       Waterman and Barthelemy testified for Walnut Creek.                        Both

acknowledged       that   the    CertainTeed      shingles    were    defective    but


       2Thisincluded the replacement cost of the air conditioners, which the court later
determined did not belong to Walnut Creek and, therefore, were not covered by the
policy.
                                   10

concluded that there was hail damage to the roofs attributable to the

August 8, 2012 storm.

      Misty Benge, the property manager of Walnut Creek, testified that

the board directed her to sign a warranty extension with CertainTeed.

She executed the CertainTeed release on February 4, 2015. Benge also

testified that, to her knowledge, Walnut Creek had not applied for the

warranty yet and had not given her approval to do so.

      Danielson and Harbert testified for Depositors.          Danielson

explained that when he inspected the roofs, the shingles “show[ed] signs

of weathering, craze cracking in the applique portion, [and] granular loss

in the applique portion,” as well as “variations in the amount of granule

loss in the . . . non-applique portion.” Danielson testified that he found

craze cracking on a majority of the shingles on the roofs at Walnut

Creek.   Danielson testified that he did not find any evidence of hail

damage. When asked if pea-sized hail could cause hail damage to the

shingles on the roofs at Walnut Creek, Danielson answered, “Absolutely

not.” He also testified that dime-sized hail would not cause damage to

the shingles.

      On August 19, the district court issued its findings of fact,

conclusions of law, and judgment. The court concluded that Depositors

did not breach the contract because the policy did not cover the damage

to Walnut Creek’s roofs. The court determined that the policy excludes

coverage of the roof damage because (1) Walnut Creek did not prove the

storm was the only cause of the physical damage to the roofs, (2) Walnut

Creek did not disprove Depositors’ contention that the shingles contained

a product defect that triggered deterioration, and (3) the defective

shingles were used in the construction of the townhomes even though

the defect was well-known in the roofing industry.
                                     11

      The court also determined that the appraisal award was “neither

binding nor conclusive upon the parties.” The court relied on the factors

set forth in the court of appeals decision in North Glenn Homeowners

Ass’n v. State Farm Fire & Casualty, 854 N.W.2d 67, 71 (Iowa Ct. App.

2014) (Whether an appraisal is binding and conclusive depends “on the

nature of the damage, the possible causes, the parties’ dispute, and the

structure of the appraisal award.” (quoting Quade v. Secura Ins., 814

N.W.2d 703, 707–08 (Minn. 2012))).        The district court found that the

damage to the shingles resulted from multiple concurrent causes,

including the preexisting defect in the shingles; Walnut Creek was aware

of the policy exclusions; and the appraisal, which was not signed by all

parties, only addressed one of the causes of roof damage.        The court

concluded that Walnut Creek did not meet its burden of showing the

appraisal award was binding and conclusive on the parties. The court

denied Walnut Creek’s breach of contract claim and claim for declaratory

judgment.

      Walnut Creek filed a motion for enlargement or amendment under

Iowa Rule of Civil Procedure 1.904(2) and for a new trial under rule

1.1004.     After a hearing, the court denied Walnut Creek’s motions,

concluding that Walnut Creek “basically asks the court to revisit matters

that it has already adequately addressed in its final ruling.”

      Walnut Creek appealed, and we transferred the case to the court of

appeals.     Depositors argued Walnut Creek’s appeal was untimely

because the insured’s rule 1.904(2) motion merely rehashed its

arguments and did not stop the thirty-day time clock to appeal the

judgment. The court of appeals determined Walnut Creek’s rule 1.904(2)

motion was proper and its appeal was timely. On the merits, the court of

appeals determined the district court misapplied the North Glenn factors.
                                     12

The appellate court explained that the purpose of the North Glenn test “is

to evaluate the structural and environmental underpinnings of the

appraisal award and search out evidence of fraud, mistake, or

malfeasance.” The court of appeals held “the appraisal’s conclusions as

to the amount of loss and causation [are] binding and conclusive.” The

court of appeals rejected the district court’s conclusion that the shingles

contained a product defect that triggered deterioration (and therefore

precluded recovery under the “Other Types of Losses” category of

exclusions), noting that it was inconsistent with the binding conclusions

of the appraisal panel.     For the same reason, the court of appeals

rejected the district court’s conclusion that the defective construction

bars recovery.

      The court of appeals rejected Walnut Creek’s request for additional

funds to pay the “soft metals” replacement costs.      While the appraisal

award determined the replacement cost was $159,541.51, Depositors

paid Walnut Creek $124,656.79 for the damage to the “soft metals.”

Because the policy states, “We will not pay on a replacement cost basis

for any loss or damage . . . [u]ntil the lost or damaged property is actually

repaired or replaced,” and Walnut Creek did not show it completed

repairs, the court of appeals concluded Walnut Creek was not entitled to

additional payment for the “soft metals.”

      The court of appeals reversed the judgment of the district court as

to the appraisal award and the breach of contract claim. The court of

appeals remanded with directions to enter judgment in Walnut Creek’s

favor consistent with the appraisal panel’s award (but excluding the

amount predicated on damage to the air conditioning units).

      One judge dissented.        The dissenting judge concluded that

causation should not be considered by the appraisal panel, so “[t]he
                                     13

district court was well within its authority to disregard the appraisal

panel’s determination on causation.”         The dissent also noted that

because the appraisal award expressly disclaimed that it determined

relative causation, it was “incumbent upon the district court to resolve

any coverage issues, policy exclusions, and issues of concurrent

causation.”    The dissenting judge would affirm the district court’s

judgment.

      Depositors applied for further review, which we granted.

      II. Standard of Review.

      We review a district court’s interpretation of an insurance policy

for correction of errors at law. Boelman v. Grinnell Mut. Reins. Co., 826

N.W.2d 494, 500 (Iowa 2013). The district court’s factual findings in a

bench trial “are binding on appeal if supported by substantial evidence.”

Pudil v. State Farm Mut. Auto. Ins., 633 N.W.2d 809, 811 (Iowa 2001). We

review the district court’s legal conclusions for correction of errors at law.

Frunzar v. Allied Prop. & Cas. Ins., 548 N.W.2d 880, 884 (Iowa 1996).

      III. Analysis.

      We must decide whether the district court erred by failing to

enforce the appraisal award. We begin with an overview of the insurance

policy appraisal provision and caselaw applying the standard policy

language. We conclude the better-reasoned cases permit appraisers to

decide the factual cause of damage to insured property to determine the

amount of the loss. The court is to decide coverage questions, but the

appraisers’ determination of the factual cause and monetary amount of

the insured loss is binding on the parties absent fraud or other grounds

to overcome a presumption of validity.

      A. The    Appraisal    Provision.      Iowa Code section 515.109

prescribes a standard form fire insurance policy to be used in the State
                                    14

of Iowa. Iowa Code § 515.109(1) (2016). The standard policy includes an

appraisal provision. Id. § 515.109(6)(a). The appraisal provision in the

Iowa Code is based on the 1943 New York Standard Fire Policy adopted

in most states.   See C.T. Drechsler, Annotation, Remedies of Insured

Other than Direct Action on Policy Where Fire or Other Property Insurer

Refuses to Comply with Policy Provisions for Appointment of Appraisers to

Determine Amount of Loss, 44 A.L.R.2d 850, § 1 & n.2, at 850–51 (1955)

(recognizing Massachusetts, New Hampshire, Minnesota, and Texas as

the only states that have not adopted the New York Standard Fire Policy).

      Iowa property insurers must use policy language that is the

“substantial equivalent” to the standard form’s terms.      See Iowa Code

§ 515.109(5) (“An insurer may issue a policy, . . . which contains

coverage against the peril of fire and substantial coverage against other

perils, if such policy includes provisions with respect to the peril of fire

which are the substantial equivalent of the minimum provisions of such

standard policy, provided [additional requirements are met].”); see also

Sager v. Farm Bureau Mut. Ins., 680 N.W.2d 8, 13 (Iowa 2004) (“Iowa’s

statute only prohibits those policies which are not the ‘substantial

equivalent’ of the statutory policy.”), superseded by statute on other

grounds, 2005 Iowa Acts ch. 70, §§ 19–21 (codified at Iowa Code

§ 515.109), as recognized in Postell v. Am. Family Mut. Ins., 823 N.W.2d

35, 48–49 (Iowa 2012).       The Depositors insurance policy appraisal

provision (on the left column), except for the final sentence, is the

substantial equivalent of the prescribed statutory language for appraisals

in the Iowa Code (on the right).

      Appraisal. If we and you        Appraisal.     In case the
      disagree on the amount of       insured and this company
      loss, either may make           shall fail to agree as to the
      written demand for an           actual cash value or the
                                      15
     appraisal of the loss. In         amount of loss, then, on the
     this event, each party will       written demand of either,
     select a competent and            each     shall    select    a
     impartial appraiser after         competent                 and
     receiving a written request       disinterested appraiser and
     from the other, and will          notify the other of the
     advise the other party of         appraiser selected     within
     the name of such appraiser        twenty     days    of    such
     within 20 days. The two           demand.      The appraisers
     appraisers will select an         shall    first    select    a
     umpire.      If appraisers        competent                 and
     cannot agree, either may          disinterested umpire; and
     request that selection be         failing for fifteen days to
     made by a judge of a court        agree upon such umpire,
     having jurisdiction.    The       then, on request of the
     appraisers     will    state      insured or this company,
     separately the value of           such umpire shall be
     property and the amount of        selected by a judge of a
     loss. If they fail to agree,      court of record in the state
     they will submit their            in which the property
     differences to the umpire.        covered is located.       The
     A decision agreed to by any       appraisers      shall    then
     two will be binding. Each         appraise the loss, stating
     party will:                       separately     actual    cash
                                       value and loss to each item;
     a. Pay       its      chosen      and, failing to agree, shall
     appraiser; and                    submit their differences,
                                       only, to the umpire.       An
     b. Bear the other expenses        award     in    writing,   so
     of the appraisal and umpire       itemized, of any two when
     equally.                          filed with this company
                                       shall determine the amount
     If there is an appraisal, we
                                       of actual cash value and
     will still retain our right to
                                       loss. Each appraiser shall
     deny the claim.
                                       be paid by the party
     Depositors policy § E.2           selecting the appraiser and
     (emphasis added).                 the expenses of appraisal
                                       and umpire shall be paid by
                                       the parties equally.

                                      Iowa Code § 515.109(6)(a).

To the extent the final sentence of Depositors’ appraisal provision

purports to change the meaning of the provision, it is unenforceable as
                                    16

not substantially equivalent to the standard policy provision. See Sager,

680 N.W.2d at 13.

      We last addressed the insurance appraisal provision in 1991. We

observed the “appraisal is a supplementary arrangement to arrive at a

resolution of a dispute without a formal lawsuit.” Cent. Life Ins. v. Aetna

Cas. & Sur. Co., 466 N.W.2d 257, 260 (Iowa 1991). We emphasized that

the appraisal “serves as an inexpensive and speedy means of settling

disputes over matters such as the amount of loss and value of the

property in question.”    Id.   A federal district court aptly noted the

appraisal is “favored by both the Iowa legislature and the Iowa Supreme

Court as a means for narrowing disputes that may ultimately have to be

resolved in litigation.” Terra Indus., Inc. v. Commw. Ins. Co. of Am., 981

F. Supp. 581, 605 (N.D. Iowa 1997).

      Other courts have noted the efficacy of these insurance appraisal

provisions. The Minnesota Supreme Court stated,

            Minnesota has mandated appraisal clauses in fire
      insurance policies since 1895. [Appraisal] provisions have
      been included in property casualty policies for over 100
      years as a means to provide “the plain, speedy, inexpensive
      and just determination of the extent of the loss.” Appraisal
      clauses are also required for insurance policies that protect
      against damage caused by hail. Accordingly, there is a
      strong public policy in Minnesota favoring appraisals . . . .

Quade, 814 N.W.2d at 707 (citations omitted) (quoting Kavli v. Eagle Star

Ins., 288 N.W. 723, 725 (Minn. 1939)). The Wisconsin Supreme Court

similarly observed,

      [T]he appraisal process is a fair and efficient tool for
      resolving disputes. First and foremost, the process is fair to
      both parties. It allows each to appoint an appraiser of their
      own liking, with a neutral umpire as the deciding vote.
      Appraisals also promote finality, are time and cost-efficient,
      and place a difficult factual question—the replacement value
      of an item—into the hands of those best-equipped to answer
                                           17
      that question. As a form of alternative dispute resolution,
      the appraisal process is favored and encouraged.

Farmers Auto. Ins. v. Union Pac. Ry., 768 N.W.2d 596, 607 (Wis. 2009);
see also Fla. Ins. Guar. Ass’n v. Olympus Ass’n, 34 So. 3d 791, 794 (Fla.

Dist. Ct. App. 2010) (“Appraisal clauses are preferred, as they provide a

mechanism for prompt resolution of claims and discourage the filing of

needless lawsuits.”).

      We addressed judicial review of appraisal awards in Central Life,

466 N.W.2d at 260. We noted, “Appraisal awards do not provide a formal

judgment and may be set aside by a court.” Id. But, importantly, we

concluded, “Provisions for appraisal of an insurance loss, whether under

policy terms or pursuant to independent agreement, are valid and

binding on the parties.”          Id. (citing 6 J. Appleman & J. Appleman,

Insurance Law and Practice §§ 3921, 3924 (rev. 1972)). We made clear

“the award is supported by every reasonable presumption and will be

sustained even if the court disagrees with the result.” Id. We specifically

held that the appraisal “award will not be set aside unless the

complaining party shows fraud, mistake or misfeasance on the part of an

appraiser or umpire.” Id.

      The insurer met that high standard to set aside the award in

Central Life.     Central Life Insurance Company (Central) was insured

under a policy issued by Aetna Casualty and Surety Company (Aetna).

Id. at 258.     A fire damaged buildings owned by Central in downtown

Des Moines. Id. When the parties were unable to agree on the amount

of the loss, Central invoked the Aetna policy’s appraisal process.                Id. 3

      3The   Aetna appraisal provision stated,
      Appraisal. In case the insured and this company shall fail to agree as to
      the actual cash value or the amount of loss, then, on the written demand
      of either, each shall select a competent and disinterested appraiser and
                                                18

Each party selected an appraiser. Id. at 258–59. “The appraisers failed

to agree on an umpire and requested that a district court judge make the

selection.” Id. at 259. After hearing suggestions from both appraisers

and Aetna’s lawyer, the court selected an umpire “who was previously

suggested by Central’s appraiser and rejected by Aetna’s appraiser.” Id.

The umpire worked closely with Central’s appraiser and ultimately

adopted the calculations of Central’s appraiser. Id. The award set the

amount payable at $522,233.               Id.    Viewing that amount as excessive,

Aetna retained another appraisal firm that determined the amount was

$180,932. Id. Aetna offered that amount, which Central rejected. Id.

       Aetna filed a declaratory judgment action to set aside the award.

Id. Central sued for enforcement of the award and for damages for

Aetna’s bad faith refusal to pay the award.                 Id.   The district court

consolidated the cases.           Id.     During discovery, Aetna learned that

Central’s appraiser had an undisclosed contingent fee that increased

with the size of the award. Id. The policy required each party to select a

“disinterested appraiser.” Id. at 258 n.1. Both parties filed motions for

summary judgment. Id. at 259. The district court denied Aetna’s motion

to vacate the appraisal award. Id. The court granted Central’s motion

_______________________
       notify the other of the appraiser selected within twenty days of such
       demand. The appraisers shall first select a competent and disinterested
       umpire; and failing for fifteen days to agree upon such umpire, then, on
       request of the insured or this Company, such umpire shall be selected by
       judge of a court of record in the state in which the property covered is
       located. The appraisers shall then appraise the loss, stating separately
       actual cash values and loss to each item; and, failing to agree shall
       submit their differences, only to the umpire. An award in writing, so
       itemized, of any two when filed with this Company shall determine the
       amount of actual cash value and loss. Each appraiser shall be paid by
       the party selecting him and the expenses of appraisal and umpire shall
       be paid by the parties equally.
Cent. Life Ins., 466 N.W.2d at 258 n.1.
                                    19

for summary judgment to enforce the appraisal award and entered

judgment for Central in the amount of the award.        Id.   The bad-faith

claim was submitted to the jury, which found Aetna was in bad faith and

awarded compensatory damages for Central’s attorney fees incurred

enforcing the appraisal award through summary judgment but awarded

no punitive damages. Id. at 259–60.

       Aetna appealed. Id. at 260. Aetna requested that we set aside the

appraisal award because Central’s appraiser was not “disinterested” as a

matter of law given his secret contingent fee. Id. Aetna also asked us to

set aside the jury verdict, arguing that Aetna was not in bad faith for

challenging the appraisal award.      Id.   We reversed the district court

judgments and remanded the case for entry of judgment in Aetna’s favor

vacating the appraisal award and dismissing the bad-faith claim. Id. at

262–64. We held that Central’s appraiser, as a matter of law, was not

disinterested because his fee increased with the size of the award. Id. at

261.   We explained “that the object and purpose of an appraisal is to

secure a fair and just evaluation by an impartial tribunal” and that

“appraisers should be in a position to act fairly and be free from

suspicion or unknown interest.” Id. at 260–61.

       Central Life governs judicial review of appraisal awards, see id. at

260, but further analysis is required because that case did not

adjudicate property damage with multiple causes.              Against this

backdrop, we turn to the challenges to the appraisal award here.

       B. Whether Causation Determinations Made by the Appraisal

Panel Are Binding. Depositors has not alleged or established any fraud

or disqualifying conflict of interest on the part of an appraiser or umpire

to set aside the award. See id. at 260. Rather, Depositors contends the

district court was free to disregard the appraisal award in determining
                                    20

the cause of the shingle damage and in applying coverage exclusions for

defective shingles. We disagree in part. Coverage questions are for the

court. See Nat’l Sur. Corp. v. Westlake Invs. LLC, 880 N.W.2d 724, 733–

34 (Iowa 2016) (setting forth interpretive principles).   But we conclude

factual causation issues may be decided through the appraisal process.

The appraisal award is presumptively binding on the parties and court.

See Cent. Life Ins., 466 N.W.2d at 260.

      Other jurisdictions have adjudicated disputes over appraisal

awards in insurance claims involving covered and uncovered damage.

“Courts across the country agree that coverage determinations are

reserved only to the courts.” Ashley Smith, Comment, Property Insurance

Appraisal: Is Determining Causation Essential to Evaluating the Amount of

Loss?, 2012 J. Disp. Resol. 591, 594 (2012); see, e.g., Trout Brook S.

Condo. Ass’n v. Harleysville Worcester Ins., 995 F. Supp. 2d 1035, 1041

(D. Minn. 2014) (“[C]overage questions are not for appraisers.”); HHC

Assocs. v. Assurance Co. of Am., 256 F. Supp. 2d 505, 511 (E.D. Va.

2003) (“[C]ourts have found consistently that whether coverage was

properly denied is a legal issue reserved for the court alone.”); CIGNA Ins.

v. Didimoi Prop. Holdings, N.V., 110 F. Supp. 2d 259, 268 (D. Del. 2000)

(“Coverage questions . . . are legal questions for the Court.”); Wausau Ins.

v. Herbert Halperin Distrib. Corp., 664 F. Supp. 987, 989 (D. Md. 1987)

(“Th[e] issue [of the application of policy exclusions] . . . is within the

competence of the Court, not an appraiser, to resolve.”); Rogers v. State

Farm Fire & Cas. Co., 984 So. 2d 382, 392 (Ala. 2007) (“Questions of

coverage and liability should be decided only by the courts, not

appraisers.”); Johnson v. Nationwide Mut. Ins., 828 So. 2d 1021, 1025

(Fla. 2002) (“[C]overage issues [a]re to be judicially determined by the

court . . . .”); Auto-Owners Ins. v. Kwaiser, 476 N.W.2d 467, 469 (Mich.
                                   21

Ct. App. 1991) (“We conclude that the issue of coverage is for the court,

not the appraisers.”); see also St. Paul Fire & Marine Ins. v. Wright, 629

P.2d 1202, 1203 (Nev. 1981) (per curiam) (concluding that umpire and

appraisers who interpreted coverage provisions to determine the award

amount exceeded the scope of their powers); 5 New Appleman on

Insurance Law Library Edition § 48.03[2], at 48-12 (Lon A. Berk &

Michael S. Levine eds., 2017) (“[A]ny . . . coverage disputes ultimately

need to be resolved by the court, regardless of the appraisal concerning

amount of loss.”).   We hold that coverage determinations are for the

court. But this does not mean the court is free to disregard the appraisal

award as to factual disputes that may be dispositive of coverage

questions.

      The fighting issue here is whether the appraisers may determine

the cause-in-fact of damage to insured property (here, roofing shingles)

when appraising the amount of the loss from the hailstorm.        “Courts

across the country are divided as to whether, in determining the ‘amount

of loss’ pursuant to appraisal provisions like the one here, appraisers

may consider questions of causation.” Auto-Owners Ins. v. Summit Park

Townhome Ass’n, 100 F. Supp. 3d 1099, 1101–02 (D. Colo. 2015). Some

courts view causation questions as off-limits for appraisers.   See, e.g.,

Spearman Indus., Inc. v. St. Paul Fire & Marine Ins., 109 F. Supp. 2d 905,

907 (N.D. Ill. 2000) (“[C]ausation is a matter for the courts—not an

appraiser—to decide.”); Rogers, 984 So. 2d at 392 (concluding that the

determination of causation “is within the exclusive purview of the courts,

not the appraisers”); Munn v. Nat’l Fire Ins. Co. of Hartford, 115 So. 2d

54, 55 (Miss. 1959) (“We have concluded that the appraisers have no

power to determine the cause of the damage. Their power is limited to
                                    22

the function of determining the money value of the property which may

be damaged by the storm.”).

      The   better-reasoned    cases,    however,   hold   the   appraisers

necessarily address causation when determining the amount of the loss

from an insured event. See, e.g., Phila. Indem. Ins. v. WE Pebble Point, 44

F. Supp. 3d 813, 818 (S.D. Ind. 2014) (“[I]t would be extraordinarily

difficult, if not impossible, for an appraiser to determine the amount of

storm damage without addressing the demarcation between ‘storm

damage’ and ‘non-storm damage.’         To hold otherwise would be to say

that an appraisal is never in order unless there is only one conceivable

cause of damage—for example, to insist that ‘appraisals can never assess

hail damage unless a roof is brand new.’ ” (quoting State Farm Lloyds v.

Johnson, 290 S.W.3d 886, 892–93 (Tex. 2009) (also stating “appraisers

must always consider causation, at least as an initial matter”))); CIGNA

Ins., 110 F. Supp. 2d at 268 (“[U]nder the circumstances of this case,

including the plain language of the policy, a determination of amount of

loss under the appraisal clause includes a determination of causation.”);

Quade, 814 N.W.2d at 706–07 (“[A] determination of the ‘amount of loss’

under the appraisal clause necessarily includes a determination of

causation.”). We are persuaded by this precedent to hold appraisers may

decide the factual cause of damage to property in determining the

amount of the loss from a storm.

      The court of appeals in North Glenn considered “whether causation

and coverage issues are to be determined by the appraisers, or by the

court.” 854 N.W.2d at 69. The court of appeals held that an “appraisal

does not determine issues of coverage but simply causation.” Id. at 68.

We agree.
                                    23

      The court of appeals in the instant case followed North Glenn.

North Glenn Homeowners Association (North Glenn) was an association

of property owners insured by State Farm. Id. After a hailstorm in July

2009, North Glenn submitted a claim for hail damage to a roof.         Id.

State Farm paid the claim, but North Glenn did not repair all of the

damage. Id. Another storm hit North Glenn’s buildings in March 2011,

and North Glenn filed another claim for wind and hail damage.          Id.

State Farm denied the claim after inspecting the roof and determining

that the hail damage was from the 2009 storm and therefore not covered

under the 2011 policy. Id. “The wind damage was estimated to be less

than the policy deductible.” Id.

      North Glenn demanded an appraisal under the policy’s standard

appraisal provision—worded identically to Depositors’.    See id.   While

State Farm agreed to an appraisal of the wind damage, it refused an

appraisal of the hail damage.      Id.   North Glenn filed a petition for

declaratory judgment, “requesting a determination of coverage issues,

seeking an order for appraisal, and alleging breach of contract.”      Id.

North Glenn later filed a motion to compel appraisal; the district court

granted the motion. Id. Upon analyzing the appraisal clause, the district

court found the clause requires the appraisers to examine the loss,

which requires consideration of any preexisting damage. Id.

      On appeal, State Farm argued that the district court erred in

ordering an appraisal that requires the appraisers to determine

causation, which State Farm contended is beyond the appraisers’

authority.   Id. at 69.   The court of the appeals recognized that “[t]he

dispute is whether causation and coverage issues are to be determined

by the appraisers, or by the court.” Id. The court of appeals rejected the

rationale of other courts that decided appraisers have no authority to
                                    24

consider issues of causation and, instead, relied on the reasoning of the

Minnesota Supreme Court in Quade. Id. at 70–71.

      The Quade court held “a determination of the ‘amount of loss’

under the appraisal clause necessarily includes a determination of

causation.”   814 N.W.2d at 706–07.      The Quade court acknowledged

“[c]overage questions, such as whether damage is excluded because it

was not caused by wind, are legal questions for the court.” Id. at 707.

The Iowa Court of Appeals adopted this reasoning, noting that “[a]s part

of the appraisal process, appraisers must determine what the amount of

‘loss’ is, which often requires consideration of causation.” North Glenn,

854 N.W.2d at 71. The North Glenn court noted that “appraisers must

consider what damage was caused by hail, and what damage was not, or

damage with which they are unconcerned, such as normal wear and

tear.” Id.

      However, the court of appeals explained that “the issue of coverage

may be further litigated,” and “the causation determinations by the

appraisers may be subject to further review by the district court.” Id.

The court then held, “[W]hether the appraisal award will be conclusive on

all issues will depend on the nature of the damage, the possible causes,

the parties’ dispute, and the structure of the appraisal award.”      Id.

(quoting Quade, 814 N.W.2d at 707–08). The court of appeals did not

further explain how to apply these factors. See id.

      Here, the appraisers themselves made clear they were determining

only the amount of loss attributable to the hailstorm without deciding

coverage exclusions or other causes of shingle damage:

      [T]he appraisal herein is limited in scope to the amount of
      loss and damage as a result of a hail and windstorm that
      occurred on or about August 8, 2012. The award does not
                                    25
      include an evaluation or determination of coverage, policy
      exclusions or the relative causation of the same.

Depositors’ policy excludes coverage for preexisting deterioration caused
by defective shingles. But the appraisers necessarily distinguished the

hailstorm damage from deterioration of defective shingles installed

between 2004 and 2006. The appraisers were entitled to rely on expert

opinions that the August 8, 2012 hailstorm caused damage to the roofing

shingles.   One roofing expert, Nicholas Waterman, observed eight to

twelve “hits” from hail per ten-by-ten-foot square sections of shingles, not

including the applique that had deteriorated over the half-decade since

the original installation.   The public adjuster, Timothy Barthelemy,

observed nine to eleven hits per ten-by-ten-foot square. The appraisers

were not required to accept conflicting expert opinions that the hail

caused no shingle damage.         It is undisputed the same hailstorm

damaged metal gutters and fascia at Walnut Creek.

      We conclude Depositors failed to overcome the appraisal award’s

presumption of validity. The district court was not free to make its own

factual determination that there was no hail damage to the shingles. See

Cent. Life Ins., 466 N.W.2d at 260 (“When reviewed, the award is

supported by every reasonable presumption and will be sustained even if

the court disagrees with the result.”).        To hold otherwise would

undermine the efficacy of the appraisal process. The appraisal award is

binding on the parties as to the dollar amount of the loss for shingle

damage caused by the August 8, 2012 hailstorm, but that amount

remains subject to coverage exclusions and limitations.

      Coverage issues are for the court.        Depositors relies on the

anticoncurrent-cause provision and the exclusions for defective materials

and deterioration.   Depositors argues the policy does not cover roof
                                       26

damage caused by both hail and deterioration from defective shingles.

See Travelers Prop. Cas. Co. of Am. v. Brookwood, LLC, 283 F. Supp. 3d

1153,    1161–63     (N.D.   Ala.   2017)   (applying   exclusions   for   faulty

workmanship and inadequate maintenance to defeat coverage claim for

storm water damage from leaking roof). Anticoncurrent-cause provisions

are enforceable under Iowa law. Amish Connection, Inc. v. State Farm Fire

& Cas. Co., 861 N.W.2d 230, 241 (Iowa 2015). “Anti-concurrent cause

language addresses multiple concurrent or sequential causes of the same

loss. It does not apply if the perils at work caused different damage or

different losses.     These would not be concurrent causes.”               5 New

Appleman on Insurance Law Library Edition § 44.04[1], at 44-28 (Marc J.

Shrake ed., 2017).

        After its bench trial, the district court found that “the defective and

deteriorating shingles are at the core of [Walnut Creek’s] roof damage.”

But the court also found no hail damage to the shingles, contrary to the

appraisal award.      A new trial is required because the district court

applied the wrong legal standard when it disregarded the appraisers’

causation determination on hail damage. In the retrial, the court shall

accept the appraisal award as to the hail damage loss, and then

determine the amount, if any, Depositors owes under the policy after

adjudicating the coverage defenses. We express no opinion on the merits

of those defenses.

        IV. Disposition.

        For these reasons, we vacate the decision of the court of appeals

and reverse the district court judgment rejecting the appraisal award.

We affirm the district court judgment declining Walnut Creek’s claim for

additional sums for soft metal damage.          We remand the case for the
                                  27

district court to adjudicate coverage exclusions for prior deterioration

and defective shingles under the anticoncurrent-cause provision.

      COURT OF APPEALS DECISION VACATED; DISTRICT COURT

JUDGMENT      AFFIRMED     IN   PART,   REVERSED      IN   PART,   AND

REMANDED WITH INSTRUCTIONS.
