Axis Surplus Insurance Company v. Condor Corporation

United States Court of Appeals
For the Eighth Circuit
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No. 21-1022
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Axis Surplus Insurance Company
Plaintiff - Appellant
v.
Condor Corporation
Defendant - Appellee
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Appeal from the United States District Court
for the District of Minnesota
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Submitted: October 20, 2021
Filed: December 7, 2021
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Before GRUENDER, ERICKSON, and STRAS, Circuit Judges.
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STRAS, Circuit Judge.
This case requires us to determine the scope of an appraiser’s duties. Here,
an insurance policy allows disagreements over the “amount of loss” to go to an
appraiser. Under a provision like this one, does the appraiser get to determine what

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caused it too? We agree with the district court1 that, under Minnesota law, the
answer is yes.
I.
Following a hailstorm in 2018, Condor Corporation filed a claim for benefits
with Axis Surplus Insurance Corporation, which had been its insurer for three years.
The parties agreed that hail had damaged the roofs on an apartment complex that
Condor owned but disagreed about when it happened. An adjuster appointed by
Axis thought the damage was old—from a pre-policy hailstorm that occurred before
2012. Condor’s position was that the damage was new.
To resolve the dispute, Condor demanded an appraisal. Under the policy,
either party could demand one whenever there was a disagreement over “the value
of the property or the amount of loss.” See Minn. Stat. § 65A.26 (requiring “[e]very
policy of insurance against damage by hail” to have a similar appraisal provision).
The next step was appraisal, in Condor’s view, because the parties could not agree
on the “amount of loss.”
What Axis did next was unsurprising. Having already denied coverage, it
refused to appoint an appraiser because, in its words, “the property insurance
contract allows for appraisal [only] in circumstances where coverage is undisputed.”
With the parties locked in a stalemate, Axis filed a lawsuit in federal court
seeking “a declaration that there [was] no coverage and [that] the [parties’] coverage
dispute preclude[d] appraisal.” True to its position, Condor responded by filing a
motion to compel one.
1 The Honorable David S. Doty, United States District Judge for the District
of Minnesota.

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The district court sided with Condor. But rather than proceeding with the
appraisal, Axis sought immediate appellate review by having the court direct the
entry of a partial final judgment. See Fed. R. Civ. P. 54(b).
II.
The interpretation of an insurance policy presents a question of law that we
review de novo. See Hampton v. Kohler, 989 F.3d 619, 621 (8th Cir. 2021). Here,
we are “bound by the decisions of the Minnesota Supreme Court” because the parties
have asked us to interpret a Minnesota policy. C.S. McCrossan Inc. v. Fed. Ins. Co.,
932 F.3d 1142, 1145 (8th Cir. 2019) (quotation marks omitted). In Minnesota, as
elsewhere, “[c]ontracts of insurance . . . [are] construed . . . in their plain, ordinary,
and popular sense.” Bobich v. Oja, 104 N.W.2d 19, 24 (Minn. 1960).
The insurance policy in this case says that, whenever Axis and Condor
“disagree on . . . the amount of loss, either may make written demand for an
appraisal of the loss.” The focus here is “on the meaning of the phrase ‘amount of
loss.’” Quade v. Secura Ins., 814 N.W.2d 703, 706 (Minn. 2012).
The Minnesota Supreme Court interpreted this exact phrase nearly a decade
ago in Quade, except there the disagreement was over how much damage a
windstorm had caused. Id. at 704–05. The duty to resolve the dispute fell upon the
appraiser because, “in the insurance context, [the] appraiser’s assessment of the
‘amount of loss’ necessarily includes a determination of the cause of the loss.” Id.
at 706 (emphasis added). The reason: the word “loss” is itself defined by reference
to the insurer’s “liability” under the contract. Id. (quoting Black’s Law Dictionary
1030 (9th ed. 2009)); see also The American Heritage Dictionary of the English
Language 1037 (5th ed. 2016) (defining “loss” as “[t]he amount of a claim on an
insurer by an insured”).

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Just like in Quade, the dispute here is over the “amount of loss.” If the earlier
storm caused the damage, as Axis claims, then the amount of loss will be zero
because the insurer would have no “liability” under the contract. Id. at 706–07. If,
on the other hand, a storm within the policy period caused the damage, as Condor
argues, then Axis’s “liability” will be greater than zero. Id.
To be sure, “the line between liability and damage questions is not always
clear.” Id. at 706. But Quade tells us how to distinguish between the two. If the
question here were solely about whether hail is a covered peril or certain preexisting
conditions are excluded, then these would be “legal questions for the court.” Id. at
707. But when, as here, it “involves separating loss due to a covered event,” the
2018 storm, “from a property’s preexisting condition,” the question is one for the
appraiser. Id. at 707.
III.
We accordingly affirm the judgment of the district court.
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