Colin Henderson; Wende Kelsey v. State Farm Fire and Casualty Company

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 23-1310
___________________________
Colin Henderson; Wende Kelsey
Plaintiffs - Appellants
v.
State Farm Fire and Casualty Company
Defendant - Appellee
____________
Appeal from United States District Court
for the Northern District of Iowa - Cedar Rapids
____________
Submitted: January 9, 2024
Filed: September 6, 2024
____________
Before SMITH, Chief Judge,1 GRUENDER and SHEPHERD, Circuit Judges.
____________
SMITH, Chief Judge.
1 Judge Smith completed his term as chief judge of the circuit on March 10,
2024. See 28 U.S.C. § 45(a)(3)(A).

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Colin Henderson and Wende Kelse (collectively, “the Homeowners”) appeal
the district court’s2 order granting summary judgment to State Farm Fire and
Casualty Company (State Farm) and dismissing the Homeowners’ claims for breach
of contract and bad faith. We affirm.
I. Background
On August 10, 2020, a derecho3 swept through Iowa and damaged the
Homeowners’ property located in Cedar Rapids. The Homeowners filed a claim with
their insurer, State Farm. Their policy promised payment of the actual cash value
(ACV)4 of any covered loss, minus their deductible. If the facts warranted, they
might also have been entitled to the cost of repairs in excess of the ACV up to the
replacement cost value (RCV). The policy stated that “to receive any additional
payments on a replacement cost basis, [the Homeowners] must complete the actual
repair or replacement of the damaged part of the property within two years after the
date of loss, and notify [State Farm] within 30 days after the work has been
completed.” R. Doc. 22-5, at 39. The policy also provided that if the parties did not
agree on the value of a loss, either the Homeowners or State Farm could invoke an
appraisal process after providing to the other party itemized documentation showing
each specific dispute. And the policy included a one-year limitation on filing suit
that would begin to run on the date of any damage.
2 The Honorable Leonard T. Strand, then Chief Judge, now United States
District Judge for the Northern District of Iowa.
3 A derecho is “a large, fast-moving complex of thunderstorms with powerful,
straight-line winds that cause widespread destruction.” Derecho, Merriam-
Webster’s Unabridged Dictionary, https://unabridged.merriam-
webster.com/unabridged/derecho (last visited Aug. 26, 2024).
4 The policy defined “actual cash value” as “the value of the damaged part of
the property at the time of loss, calculated as the estimated cost to repair or replace
such property, less a deduction to account for pre-loss depreciation.” R. Doc. 22-5,
at 22.

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In September, a State Farm field adjuster inspected the Homeowners’ property
and reported finding minor damage to one shingle on the home’s roof, missing and
loose siding, missing fascia, cracked ceiling texture in the living room, moderate
damage to the garage roof and the garage’s paint, damage to a gate, and damage to
a grill. State Farm paid the Homeowners $2,297.26, representing what State Farm
had determined to be the ACV of the loss minus the deductible.
In October, the Homeowners sent State Farm additional photos, an invoice for
the fence repair, and another estimate. State Farm assigned an out-of-state claim
specialist, Tony Swindoll, to handle the claim, and he reviewed the materials
remotely. State Farm revised its estimate and paid the Homeowners an additional
$3,822.68.
The Homeowners retained DHI Roofing to estimate the cost of repairs.
Jonathan Pugsley of DHI Roofing determined that the home needed a total roof
replacement. He sent State Farm additional photos and an estimate of $21,537.45 for
repairs to the property. According to State Farm’s claim notes, Swindoll reviewed
the additional materials and decided that the damage was minimal, and a team leader
also reviewed the materials and determined that no additional inspection was needed
and that the roof did not need to be replaced. On November 5, State Farm told the
Homeowners that it would not reinspect the roof. Pugsley then informed State Farm
that there were multiple damaged shingles and that there was no well-sheathed
surface to which the shingles could be nailed, as required by the International
Residential Code. Thereafter State Farm ordered a second inspection of the siding
by a different field adjuster and authorized the field adjuster to reinspect the roof if
he thought it necessary. The field adjuster did so, and he did not recommend
replacing the roof but did find damage to one or two additional shingles, a ridge cap,
and the drip edge. He also noted there was a missing tab. State Farm then adjusted
its estimate and, on December 7, paid the Homeowners $119.75.
From late fall 2020 into spring 2021, the Homeowners and State Farm
continued to disagree about whether the roof needed to be replaced. State Farm’s

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claim notes show that State Farm was aware that the decking5 was spaced but still
considered it capable of having shingles nailed to it if the new nails were placed in
the same locations as the pre-existing nails. Pugsley disagreed and forwarded an
email from the local building inspector stating that the building code applied to
repairs and not only to new construction. Pugsley also informed State Farm that there
were greater than one-quarter-inch gaps in the decking. But State Farm’s claim notes
show that the current decking had been used for a shingle replacement 10 or 12 years
earlier. State Farm’s claim notes show that, in March 2021, Pugsley again sought
replacement of the entire roof because of granular loss and an inability to match the
shingles. State Farm responded that any difference in appearance could be addressed
after completing the repairs. In April, the Homeowners requested another inspection;
State Farm denied this request.
Throughout this period, the Homeowners and State Farm also disagreed about
other repairs. The Homeowners obtained a quote for interior work that was greater
than State Farm’s estimate. State Farm did not increase its estimate, but Swindoll
offered to review additional information. And there was also an issue with the siding.
State Farm and Pugsley each mailed samples of the siding to third parties so that
they could find a match. State Farm’s matching service showed that Community
Builders Supply Company carried matching siding, but that company informed
Pugsley that it could not get the siding. Pugsley shared this information with State
Farm and sought replacement of all the siding. On January 25, 2021, State Farm
provided Pugsley with contact information for a siding distributor that was supposed
to have the correct siding in stock. On March 1, Pugsley again asked for total
replacement of the siding, stating that the distributor had a limited amount of siding
and that the new siding probably would not match.
The Homeowners complained about Swindoll to their insurance agent, noting
that Pugsley had said that Swindoll was rude. Based on their interactions with
5 A roof deck is “[t]he flat or sloped surface not including its supporting
members or vertical supports.” 2018 Int’l Residential Code § R202.

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Swindoll, Kelsey and Henderson both considered Swindoll to be a “bully.” R. Doc.
22-5, at 102; R. Doc. 22-6, at 6. Kelsey spoke to Swindoll on two occasions during
the claims process but also called State Farm two or three times without getting a
response. According to Henderson, early in 2021, State Farm stopped answering his
calls. The Homeowners filed a complaint with the Iowa Insurance Division, but the
Division declined to intervene.
On August 2, 2021, the Homeowners requested an appraisal of their claim and
an extension of the limitation period for filing suit. State Farm did not extend the
limitation period. The Homeowners filed suit in state court on August 9, bringing
claims for breach of contract, bad faith, and declaratory judgment and injunctive
relief, seeking to enforce the appraisal clause. Pursuant to the policy, State Farm
asked the Homeowners for itemized documentation of disputed damages. In
response, Pugsley sent State Farm an RCV estimate of $41,049.79.
State Farm removed the action to federal court. While the action was pending,
State Farm and the Homeowners engaged in the appraisal process. In March 2022,
the appraisers set the ACV at $16,155.48 and the RCV at $21,069.59. The appraisers
determined that the roof should be replaced. State Farm immediately paid the
Homeowners $9,096.20, the difference between the amount it had already paid and
the new ACV. It also informed the Homeowners that to obtain RCV funds, they
would need to complete repairs by August 10, 2022; notify State Farm within 30
days of completion; and submit documentation showing that completion. State Farm
also stated:
Without waiving the above requirements, we will consider paying
replacement cost benefits prior to actual repair or replacement if we
determine repair or replacement cost will be incurred because repairs
are substantially under way, or we are presented a signed contract
acceptable to us. State Farm is not waiving any of the policy coverage,
limitations, exclusions, or provisions all of which are specifically
reserved.

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R. Doc. 22-6, at 116.
At his deposition on August 26, 2022, Henderson stated that he had repaired
the roof but had no money to repair the siding. On the same day, Kelsey stated in
her deposition that they had not begun repairing the siding because they could not
find matching siding.
On September 2, State Farm moved for summary judgment, arguing that it
had paid the Homeowners everything to which they were entitled because it had paid
the full ACV amount and the Homeowners had never submitted documentation
showing that they were entitled to the RCV. It also argued that it had objectively
reasonable bases for its payment decisions, thus negating the bad-faith claim. The
Homeowners countered that State Farm was required to pay the entire appraisal
award within 60 days of the appraisal. They contended that even if the policy
required the Homeowners to make repairs before claiming the RCV, impossibility
excused their performance. They also attached a contract dated August 1, 2022, for
replacement of or repairs to the roof, garage roof, and siding. In its reply, State Farm
noted that it was still evaluating the claim for payment of additional funds.
On December 20, 2022, the district court granted summary judgment to State
Farm on the breach-of-contract and bad-faith claims.6 The court held that State Farm
had not breached the contract because it was only required to pay RCV benefits upon
receipt of documentation showing that the Homeowners had made repairs. The court
noted that
State Farm agrees that it is bound by the appraisal award, which
includes the RCV determination. The current legal issue before me is
simply whether the Homeowners were entitled to this payment 60 days
after the appraisal award, regardless of whether they repaired or
replaced any items covered by the appraisal award.
6 Both parties agreed that the claim for declaratory judgment and injunctive
relief was moot.

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Henderson v. State Farm Fire & Cas. Co., 649 F. Supp. 3d 748, 760 n.4 (N.D. Iowa
2022). The court also held that State Farm had an objectively reasonable basis for
rejecting the Homeowners’ original request for a full roof replacement.
The Homeowners moved to alter or amend the judgment under Federal Rule
of Civil Procedure 59(e) or for relief under Rule 60(b)(6). They argued that the
court’s judgment eliminated their recourse if State Farm refused to pay the RCV
even after receiving documentation of repairs. State Farm responded that the policy
required the Homeowners to complete repairs within two years of the date of damage
to obtain the RCV. State Farm pointed out that the Homeowners had submitted
documentation after the expiration of that two-year period, but it noted that it had
paid the Homeowners part of the RCV after they submitted that documentation.
The district court denied the Homeowners’ post-judgment motion. The
Homeowners appeal.
II. Discussion
The Homeowners argue that the district court lacked jurisdiction over the
action. Alternatively, they contend that the district court erred in granting summary
judgment to State Farm on the breach-of-contract and bad-faith claims. We hold that
the district court had jurisdiction over this action and appropriately granted summary
judgment to State Farm on both claims.
A. Standard of Review
We review de novo whether the district court had jurisdiction. Wagstaff &
Cartmell, LLP v. Lewis, 40 F.4th 830, 839 (8th Cir. 2022). We also review de novo
the district court’s entry of summary judgment. N. Bottling Co. v. Pepsico, Inc., 5
F.4th 917, 922 (8th Cir. 2021). “Summary judgment is appropriate when there is no
genuine issue as to any material fact and the moving party is entitled to judgment as
a matter of law.” Id. “[W]e consider the evidence in the light most favorable to the
nonmoving party and draw all reasonable inferences in that party’s favor.” Id.

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(internal quotation marks omitted). “A movant for summary judgment bears the
initial responsibility of informing the court of the basis for the motion, and must
identify those portions of the record which the movant believes demonstrate the
absence of a genuine issue of material fact.” Gannon Int’l, Ltd. v. Blocker, 684 F.3d
785, 792 (8th Cir. 2012). The nonmovant must then “respond by submitting
evidentiary materials that set out specific facts showing that there is a genuine issue
for trial.” Id.; see also JRT, Inc. v. TCBY Sys., Inc., 52 F.3d 734, 739 (8th Cir. 1995)
(“[W]ith [the defendant] having shown an absence of facts supporting [the
plaintiff’s] claim of the bad faith required for a finding of fraud . . . the burden was
upon [the plaintiff] to raise a genuine issue regarding [the defendant’s] alleged bad
faith.”); Fed. R. Civ. P. 56 advisory committee’s note to 2010 amendment (“[A]
party who does not have the trial burden of production may rely on a showing that a
party who does have the trial burden cannot produce admissible evidence to carry
its burden as to the fact.”).
B. Jurisdiction
The Homeowners suggest that the district court lacked subject matter
jurisdiction because the amount in controversy did not exceed $75,000. They
contend that State Farm could not remove the action in reliance on the Homeowners’
claim for bad faith knowing that it would seek summary judgment on that claim.
Under 28 U.S.C. § 1332(a)(1), district courts “have original jurisdiction of all
civil actions where the matter in controversy exceeds the sum or value of $75,000,
exclusive of interest and costs, and is between . . . citizens of different States.” The
Supreme Court has held that “a defendant’s notice of removal need include only a
plausible allegation that the amount in controversy exceeds the jurisdictional
threshold. Evidence establishing the amount is required by [28 U.S.C.]
§ 1446(c)(2)(B) only when the plaintiff contests, or the court questions, the
defendant’s allegation.” Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81,
89 (2014). Furthermore, “jurisdiction is measured at the time of removal.” Pudlowski
v. St. Louis Rams, LLC, 829 F.3d 963, 964 (8th Cir. 2016) (per curiam).

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The Homeowners did not include an amount in controversy in their petition
in state court. State Farm removed the action, explaining in its notice of removal that
it believed the amount in controversy was greater than $75,000. The Homeowners
did not contest the removal. And prior to removal, the Homeowners estimated their
loss at $41,049.79, approximately $35,000 of which was unpaid at that time.
Additionally, under Iowa law, a bad-faith claim can support punitive damages. See
Nassen v. Nat’l States Ins. Co., 494 N.W.2d 231, 238 (Iowa 1992). The Homeowners
specifically sought punitive damages in their complaint.
The Homeowners rely on two of our precedents holding that there was no
jurisdiction because the amount in controversy was inadequate. See Floyd Cnty. Mut.
Ins. Ass’n ex rel. McGregor v. CNH Indus. Am. LLC, 18 F.4th 1024, 1029 (8th Cir.
2021); James Neff Kramper Fam. Farm P’ship v. IBP, Inc., 393 F.3d 828, 834 (8th
Cir. 2005). These cases are inapposite. In Floyd County Mutual Insurance, we held
that there was no subject-matter jurisdiction because the plaintiff had sought
damages that could not be recovered as a matter of law. 18 F.4th at 1029. The claim
itself was not at issue; the question was whether the damages the plaintiff sought
were recoverable under state law. Id. Similarly, in James Neff Kramper, we held that
removal was improper because it was implausible that the damages could be greater
than $75,000 even if the plaintiff proved its claim. 393 F.3d at 831, 834. Both cases
dealt with whether certain damages were recoverable. Neither of these cases suggest
that a defendant who removes a case is precluded from seeking summary judgment
on the merits of a claim that supported the amount in controversy.
“[O]ur jurisdictional inquiry focuses on the claims made at the time of
removal, such that certain subsequent events—for example, the dismissal of one or
more claims or parties—do not divest us of jurisdiction . . . .” Id. at 834. At the time
of removal, the Homeowners’ estimate of $35,000 in unpaid insurance benefits,
combined with the prospect of punitive damages and injunctive relief, demonstrated
that the potential damages at issue exceeded the jurisdictional threshold. Thus, the
district court had jurisdiction.

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C. Breach of Contract
The Homeowners argue that State Farm breached the insurance contract by
making it impossible for them to perform repairs before the two-year deadline and
by failing to timely adjust their losses.
Iowa law applies to this diversity action. See Erie R. Co. v. Tompkins, 304
U.S. 64, 78 (1938). Under Iowa law, to prevail on a breach-of-contract claim, a party
must prove
(1) the existence of a contract; (2) the terms and conditions of the
contract; (3) that it has performed all the terms and conditions required
under the contract; (4) the defendant’s breach of the contract in some
particular way; and (5) that plaintiff has suffered damages as a result of
the breach.
Iowa Arboretum, Inc. v. Iowa 4-H Found., 886 N.W.2d 695, 706 (Iowa 2016)
(quoting Iowa Mortg. Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 111 (Iowa 2013)).
1. The Homeowners’ Failure to Make Repairs Within Two Years
Certain contract terms constitute conditions precedent. One party’s failure to
perform these terms will prevent the other party from having any duty to perform.
See Nat’l Farmers Org., Inc. v. Lias, 271 N.W.2d 751, 754 (Iowa 1978). “A
determination that a condition precedent exists depends not on the particular form
of words used, but upon the intention of the parties gathered from the language of
the entire instrument.” ARDI Exch. v. Valley Nat’l Bank, 493 N.W.2d 862, 864 (Iowa
1992) (quoting Khabbaz v. Swartz, 319 N.W.2d 279, 283 (Iowa 1982)). If an
insurance policy includes a term as a condition precedent to the insurer’s
performance, the insured must prove “(1) substantial compliance with the condition
precedent; (2) the failure to comply was excused or waived; or (3) the failure to
comply was not prejudicial to the insurer.” Am. Guar. & Liab. Ins. Co. v. Chandler
Mfg. Co., 467 N.W.2d 226, 228 (Iowa 1991). “[A] substantial breach of a condition

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precedent which is not excused or waived must be presumed prejudicial to the
insurer.” Id.
Here, the policy expressly stated that State Farm would pay only the ACV
until repairs were completed. The Homeowners have abandoned their argument that
the policy required State Farm to pay them the RCV within 60 days of the appraisal
even absent repairs. Instead, they argue that their failure to make repairs within two
years should have been excused based on substantial compliance, impossibility,
waiver, lack of prejudice to State Farm, and prejudice to themselves.
a. Substantial Compliance
The Homeowners argue that they substantially complied with the conditions
precedent by submitting receipts as they completed repairs. But the policy required
them to both complete repairs within two years and give State Farm notice thereof
within 30 days of completion. They have pointed to no unreimbursed outstanding
receipts that they have submitted. Four months elapsed between the August 10, 2022
deadline to make repairs and the district court’s entry of summary judgment. During
those four months, the record remained open. The Homeowners only submitted one
contract for repairs during that time, a late submission in September. The
Homeowners, however, do not dispute that State Farm paid them a portion of the
RCV based on this late submission. The undisputed facts support the district court’s
conclusion that the Homeowners have not substantially complied with the
requirements for further payment. Because they neither finished the repairs nor
notified State Farm thereof during this four-month period, they cannot show that
they substantially complied with the conditions precedent.
b. Impossibility
The Homeowners argue that State Farm’s delay in making a substantial
payment constituted an anticipatory breach and rendered it impossible for them to

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repair their property by the August deadline.7 They also point to widespread damage
from the derecho, a shortage of contractors, and COVID-19 as contributing to the
impossibility, and they note that the Iowa Insurance Commissioner asked insurers to
extend deadlines to make repairs.
Impossibility of performance excuses “nonperformance generally where that
which has been promised becomes objectively impossible to perform due to no fault
of the nonperforming party.” Nora Springs Coop. Co. v. Brandau, 247 N.W.2d 744,
747 (Iowa 1976). But “ordinarily a contingency which reasonably may have been
anticipated must be provided for by the terms of the contract, or else the impossibility
of performance resulting therefrom does not operate as an excuse.” Id.
The Homeowners rely on Conrad Brothers v. John Deere Insurance Co., in
which the Supreme Court of Iowa noted that “[i]t is widely recognized that a party
may not rely on a condition precedent when by its own conduct it has made
compliance with that condition impossible.” 640 N.W.2d 231, 240 (Iowa 2001)
(internal quotation marks omitted). The Homeowner’s reliance on Conrad Brothers
is misplaced, as that case is distinguishable. In Conrad Brothers, the court held that
the insurer had repudiated the contract by informing an assignee that it would not
pay the replacement cost. Id. at 235, 242. The court noted that “when two parties
differ as to the interpretation of a contract, the mere demand by one party that the
contract be performed according to its interpretation does not . . . constitute
repudiation” unless “accompanied by a clear expression of intent not to perform
under any other interpretation.” Id. at 241–42. Here, State Farm never denied
liability. State Farm disagreed with the Homeowners about the amount due, but State
7 The Homeowners suggest that State Farm shifted its argument between its
original summary judgment motion and its brief in this court. But the Homeowners
raised impossibility in their resistance to State Farm’s motion for summary
judgment, and they were on notice of their burden to produce evidence supporting
that argument in case the district court interpreted the policy in accordance with State
Farm’s understanding. See generally Gannon Int’l, 684 F.3d at 792 (discussing the
burden to produce evidence to resist summary judgment).

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Farm never clearly expressed an intent not to perform if, for example, the
Homeowners invoked the contractual appraisal process. State Farm did not repudiate
the contract.
By the fall of 2020, the Homeowners knew that State Farm disagreed with
their assessment that the roof needed to be replaced. But the Homeowners waited
until August 2021 to initiate the appraisal process, which was not completed until
March 2022.8 At that point, State Farm paid the full ACV. The Homeowners still
had nearly five months to repair their property. They point to a shortage of
contractors, the widespread storm damage, and COVID-19 as factors contributing to
impossibility. But the record does not support a finding that these factors made it
impossible for the Homeowners to complete the repairs by August 2022. The only
evidence the Homeowners submitted on this issue was a bulletin from the Iowa
Insurance Commission prepared in July of 2021. This bulletin may show why repairs
were difficult to make in 2021, but it does not show that it was impossible for the
Homeowners to make repairs in 2022. And in their depositions, the Homeowners
blamed other factors for their inability to make repairs. They did not say that it had
been impossible for them to complete the repairs because of the contractor shortage,
the widespread damage, or COVID-19. The Homeowners have not shown that their
failure to perform the conditions precedent to payment of the RCV should be
excused based on impossibility.
c. Waiver
The Homeowners argue that State Farm waived the two-year deadline by
paying them a portion of the RCV on September 30, 2022—after the August 10
deadline. They contend that State Farm represented to the district court that it was
continuing to review receipts even after the deadline.
8 The Homeowners suggested, in their resistance to summary judgment, that
the delay between their initial appraisal demand and the award was due in part to
settlement negotiations.

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Waiver is “the voluntary or intentional relinquishment of a known right.”
Scheetz v. IMT Ins. Co. (Mut.), 324 N.W.2d 302, 304 (Iowa 1982) (en banc) (quoting
Travelers Indem. Co. v. Fields, 317 N.W.2d 176, 186 (Iowa 1982)). It “can be shown
by the affirmative acts of a party, or . . . inferred from conduct that supports the
conclusion waiver was intended.” Id. Whether a party has waived a contract
provision is generally a question for the trier of fact. Id.
State Farm did not waive the two-year deadline. State Farm explicitly stated
its intention to stand on its contractual rights. Every time State Farm issued a
payment—including when it paid the ACV value in March—it informed the
Homeowners of the impending deadline. State Farm did suggest that it would
consider paying out sums for repairs started or contracted for before the two-year
deadline. It did not suggest, however, that it would pay the Homeowners for repairs
begun after the deadline. The record shows that State Farm made one payment after
the two-year deadline, but that was in response to a contract the Homeowners
submitted that was dated August 1, before the deadline. That documentation was
submitted in September, after the 30-day deadline for notice. In making that
payment, State Farm could arguably have waived the notice deadline. But there is
no indication that State Farm ever waived the two-year repair deadline. It
specifically reserved its rights.
Although waiver is generally a question for the trier of fact, here there is no
evidence showing that State Farm waived the two-year deadline. Thus, there is no
genuine issue of material fact as to waiver.
d. Lack of Prejudice to State Farm
As noted above, Iowa courts will presume that an insurer is prejudiced by an
insured’s “substantial breach of a condition precedent” unless the breach is excused
or waived. Am. Guar. & Liab. Ins., 467 N.W.2d at 228. Because the Homeowners
failed to show that their breach was excused or waived, the district court could
presume that the breach was prejudicial to State Farm, and the Homeowners had the
burden of rebutting that presumption. Simpson v. U.S. Fid. & Guar. Co., 562 N.W.2d

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627, 632 (Iowa 1997). But the Homeowners never argued in the district court that
their failure to make repairs within two years did not prejudice State Farm. And even
if they had, the record does not show that they could have overcome the presumption
of prejudice.
e. Prejudice to the Homeowners
Relatedly, the Homeowners argue that they have been prejudiced by the
district court’s order. But they point to no precedent suggesting that prejudice to the
nonperforming party is an independent ground for excusing performance of a
condition precedent. Furthermore, Iowa contract law recognizes that the purpose of
requiring insureds to complete repairs before collecting RCV funds is to prevent
insureds from profiting from their losses. See Pierce v. Farm Bureau Mut. Ins. Co.,
548 N.W.2d 551, 554 (Iowa 1996). Here, State Farm did not automatically owe the
Homeowners the RCV. The RVC served as a cap on State Farm’s reimbursement
for repairs made by the Homeowners. The Homeowners were not unfairly prejudiced
so as to relieve them from compliance with the two-year deadline.
f. Summary
The Homeowners have not shown that they are entitled to relief from the
condition precedent requiring them to make repairs within two years and to notify
State Farm thereof. Therefore, State Farm did not breach the contract when it
declined to pay the Homeowners the remaining RCV.
2. Failure to Timely Adjust the Loss
The Homeowners also argue that State Farm breached the insurance contract
by failing to timely adjust their loss. As discussed, to prevail on a claim for breach
of contract, the Homeowners must prove that they “suffered damages as a result of
the breach.” Iowa Arboretum, 886 N.W.2d at 706 (internal quotation marks omitted);
see also Seneca Waste Sols., Inc. v. D&K Managing Consultants, LLC, No. 13–1777,
2015 WL 567272, at *9 (Iowa Ct. App. Feb. 11, 2015) (unpublished table decision)
(affirming judgment for the defendant on a breach-of-contract claim when the
plaintiff failed to prove damages). In Iowa, consequential damages are generally not

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recoverable for breach of an insurance contract. Brown Twp. Mut. Ins. Ass’n v. Kress,
330 N.W.2d 291, 298–300 (Iowa 1983). The Iowa Supreme Court has quoted with
approval the statement that
[i]n accordance with the rule that the general measures of damages, in
an action for breach of a contract to pay a sum of money, and in the
absence of special circumstances in the contemplation of the parties at
the time of the making of the contract, is the principal sum agreed to be
paid by the terms of the contract, with legal interest thereon, it has been
held that consequential damages, resulting from the failure or delay of
an insurer in making payments due under an insurance contract are, as
a general proposition, and without regard to any special circumstances
indicating that such damages were within the contemplation of the
parties, not recoverable, limiting recovery for such breach of contract
to the amount due under the policy, with interest.
Id. at 298 (quoting 47 A.L.R.3d 314, 326 (1973)). The Homeowners point out that
Brown Township was decided before Iowa recognized a cause of action for first-
party bad-faith refusal to pay insurance benefits. But we do not think the Iowa
Supreme Court’s later recognition of a cause of action for bad faith expanded the
available damages for ordinary breach of an insurance contract. The Homeowners
also rely on Royal Indemnity Co. v. Factory Mutual Insurance Co., 786 N.W.2d 839
(Iowa 2010), to advance their argument. Royal Indemnity is of limited help to the
Homeowners because that case dealt with damages for breach of a contract “to
provide loss prevention services,” which were “under a separate payment-for-
services contract and fee unrelated to [the insured’s] insurance policy premiums.”
Id. at 842. And in any case, the court in Royal Indemnity decided that the damages
at issue were not recoverable. Id. at 853.
The Homeowners have not shown that, at the time they entered the contract
with State Farm, any special circumstances existed demonstrating that they and State
Farm contemplated additional recoverable damages. See Brown Twp., 330 N.W.2d
at 298. The measure of the Homeowners’ damages for breach of contract would have

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been the amount State Farm owed them under the policy, which State Farm has
already paid.9
The Homeowners have not shown that State Farm breached the contract in a
manner that caused them any compensable damage. Therefore, the district court
correctly granted summary judgment to State Farm on the Homeowner’s claim for
breach of contract.
D. Bad Faith
The Homeowners argue that State Farm is liable for bad faith because it
remotely adjusted their claim, placed the burden on them to adjust the claim, ignored
Iowa’s line-of-sight and sheathing requirements, and unreasonably delayed in
making a proper payment.
To establish a claim for bad faith, the plaintiff must prove that “(1) [the
defendant] had no reasonable basis for denying the plaintiff’s claim . . . and (2) the
defendant knew or had reason to know that its denial or refusal was without
reasonable basis.” Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473
(Iowa 2005). The first element is objective; the second, subjective. Id. “A reasonable
basis exists for denial of policy benefits if the insured’s claim is fairly debatable
either on a matter of fact or law”; that is, “if reasonable minds can differ.” Id. This
is generally a question for the court. Id. “The fact that the insurer’s position is
ultimately found to lack merit is not sufficient by itself to establish the first element
of a bad faith claim.” Id. Instead, the question is “whether evidence existed to justify
denial of the claim.” Id. at 474 (internal quotation marks omitted). A “negligent or
sub-par investigation or evaluation of a claim” will not give rise to liability “if the
insurer in fact has an objectively reasonable basis for denying the claim.” Id.
(internal quotation marks omitted). And an insurer need not “disregard the opinion
of its own expert in favor of the insured’s expert’s opinion.” Luigi’s, Inc. v. United
9 The Homeowners did not raise the issue of interest either here or before the
district court, so we decline to consider whether interest is recoverable after an
insurer pays an appraisal award.

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Fire & Cas. Co., 959 N.W.2d 401, 408 (Iowa 2021) (internal quotation marks
omitted).
The Homeowners take issue with State Farm’s method of evaluating their
claim, specifically its reliance on an out-of-state adjuster who just looked at pictures
and materials submitted by an inspector who physically visited the property. The
Homeowners failed to show that State Farm’s use of Swindoll and two different
inspectors makes State Farm’s process unreasonable. They also have not shown that
Iowa law imposes a duty on insurers to have the same person physically inspect the
property and complete adjustment for the claim.
The Homeowners also argue that State Farm breached the duty of good faith
by burdening them with responsibility for adjusting the claim. We are not persuaded.
State Farm sent an inspector to the property, adjusted the claim, and paid the
Homeowners. The Homeowners then submitted additional materials and obtained a
larger award. State Farm eventually sent a second inspector to the property and
revised the award again. The Homeowners, still dissatisfied, disputed State Farm’s
valuation of their loss through their own contractor. The appraisal process proceeded
as contemplated by the contract. The Homeowners were vindicated when the
appraisal was complete; State Farm was wrong about the value of the loss. However,
State Farm’s lower valuation, without more, does not show bad faith.
Additionally, the Homeowners argue that State Farm improperly ignored
Iowa law. They contend that State Farm committed an “[u]nfair claim settlement
practice[]” by “[c]ompelling insureds to institute litigation to recover amounts due
under an insurance policy by offering substantially less than the amounts ultimately
recovered in actions brought by such insureds.” Iowa Code § 507B.4(3)(j)(7). But
Iowa Code § 507B.4(3)(j) provides that such conduct constitutes an “[u]nfair claim
settlement practice[]” when it is “[c]ommitt[ed] or perform[ed] with such frequency

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as to indicate a general business practice.”10 Thus, Iowa Code § 507B.4(3)(j)(7) does
not require insurers to be invariably correct about the value of losses. And as the
Homeowners concede, Iowa Code § 507B.4 does not create a cause of action, Bates
v. Allied Mut. Ins. Co., 467 N.W.2d 255, 260 (Iowa 1991), though a violation may
be relevant to a bad-faith inquiry, see B&F Jacobson Lumber & Hardware, L.L.P.
v. Acuity, 852 N.W.2d 20, 2014 WL 1714968, at *9 (Iowa Ct. App. Apr. 30, 2014)
(unpublished table decision). Here, though, the Homeowners have not shown that
State Farm violated Iowa Code § 507B.4(3)(j)(7) because they have not shown that
State Farm’s general business practice includes offering less than the value of a
claim.
The Homeowners also contend that State Farm acted in bad faith by failing to
comply with Iowa’s line-of-sight rule. An Iowa regulation states:
When a loss requires replacement of items and the replaced items do
not match in quality, color or size, the insurer shall replace as much of
the item as is necessary to result in a reasonably uniform appearance
within the same line of sight. . . . Exceptions may be made on a case-
by-case basis.
Iowa Admin. Code r. 191-15.44(1)(b) (2024).
The undisputed facts show that State Farm did not disregard this regulation.
Rather, they show that the company found a source for potentially matching siding
10Cf. Thielen v. Aetna Cas. & Sur. Co., 662 N.W.2d 370, 2003 WL 118204, at
*7 (Iowa Ct. App. 2003) (unpublished table decision) (“Even if we assume without
deciding that [Iowa Code § 507B.4(9)] might under certain circumstances create a
private cause of action for bad faith against a workers’ compensation insurer who
fails to timely investigate a claim or to timely notify its insured of a decision to deny
a claim, we would conclude that the district court correctly declined to instruct the
jury as to the existence of such a duty in this case. There is no evidence in this record
that [the insurer] failed to investigate claims or timely deny claims with such
frequency as to constitute a general business practice.”).

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for the Homeowners. And when Pugsley informed State Farm that the source it had
suggested did not have the siding, State Farm found another source for the siding
and sent Pugsley contact information for that source. The record does not show
whether Pugsley ever tried to purchase siding from that source. But State Farm’s
claim notes indicate that on March 1, 2021, Pugsley called and expressed concern
that the siding probably would not match and raised the issue of whether the new
shingles would match. State Farm responded that Pugsley should go ahead and
replace the siding and shingles and then submit photographs of the shingles if they
did not match. Although Pugsley expressed concern that the siding and shingles
would not match, the Homeowners have not shown that they or Pugsley ever
presented State Farm with any evidence that, after inspection, the available siding or
shingles did not match. See Bellville, 702 N.W.2d at 477–78 (“[A]n insurance
company is not obligated to disregard the opinion of its own expert in favor of the
insured’s expert’s opinion. . . . [T]here is no clearly defined duty of investigation on
an insurer; the insurer may require the insured to present adequate proof of loss
before paying the claim.” (cleaned up)). This record fails to show that State Farm
disregarded the line-of-sight regulation. Instead, it shows the company tried to
provide materials that would result in a reasonably uniform appearance.
As for the roof, the claim notes suggest that State Farm believed the new
shingles would match or could be fixed later. The record does not show why Pugsley
thought the new shingles would not match, nor whether he was correct in that belief.
Having performed two inspections and adjusted the claim, State Farm was under no
obligation to accept Pugsley’s opinion that new shingles would not match, in the
absence of additional objective evidence, such as a third-party report, supporting his
opinion. See Bellville, 702 N.W.2d at 477–49 (noting that, once the insurer has a
reasonable basis for denying a claim, the insurer has no further duty to investigate,
and the insured bears the burden of proving entitlement to compensation). State
Farm had a reasonable basis for its decision not to replace all the shingles.
The Homeowners, through Pugsley, also brought to State Farm’s attention a
provision of the 2018 International Residential Code (IRC) providing that “[a]sphalt

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shingles shall be fastened to solidly sheathed decks.” 2018 IRC § R905.2.1. The
2018 IRC has been adopted by the City of Cedar Rapids. Cedar Rapids, Iowa, Code
§ 33.01 (2019). It applies to both new construction and repairs. 2018 IRC § R101.2.
Does the IRC require replacement of all nonconforming parts of a roof when
replacing damaged shingles? No, it does not. The IRC provides that “[a]dditions,
alterations or repairs to any structure shall conform to the requirements for a new
structure without requiring the existing structure to comply with the requirements of
this code, unless otherwise stated.” Id. § R102.7.1 (emphasis omitted).
In a similar case, the Fifth Circuit held that the 2000 IRC did not require a
homeowner to replace undamaged spaced decking with solid sheathing when
repairing his roof after a storm. Toney v. State Farm Lloyds, 661 F. App’x 287, 292
(5th Cir. 2016) (unpublished per curiam). In Toney, a building inspector had initially
issued a letter stating that spaced decking did not satisfy the 2000 IRC but had later
clarified that undamaged decking did not need to be replaced. Id. at 288–89. The
2000 IRC incorporated an explicit statement that “[p]ortions of the structure not
altered and not affected by the alteration are not required to comply with the code
requirements for a new structure.” Id. at 291–92 (alteration in original) (quoting
2000 Int’l Bldg. Code § 3402.1). In holding that the 2000 IRC did not require
replacement of the undamaged decking, the Fifth Circuit also noted that the
provisions requiring repairs to conform to the Code “only require that the materials
actually used and repairs actually undertaken conform to the requirements for newly
constructed dwellings.” Id. at 292.
Here, State Farm could have reasonably believed that the 2018 IRC did not
require replacement of the roof’s decking. The 2018 IRC specifically allows repairs
without updates to “the existing structure,” 2018 IRC § R102.7.1, and State Farm
could have reasonably concluded that the existing decking was part of the existing
structure. The email from the building inspector does not change this result, as it
does not state that the entire roof would need to be replaced to remedy the spaced
decking beneath the damaged shingles.

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Finally, State Farm did not breach the duty of good faith by unreasonably
delaying payment. As of December 2020, State Farm believed it had paid the
Homeowners the full ACV. Although State Farm was wrong, as established by the
appraisal, it had a reasonable basis for this belief—the inspections of two field
adjustors and the estimates of Swindoll. Furthermore, as noted above, the
Homeowners knew about the dispute in the fall of 2020 but did not seek an appraisal
until August of 2021. The year-and-a-half that elapsed between the derecho and the
ACV payment shows that a genuine dispute about valuation of the loss caused much
of the delay.
Because State Farm had a reasonable basis for its evaluation of the claim,
State Farm is not liable for bad faith, and we decline to consider the subjective
element of the bad-faith inquiry.
III. Conclusion
State Farm underestimated the Homeowners’ loss. But it was not required to
reimburse them for repairs unless those repairs were made within two years of the
loss, nor is it liable for breach of contract or bad faith. Therefore, we affirm.
______________________________

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