Mesco Manufacturing, LLC v. Motorists Mutual Insurance Company

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 24-1307
M ESCO M ANUFACTURING, LLC,
Plaintiff-Appellee,
v.
M OTORISTS M UTUAL I NSURANCE C OMPANY ,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:19-cv-04875 — James P. Hanlon, Judge.
____________________
A RGUED DECEMBER 12, 2024 — DECIDED J ULY 25, 2025
____________________
Before R IPPLE, S CUDDER , and M ALDONADO, Circuit Judges.
R IPPLE, Circuit Judge. Mesco Manufacturing, LLC
(“Mesco”) filed this action in the United States District Court
for the Southern District of Indiana1 against Motorists Mutual
Insurance Company (“Motorists Mutual”), alleging that Mo-
torists Mutual breached their contract for business insurance
1 The district court’s diversity jurisdiction was predicated on 28 U.S.C.
§ 1332.

-- 1 of 13 --

2 No. 24-1307
in violation of Indiana state law. The district court granted
Mesco’s motion for summary judgment. Motorists Mutual
now appeals that determination.2 For the reasons set forth in
this opinion, we affirm the judgment of the district court.
I
BACKGROUND
A.
Mesco held a business insurance policy from Motorists
Mutual that was effective from September 13, 2017 to Septem-
ber 13, 2018. The policy covered “direct physical loss of or
damage to” the covered property “caused by or resulting
from any Covered Cause of Loss.”3 Under the policy’s terms,
hail was a covered cause of loss but wear and tear was not.
After a storm on August 25, 2018, Mesco submitted a claim
for hail damage to the roofs of its manufacturing facilities in
Greensburg, Indiana. These roofs were made of sheet metal,
modified bitumen, and ethylene propylene diene terpolymer
(“EPDM”). Motorists Mutual initially adjusted the claim for
$7,806.75, but Mesco disagreed with the award and invoked
the policy’s appraisal provision:
If we and you disagree on the value of the prop-
erty or 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. The two appraisers
will select an umpire. If they cannot agree, ei-
ther may request that selection be made by a
2 Our jurisdiction is secure under 28 U.S.C. § 1291.
3 R.54-3 at 34.

-- 2 of 13 --

No. 24-1307 3
judge of a court having jurisdiction. The ap-
praisers will state separately the value of the
property and 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. … If there is an appraisal, we will still
retain our right to deny the claim.4
Pursuant to the appraisal provision, Mesco and Motorists
Mutual chose Nick Banks and Geoff Young as their respective
appraisers. The appraisers agreed that the metal roofing was
hail damaged but disagreed on whether the EPDM and mod-
ified bitumen roofs were hail damaged. They therefore se-
lected Bart Myers to serve as umpire. Before Umpire Myers
could resolve the dispute, however, Motorists Mutual re-
tained an engineer to inspect Mesco’s property. The engineer
determined that the modified bitumen and EPDM roofs were
not hail damaged. In light of the engineer’s determination,
Motorists Mutual notified Mesco that those roofs “cannot be
included in the appraisal process as the disagreement is not
of the value of the roof coverings; rather if the roof coverings
are damaged.”5
Umpire Myers nevertheless proceeded with his inspection
and concluded that the modified bitumen roofs were hail
damaged, but that the EPDM roofs were not. He and Ap-
praiser Banks signed an appraisal award for $1,020,490.32 in
replacement cost value, or $894,733.82 in actual cash value.
Motorists Mutual did not issue the full award, however; it is-
sued only $265,296.21 for “the covered damages that were
4 Id. at 43.
5 R.61-6 at 2.

-- 3 of 13 --

4 No. 24-1307
awarded by appraisal,”6 which excluded damage to the mod-
ified bitumen and EPDM roofs. On November 5, 2019, Mesco
submitted a sworn proof of loss statement for the entire ap-
praisal award, to which Motorists Mutual did not respond.
B.
On December 10, 2019, Mesco filed a complaint in the dis-
trict court alleging that, under Indiana law, Motorists Mutual
had breached their contract and acted in bad faith.7 Mesco
also sought a declaratory judgment that Motorists Mutual
owed the entire appraisal award. The parties filed cross-mo-
tions for summary judgment on the breach of contract claim.
The district court granted Mesco’s motion for summary
judgment. In the court’s view, the “right to deny” clause of
the appraisal provision did not give Motorists Mutual the
“unrestricted right to deny” Mesco’s claim.8 The court relied
primarily on Villas at Winding Ridge v. State Farm Fire & Casu-
alty Co., 942 F.3d 824 (7th Cir. 2019), where we determined
that a “substantively identical appraisal provision” was
“binding and unambiguous.”9 The district court further ex-
plained that if Villas did not control, it would reach the same
conclusion under Indiana law, which refrains from constru-
ing contract terms in a way that renders them redundant. The
6 R.61-7 at 2.
7 Later in the proceedings, the parties voluntarily dismissed with preju-
dice the bad faith claim.
8 Mesco Mfg., LLC v. Motorists Mut. Ins. Co., No. 19-cv-04875, 2023 WL
403974, at *4 (S.D. Ind. Jan. 25, 2023).
9 Id. (citing Villas at Winding Ridge v. State Farm Fire & Cas. Co., 942 F.3d
824, 828, 830–31 (7th Cir. 2019)).

-- 4 of 13 --

No. 24-1307 5
court concluded that because Mesco had complied with all
policy terms in submitting its sworn proof of loss and no ex-
ceptional circumstances justified setting aside the appraisal
award, Motorists Mutual had breached the insurance contract
by not paying the full award. The district court later denied
Motorists Mutual’s motion for reconsideration. Motorists
Mutual timely appealed.
II
DISCUSSION
A.
We review the district court’s grant of summary judgment
de novo. Jones v. Lamb, 124 F.4th 463, 467 (7th Cir. 2024). Sum-
mary judgment is appropriate if “there is no genuine dispute
as to any material fact” and the moving party “is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). “As this
case involved cross-motions for summary judgment, our re-
view of the record requires that we construe all inferences in
favor of the party against whom the motion under considera-
tion was made.” Emps. Mut. Cas. Co. v. Skoutaris, 453 F.3d 915,
923 (7th Cir. 2006).10 Accordingly, we review the record in the
light most favorable to Motorists Mutual and draw all reason-
able inferences in its favor.
The parties agree that Indiana law applies to the present
case. Therefore, “our role is to apply Indiana law as we pre-
dict the Indiana Supreme Court would today.” AXIS Ins. Co.
v. American Specialty Ins. & Risk Servs., 111 F.4th 825, 830 (7th
Cir. 2024). Under Indiana law, unambiguous insurance policy
10 Accord Accident Fund Ins. Co. of America v. Custom Mech. Constr., Inc.,
49 F.4th 1100, 1105 (7th Cir. 2022).

-- 5 of 13 --

6 No. 24-1307
language is given “its plain and ordinary meaning.” Ebert v.
Illinois Cas. Co., 188 N.E.3d 858, 864 (Ind. 2022). Ambiguous
insurance policies, in contrast, “are construed strictly against
the insurer,” especially “where the language in question pur-
ports to exclude coverage.” State Farm Mut. Auto. Ins. Co. v.
Jakubowicz, 56 N.E.3d 617, 619 (Ind. 2016). Moreover, “when
construing the language of an insurance policy, a court
‘should construe the language … so as not to render any
words, phrases or terms ineffective or meaningless.’” Id.
(quoting Wert v. Meridian Sec. Ins. Co., 997 N.E.2d 1167, 1170
(Ind. Ct. App. 2013)).
B.
Under Indiana law, when parties voluntarily submit to an
appraisal, they are bound by the appraisal award absent ex-
ceptional circumstances such as manifest injustice, fraud, col-
lusion, or misfeasance. See FDL, Inc. v. Cincinnati Ins. Co., 135
F.3d 503, 505 (7th Cir. 1998).11 First, Motorists Mutual submits
that the appraisal award is not binding because Umpire My-
ers exceeded the proper scope of an appraisal. Second, Motor-
ists Mutual maintains that it properly exercised its right to
deny coverage after the appraisal. We will address each issue
in turn.
11 See also Villas, 942 F.3d at 830; Atlas Constr. Co., Inc. v. Indiana Ins. Co.,
Inc., 309 N.E.2d 810, 813 (Ind. Ct. App. 1974) (“Generally, a court will not
interfere with an appraisal award but, to the contrary, will indulge in
every reasonable presumption to sustain it in the absence of fraud, mis-
take, or misfeasance.” (quoting Lakewood Mfg. Co. v. Home Ins. Co. of New
York, 422 F.2d 796, 798 (6th Cir. 1970))).

-- 6 of 13 --

No. 24-1307 7
1.
Motorists Mutual submits that pursuant to Indiana law,
an appraisal may only determine the amount of loss, “without
regard to liability or causation.”12 Motorists Mutual is correct
that an appraiser may not decide an issue of liability because
that issue is a legal question reserved for the courts. See Atlas
Constr. Co., Inc. v. Indiana Ins. Co., Inc., 309 N.E.2d 810, 813
(Ind. Ct. App. 1974) (“In matters of strict appraisal, as here, it
is only the amount of the loss which is fixed. Other possible
issues such as liability are not determined.”).13 However,
whether a roof is hail damaged is a separate question from
whether hail damage or the replacement thereto is covered
under a policy. And, importantly, the Indiana courts have not
addressed squarely whether appraisers may consider the sep-
arate issue of causation. See Shifrin v. Liberty Mut. Ins., 991
F. Supp. 2d 1022, 1037 (S.D. Ind. 2014) (collecting cases). Mo-
torists Mutual would have us read into Atlas Construction Co.,
Inc., v. Indiana Insurance Co., Inc., 309 N.E.2d 810 (Ind. Ct. App.
1974) a pronouncement that appraisers may not consider cau-
sation. We are not persuaded, however, because in Atlas, the
covered property was completely destroyed by fire. Id. at 812.
Therefore, the appraiser did not have to attribute the damage
to different causes.
Motorists Mutual also invites our attention to Shifrin v. Lib-
erty Mutual Insurance, 991 F. Supp. 2d 1022 (S.D. Ind. 2014), in
12 Appellant’s Br. 13.
13 See also 15 Jordan R. Plitt et al., Couch on Insurance § 212:13 (3d ed. 2024)
(“Under a typical appraisal clause, the only issue to be determined by the
appraiser is the amount of the loss. Consequently, questions concerning
policy defenses or coverages are not to be addressed by the appraisers.”).

-- 7 of 13 --

8 No. 24-1307
support of its contention. In Shifrin, the district court held that
the insurer could invoke the policy’s appraisal provision even
though issues of causation remained. See id. at 1038. In doing
so, the court quoted from an Iowa district court opinion stat-
ing that most courts hold “that the appraisers should stick to
dollar amounts and stay away from making findings about
causation or coverage.” Id. (quoting Mapleton Processing, Inc.
v. Soc’y Ins. Co., No. C12-4083, 2013 WL 3467190, at *22 (N.D.
Iowa July 10, 2013)).14 But the central issue in Shifrin was the
availability, as opposed to the scope, of an appraisal. We are
not convinced by this dictum. Moreover, the Shifrin court rec-
ognized later in its opinion that “[a]ppraisal can be a useful
tool … even where issues of causation may necessarily mix in
with issues of loss.” Id.
Like the district court, we instead find Villas to be most in-
structive. In that case, the parties disputed the extent of hail
damage to the insured’s roofs. See Villas, 942 F.3d at 828. The
insured’s appraiser believed that the shingles on thirteen
roofs needed to be entirely replaced. Id. at 828–29. Unable to
agree on an estimate, the parties’ appraisers chose an umpire,
whose proposed award included a “20% repair allowance for
roofing shingles on 13 buildings.” Id. at 829. Because the re-
placement shingles would not match the existing shingles, the
insured asked the umpire to modify his award to fully replace
thirteen roofs. Id. The umpire declined, noting that he was to
consider the “presence of damage to the shingles,” not
“matching issues [that] are in the realm of policy coverage
14 The Iowa Supreme Court has since held that appraisers may decide cau-
sation when determining the amount of loss. See Walnut Creek Townhome
Ass’n v. Depositors Ins. Co., 913 N.W.2d 80, 91 (Iowa 2018) (“[W]e conclude
factual causation issues may be decided through the appraisal process.”).

-- 8 of 13 --

No. 24-1307 9
issues which are not a part of this appraisal process.” Id. We
affirmed the district court’s grant of summary judgment to
the insurer. We held that it was proper for the umpire to de-
cide the amount of hail damage to the roofs. See id. at 831. In
doing so, he did not “mistakenly determine[] the scope of the
loss.” Id. Instead, he “resolved the dispute that the parties pre-
sented to him: namely, the amount of hail damage to the roof-
ing shingles on 13 buildings.” Id. Nor did the coverage dis-
pute regarding matching shingles—with which the umpire
properly declined to get involved—negate the appraisal
award. See id.
As it was proper in Villas for the umpire to decide the
amount of hail damage to the roofs, it was proper for Umpire
Myers to decide the amount of hail damage to Mesco’s roofs.15
We reach this conclusion because the existence and extent of
hail damage are factual questions that can be resolved by an
umpire. To issue his appraisal award, an umpire necessarily
must differentiate between damage that is caused by ordinary
wear and tear and damage that is caused by hail. See Phila.
15 Motorists Mutual’s attempts to distinguish Villas are unpersuasive,
though Villas does differ factually from the present case in a few immate-
rial respects. First, the Villas insurer was satisfied with the appraisal
award, which found minimal hail damage, and paid it in full. 942 F.3d at
829. In contrast, Motorists Mutual was dissatisfied with the appraisal
award, which found extensive hail damage, and paid only a portion of it.
Regardless, the parties to both cases contested the cause of the damage
that prompted the appraisals. Second, in Villas, the insured expanded the
scope of its lawsuit, seeking to hold the insurer responsible for replacing
the shingles on all its buildings, instead of just the thirteen that were the
focus of the appraisal. See id. at 829–31. The consistency with which Mo-
torists Mutual has asserted that only the metal roofing was hail damaged
does not render this assertion true, nor does it overcome the binding ap-
praisal award to the contrary.

-- 9 of 13 --

10 No. 24-1307
Indem. Ins. Co. v. WE Pebble Point, 44 F. Supp. 3d 813, 818 (S.D.
Ind. 2014) (“[I]t would be extraordinarily difficult, if not im-
possible, 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.”).16
Our holding aligns us with the growing number of courts,
both state and federal, that have permitted appraisers to de-
cide causation.17 We also preserve the appraisal provision’s
16 See also TMM Invs., Ltd. v. Ohio Cas. Ins. Co., 730 F.3d 466, 474 (5th Cir.
2013) (“[A]ppraisal panels are within their rights when they consider
whether damage was caused by a particular event or was instead the re-
sult of non-covered pre-existing perils like wear and tear.”); 15 Couch on
Insurance § 210:42 n.1 (“An appraisal necessarily includes some causation
element, because setting the amount of loss requires appraisers to decide
between damages for which insurance coverage is claimed from damages
caused by everything else.”).
17 See, e.g., TMM Invs., 730 F.3d at 474–75; BonBeck Parker, LLC v. Travelers
Indem. Co. of America, 14 F.4th 1169, 1181 (10th Cir. 2021) (concluding that
an appraisal panel could decide the cause of loss); CIGNA Ins. Co. v. Didi-
moi Prop. Holdings, N.V., 110 F. Supp. 2d 259, 264 (D. Del. 2000) (“[I]n the
insurance context, an appraiser’s assessment of the ‘amount of loss’ nec-
essarily includes a determination of the cause of the loss, as well as the
amount it would cost to repair that which was lost.”); Quade v. Secura Ins.,
814 N.W.2d 703, 704 (Minn. 2012) (“[T]he phrase ‘amount of loss,’ as it
relates to the authority of the appraiser under the policy, unambiguously
permits the appraiser to determine the cause of the loss.”); State Farm
Lloyds v. Johnson, 290 S.W.3d 886, 893 (Tex. 2009) (“Any appraisal neces-
sarily includes some causation element, because setting the ‘amount of
loss’ requires appraisers to decide between damages for which coverage
is claimed from damages caused by everything else.”). See generally Ashley
Smith, Comment, Property Insurance Appraisal: Is Determining Causation Es-
sential to Evaluating the Amount of Loss?, 2012 J. Disp. Resol. 591, 599.

-- 10 of 13 --

No. 24-1307 11
purpose, which Motorists Mutual agrees is to “serve[] as an
inexpensive and speedy means of settling disputes,”18 by de-
clining to substitute our judgment for that of the appraisers.
See Atlas, 309 N.E.2d at 813 (“When, however, the award is
uninfected with such unfairness or injustice, it is not to be set
aside and replaced by the subjective judgment of a reviewing
court.”).19
To conclude, decisions of causation are bound up with the
appraisal process. Therefore, Umpire Myers was acting
within his authority when he attributed the roof damage to
hail, as opposed to ordinary wear and tear, and signed a bind-
ing appraisal award based on his determination.
2.
Motorists Mutual next maintains that the “right to deny”
clause in the appraisal provision permits it to deny Mesco’s
claim.20 But “under Atlas, a party who voluntarily submits to
appraisal to determine the amount due under a[n] … insur-
ance policy is bound by the appraisal award, absent excep-
tional circumstances” or another policy provision that justi-
fies denying the claim. FDL, Inc., 135 F.3d at 505.21 Motorists
18 Appellant’s Br. 15 (quoting Shifrin v. Liberty Mut. Ins., 991 F. Supp. 2d
1022, 1038 (S.D. Ind. 2014)).
19 See also 16 John J. Dvorske et al., Indiana Law Encyclopedia § 192 (2025)
(“Generally, a court will not interfere with an appraisal award but, to the
contrary, will indulge in every reasonable presumption to sustain it in the
absence of fraud, mistake, or misfeasance.”).
20 The provision reads, “If there is an appraisal, we will still retain our
right to deny the claim.” R.54-3 at 43.
21 See also Jupiter Aluminum Corp. v. Home Ins. Co., 225 F.3d 868, 875 (7th
Cir. 2000) (“Under Indiana law, an appraisal is binding unless it can be

-- 11 of 13 --

12 No. 24-1307
Mutual has not alleged any exceptional circumstances such as
fraud, collusion, or manifest injustice that would justify set-
ting aside the appraisal award. See id.; Villas, 942 F.3d at 828,
831 (declining to set aside an appraisal award, even when the
appraisal provision contained a “right to deny” clause, be-
cause the insured had “not identified any exceptional circum-
stances … that would warrant setting this award aside”). Nor
has it raised a defense unrelated to causation that would have
warranted its partial denial of Mesco’s claim. See, e.g.,
Skoutaris, 453 F.3d at 925 (declining to hold an insurer to the
appraisal where the insured failed to submit to an examina-
tion under oath, as required by another policy provision).22
Instead, Motorists Mutual would have us interpret the “right
to deny” clause as permitting an insurer to set aside any bind-
ing appraisal award with which it disagrees. Doing so would
undercut not only the policy’s plain language, which empha-
sizes that “[a] decision agreed to by any two will be bind-
ing,”23 but also the purpose of the appraisal process. See FDL,
Inc., 135 F.3d at 505. Motorists Mutual breached the insurance
contract by declining to pay the full appraisal award. It cannot
shown that the appraisal is infected with unfairness or injustice.”); 15
Couch on Insurance § 213.3 (“[A] party to an … appraisal agreement cannot
refuse to be bound by the award merely because he or she disagrees with
the … appraiser’s judgment.”); Emps. Mut. Cas. Co. v. Skoutaris, 453 F.3d
915, 924–25 (7th Cir. 2006).
22 See also BonBeck, 14 F.4th at 1180 (“After the appraisal, Travelers can’t
rehash that finding, but it can deny the claim for a host of other reasons
having nothing to do with the cause of the damage.”).
23 R.54-3 at 43.

-- 12 of 13 --

No. 24-1307 13
escape the ramifications of its breach by exercising its “right
to deny” Mesco’s valid claim.24
Conclusion
The judgment of the district court is affirmed.
AFFIRMED
24 Id.

-- 13 of 13 --