Margrit Meier , doing business as HARTLAND INN v. Wadena Insurance Company

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 23-2282 and 23-2354
M ARGRIT M EIER , doing business as HARTLAND I NN ,
Plaintiff-Appellant, Cross-Appellee,
v.
W ADENA I NSURANCE C OMPANY ,
Defendant-Appellee, Cross-Appellant.
____________________
Appeals from the United States District Court for the
Eastern District of Wisconsin.
No. 2:23-cv-00158-BHL — Brett H. Ludwig, Judge.
____________________
A RGUED F EBRUARY 8, 2024 — DECIDED M ARCH 8, 2024
____________________
Before EASTERBROOK, S CUDDER , and S T. EVE, Circuit Judges.
S CUDDER , Circuit Judge. Margrit Meier appeals the district
court’s dismissal of state law claims against Wadena Insur-
ance Company arising out of coverage requests following a
fire that destroyed her restaurant in Hartland, Wisconsin. In-
terpreting the terms of the commercial property insurance
policy, the district court held Meier to her choice and agree-
ment to resolve a portion of the coverage dispute through an
appraisal process resembling arbitration. From there the

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2 Nos. 23-2282 & 23-2354
district court saw nothing problematic about the appraisal
process or its outcome. We agree and affirm.
I
A
After a fire caused extensive damage to the Hartland Inn
in June 2019, the owner of the building, Margrit Meier, sub-
mitted a coverage request to Wadena Insurance Company.
The parties begin from the common point of agreement that
the policy entitled Meier to the “actual cash value” of the
Hartland Inn at the time of the fire, subject to the policy’s
overall coverage limit of approximately $1.1 million. But the
policy does not define “actual cash value,” and the parties dis-
agree about how to calculate it.
Wadena first paid Meier $775,000 on her claim. The com-
pany explained in a letter that in accordance with Wisconsin
law, it had calculated actual cash value using a method called
the “Broad Evidence Rule,” which, as its name implies, per-
mits an insurer to consider a variety of relevant evidence in
estimating the value of the covered property at the time of the
loss. See Doelger & Kirsten, Inc. v. Nat’l Union Fire Ins. Co., 167
N.W.2d 198, 200 (Wis. 1969) (describing the Broad Evidence
Rule as “giv[ing] to the trial forum the right to consider in a
given case all facts reasonably tending to throw light upon the
subject”). Wadena averaged the “assessed value, sales ap-
proach value, cost approach value[,] and actual cost value” to
produce the actual cash value estimate for the Hartland Inn.
Displeased by her recovery, Meier hired a third-party ad-
juster to provide its own estimate. Meier’s adjuster concluded
that the actual cash value of the building exceeded the insur-
ance limit of $1.1 million. Upon learning of this estimate,

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Nos. 23-2282 & 23-2354 3
Wadena increased its own estimate of Meier’s covered loss
and paid her an additional $60,135.79, resulting in a total pol-
icy coverage of $845,135.79.
Still unsatisfied, Meier invoked the policy’s panel ap-
praisal option:
If we and you disagree on the amount of loss,
either may make written demand for an ap-
praisal 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, either may request that selection
be made by a judge of a court having jurisdic-
tion. The appraisers will state separately the
amount of loss. If they fail to agree, they will
submit their differences to the umpire. A deci-
sion agreed to by any two will be binding.
After the parties proposed their respective appraisers,
Meier attempted to short-circuit the appraisal process by fil-
ing suit in federal court in Milwaukee. See Meier v. Wadena Ins.
Co., 2021 WL 3679614 (E.D. Wis. Aug. 19, 2021). The district
court dismissed the action, pointing to Meier’s prior choice to
resolve the coverage dispute outside of court and ordering
her to complete the appraisal proceeding before a neutral um-
pire. See id. at *2.
The appraisal process culminated in the umpire arriving
at an independent estimate of the building’s actual cash value.
Applying the Broad Evidence Rule, the umpire computed the
recovery amount by averaging a market valuation, cost ap-
proach valuation, tax assessment, the Wadena appraiser’s
valuation, a repair estimate by Meier’s appraiser, and a

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second repair estimate to reach an actual cash value of
$939,136.58. Wadena’s appraiser agreed with that estimate—
making the amount “binding”—so the insurer increased its
coverage payment to match the umpire’s determination.
Meier then filed a second lawsuit in Wisconsin state court,
naming both Wadena and the umpire as defendants. She al-
leged breach of contract and bad faith and sought to set aside
the appraisal award as invalid under state law. After the Wis-
consin court dismissed the umpire, Wadena invoked federal
diversity jurisdiction and removed the action to the Eastern
District of Wisconsin. See 28 U.S.C. §§ 1332(a), 1441(b).
B
Wadena moved to dismiss, contending that Meier’s claims
failed because she had agreed to resolve the coverage dispute
through the appraisal process. The district court agreed and
dismissed the action, observing that Wadena “did precisely
what it undertook to do”: it complied with the alternative dis-
pute resolution process and paid out the binding award. From
there the district court added that nothing in either Wisconsin
law or the policy prohibited use of the Broad Evidence Rule
to determine the actual cash value of the Hartland Inn. The
district court later denied Wadena’s motion for sanctions un-
der Federal Rule of Civil Procedure 11, rejecting the com-
pany’s argument that Meier’s state law claims were frivolous.
Meier now appeals the dismissal of her breach of contract
and other state law claims, and Wadena cross-appeals the de-
nial of its motion for sanctions.

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Nos. 23-2282 & 23-2354 5
II
A
Wisconsin public policy favors freedom of contract—the
idea “that individuals should have the power to govern their
own affairs without governmental interference.” Merten v.
Nathan, 321 N.W.2d 173, 177 (Wis. 1982). To protect this free-
dom, courts aim to “ensur[e] that promises will be per-
formed,” thereby preserving “justifiable expectations and the
security of transactions.” Id. The contracting parties are “re-
sponsible for evaluating the obligations [they] take[] on be-
fore entering into [an] agreement.” Farmers Auto. Ins. Ass’n v.
Union Pac. Ry. Co., 768 N.W.2d 596, 606 (Wis. 2009).
The Wisconsin Supreme Court has emphasized that when
parties to an insurance policy agree to use an appraisal pro-
cess as a means of alternative dispute resolution, Wisconsin
law backs that choice. See id. at 607. Indeed, “[t]he obvious
point of contracting for an appraisal process is to keep a jury
or court out of that decision.” Id. Appraisals “promote final-
ity, 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 that question.” Id. The Wis-
consin Supreme Court has explained that for these reasons
appraisal awards should be treated as “presumptively valid.”
Id.
An award may be set aside under limited circumstances—
“upon the showing of fraud, bad faith, a material mistake, or
a lack of understanding or completion of the contractually as-
signed task.” Id. (citing Dechant v. Globe & Rutgers Fire Ins. Co.,
217 N.W. 322, 322 (Wis. 1928)). Regarding the last exception,
the Wisconsin Supreme Court has cautioned that “[t]he

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6 Nos. 23-2282 & 23-2354
court’s role is not to determine whether the third party ex-
perts accurately valued the item (as if the court itself could do
[a] better job), but whether the third party experts understood
and carried out the contractually assigned task.” Id. at 607.
B
Meier insists that the appraisal award is invalid because
the umpire did not understand the contractually assigned
task to calculate the actual cash value of the Hartland Inn. We
take her argument to be that the policy prohibited the appli-
cation of the Broad Evidence Rule to calculate actual cash
value—that the term “actual cash value” as understood in its
“common and ordinary” sense prohibits use of the Rule when
the policy leaves the term undefined. See Danbeck v. Am. Fam-
ily Mut. Ins. Co., 629 N.W.2d 150, 153 (Wis. 2001) (stating the
foundational principle that “[t]he words of an insurance pol-
icy are given their common and ordinary meaning”).
That cannot be right. The Wisconsin Supreme Court has
(at least) twice reached the opposite conclusion, explaining
that an insurer may use the Broad Evidence Rule to calculate
actual cash value when the insurance contract does not define
the term. See Doelger, 167 N.W.2d at 199–200 (identifying the
Broad Evidence Rule as “consistently” applied in determining
“actual cash value” in fire insurance cases); see also Engh v.
Calvert Fire Ins. Co., 63 N.W.2d 831, 834 (Wis. 1954) (allowing
any competent evidence as to the value of a salvaged car for
purposes of calculating “actual cash value”).
Undeterred by the Wisconsin Supreme Court’s endorse-
ments of the Broad Evidence Rule in Doelger and Engh, Meier
urges us to wade into Wisconsin insurance law and the nu-
ances of the Rule. She invokes Coppins v. Allstate Indemnity Co.,

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Nos. 23-2282 & 23-2354 7
857 N.W.2d 896 (Wis. Ct. App. 2014), for the proposition that
Wisconsin law altogether prohibits application of the Rule
where, as here, the policy does not define the term “actual
cash value.” We decline the invitation.
As the district court explained, Coppins did not declare use
of the Broad Evidence Rule unlawful in calculating “actual
cash value” under any and all such policies. The Coppins court
held more narrowly that appraisers must use a logical, pre-
dictable methodology to calculate “actual cash value” con-
sistent with both the language of the underlying policy and
“commonly-accepted definitions” of the term. See id. at 905;
see also Doelger, 167 N.W.2d at 200 (listing “opinions upon
value given by qualified witnesses” as an acceptable category
of evidence under the Broad Evidence Rule (quoting McAnar-
ney v. Newark Fire Ins. Co., 159 N.E. 902, 905 (N.Y. 1928))). The
appraisers in Coppins misapplied the Rule in an attempt to
disguise a “free-for-all” approach to calculating actual cash
value, in the process disregarding policy terms suggesting
that actual cash value would be determined as “replacement
cost less depreciation.” See 875 N.W.2d at 905.
Meier overreads Coppins. Rather than invoking the case to
explain how the umpire’s application of the Broad Evidence
Rule was incoherent or violated the specific terms of her pol-
icy, she contends that Coppins altogether prohibited the um-
pire from using the Rule. But Coppins, in short, was a case
about the manner in which the appraisers applied the Broad
Evidence Rule under the terms of a specific policy that dif-
fered in material ways from the policy here. Coppins was not
a case that disturbed the Wisconsin Supreme Court’s prior
holding in Doelger approving use of the Rule generally.

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8 Nos. 23-2282 & 23-2354
Our role as a federal court is to decide the case before us
and not to sort out uncertainties about applications of the
Broad Evidence Rule at the margins. That work remains en-
trusted to Wisconsin courts, including the state’s Supreme
Court. It is enough for us to conclude that Wadena complied
with a dispute resolution process that resulted in the payment
of a valid and binding award.
C
We can make short work of Meier’s breach of contract
claim. She seems to argue that Wadena breached the policy
by paying a coverage amount based on a contractually pro-
hibited method—the Broad Evidence Rule. But we have ex-
plained why that view is a non-starter. The rest is simple. The
parties agreed that in the event of a dispute about the actual
cash value of the building, either party could invoke panel ap-
praisal as a means of resolving the coverage dispute. Indeed,
Meier herself invoked that clause, and the appraisal pro-
ceeded accordingly, with Wadena paying out a final binding
award equal to approximately 85% of the coverage limit.
There was neither breach of contract nor bad faith here.
D
Finally, we affirm the district court’s denial of Wadena’s
motion for sanctions under Federal Rule of Civil Procedure
11. Meier’s challenge to the appraisal award may have been a
long shot, anchored as it was in a stretched reading of the Wis-
consin Court of Appeals’s decision in Coppins. But litigation
long shots and frivolous claims are not the same. We see no
abuse of discretion in the district court’s preference for closing
the book on this litigation without an accompanying imposi-
tion of sanctions.

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Nos. 23-2282 & 23-2354 9
For these reasons, we AFFIRM.

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