Homeowners insurance

Is your Homeowners Insurance Refusing to Pay for New Roofing or Siding Material?

Is there a Minnesota law requiring insurance companies to “match” your shingles or siding in an insurance claim?

Sometime protection companies insist on only changing a portion of a roof or siding, particularly the area that has direct physical damage. This may be one slope of a roof or one side of a house. Is there a Minnesota law requiring insurance companies to match existing material?

Minnesota statutory or legislative law address this issue in this manner:

(8) except where limited by policy provisions, settling or offering to settle a claim or part of a claim with an insured under replacement value provisions for less than the sum necessary to replace the damaged item with one of like kind and quality, including all applicable taxes, license, and transfer fees;   72A.201 REGULATION OF CLAIMS PRACTICES Subd. 5.Standards for fair settlement offers and agreements. (bold emphasis added by Daryl)

I am not aware of any other statutory law requiring insurance companies to match existing material.

I added bold emphasis to the above statutory law to emphasize some key component that have been litigated and thereby establishing case law in Minnesota. Other states may have similar statutory law and resultant case law but I typically provide Public Adjuster services in Minnesota, therefore this post addresses only Minnesota law.

“excluding where limited by policy provisions”. What does this mean? Insurance companies are starting to add endorsements to their policies that limit or eliminate the wording of “like kind and quality”. Insurance policy are contracts between the insured and insurer. Litigation is settled under contract law principles. Therefore, the insurance policy (contract) may make the above quoted clause, irrelevant with your claim.

A typical ISO (Insurance Services Organization) replacement cost policy will have wording like this: “Repair, rebuild or replace the property with other property of like kind and quality”. Sometimes this is worded in this manner: “comparable material and quality”. 

In the last fifteen years there has been at least three major Minnesota court cases involving the issue of “matching”, “like kind and quality”, “comparable material and quality” and “direct physical damage”. A summary of these cases (chronological order) are as follows.

In 1999, Minnesota Attorney General Mike Hatch filed a complaint in District Court against American Family alleging false advertising, deceptive trade practices, consumer fraud and violating the above quoted statutory law. At this time American Family’s replacement cost policy contained wording in this manner: “the cost to replace the damage building with like construction for similar use on the same premises”

The court concluded:

Defendant’s (American Family) practice and policy of limiting the amount paid to settle claims under the replacement value provisions of its homeowner’s policies to the cost to repair only the damage areas, when the repairs result in mismatches in materials because of the unavailability of matching materials, violates the requirement under Minn. Stat. {72A.201, Subd. 5(8) (1988) (Bold emphasis added by me)

The court ordered:

The State is awarded partial summary judgment against American Family Mutual Insurance Company for declaratory relief that American Family’s obligation to pay claims under replacement value provisions of its homeowner’s insurance policies, based upon American Family’s policies and Minn. Stat. {72A.201, Subd. 5(8) (1988)  (bold emphasis added by me)

  1. requires American Family to pay for full replacement with materials of like kind and quality;
  2. is not satisfied by the replacement of only those materials that are physically damaged by a storm, if the replacement materials do not or would not reasonably match in terms of color, quality, texture or type of material the existing materials on the policyholders’ home; and
  3. when the materials replacing the physically damaged materials do not or would not reasonably match the existing materials, American Family must also pay the sum necessary to replace the existing materials so there is a reasonable match, except where the mismatch is attributable to the natural weathering of the existing materials.

While this is a very good ruling in favor of the insured there are some limits to this ruling. The wording reasonable match is important. The ruling also has an exclusion for mismatches attributable to the natural weathering of the existing materials.

View the entire court filing here.

In 2014, the United States District Court – District of Minnesota in Trout Brook South Condominium Association v. Harleysville Worcester Insurance Company, the court gave the following opinions:  (Note: The attorneys for Harleysville moved this from Sherburne County District Court to Federal Court. This case also involved an appraisal award with an attempt to overturn the award)

These were some of the opinions given:

In the event of a loss to covered property, the Policy obligated Harleysville to pay for its “replacement cost,” defined as the lesser of (1) “the cost of repair or replacement with similar materials for the same use and purpose, on the same site” or (2) “the cost to repair, replace, or rebuild the property with material of like kind and quality to the extent practicable.”

First, it is predicated on an unsupported definition of the term “covered property.” By Harleysville’s logic, each individual roof shingle on Trout Brook’s buildings constitutes “covered property,” undermining any obligation to pay for shingles not damaged by hail. But in the Court’s view, this reads the term “covered property” too narrowly. Harleysville points to no Policy definition supporting its argument, and in fact the Policy’s “Property Covered” section indicates coverage extends to “buildings and structures.” Moreover, the Policy’s “location schedule,” which defines the extent of Trout Brook’s “property coverage,” simply lists the association’s eighteen buildings. Accordingly, the Policy suggests that “covered property” is each of Trout Brook’s buildings, and not individual items (such as shingles or siding) attached or appurtenant to them. And it is undisputed that each building sustained “direct physical loss” from the 2010 hail storm.

 Accordingly, the Court does not believe the terms “like kind” and “similar” can be so easily “divorced” from color.

The terms “similar materials” and “material of like kind and quality” simply cannot be defined, as a matter of law, to preclude consideration of color.

View the entire court filing here.

In 2014, the Minnesota Supreme Court in Cedar Bluff Townhouse Condominium Association vs American Family Mutual Insurance Company gave the following opinions and conclusions: (Note: This case also involved an appraisal award and the refusal by the insurer to pay the award)

The appraisal panel did not err in determining that the replacement of respondent’s damaged siding panels with siding of comparable material and quality required replacement of all of the siding on respondent’s buildings to achieve a reasonable color match.

A dispute arose as to whether the policy language providing for the replacement of “damaged property with other property . . . [o]f comparable material and quality” requires the replacement of all siding, even undamaged siding, in order to provide a color match. Because the appraisal panel properly concluded that siding of comparable material and quality required a reasonable color match between the damaged and undamaged siding, we affirm the court of appeals’ decision.

At the time of the hail storm, the siding was approximately 11 years old, and the color of the panels had faded. Replacement panels were available from the same manufacturer with the same specifications, but the panels were not available in the same color.

Replacement cost is to be determined based on the cost to replace “the lost or damaged property with other property . . . [o]f comparable material and quality.”

replacement cost of the damaged property, based on the cost of “other property . . . [o]f comparable material and quality.” American Family, however, uses the phrase “other property . . . [o]f comparable material and quality” interchangeably with the phrase “other property of like kind and quality.”

The court of appeals added that the value of the covered property was to be “determined based on the cost to replace the ‘damaged property with other property . . . [o]f comparable material and quality,’ ” and determined that “a reasonable person could understand that ‘comparable material’ means material that is the same color as the damaged property.”

Thus, we conclude that on the spectrum of resemblance, “comparable material and quality” requires something less than an identical color match, but a reasonable color match nonetheless.

Therefore, in accordance with the plain meaning of the policy language, we construe the phrase “comparable material and quality” to mean a reasonable color match between new and existing siding when replacing damaged siding.

Because of the color mismatch resulting from the inability to replace the hail-damaged siding panels with siding of “comparable material and quality,” the covered property—Cedar Bluff’s “buildings”—has sustained a “distinct, demonstrable, and physical alteration.” Thus, we conclude that the covered property sustained a covered loss.

Of course, all storm-related property damage claims present their own facts. In this particular case, the spot damage to multiple siding panels on multiple buildings, along with the appraisal panel’s assessment of the particular color mismatch, applied to the policy language at issue, lead to our conclusion that there is coverage. In summary, we hold that, under the terms of its insurance policy with American Family, Cedar Bluff is entitled to have all of the siding panels on each of its 20 buildings replaced. Consequently, we affirm the appraisal panel’s award.

Once again this is a very good ruling on behalf of the insured. In my opinion, the State of Minnesota has been consistent with its court decisions regarding the legal interpretation of contract language of “like kind and quality” and “comparable material and quality”.

It is important to understand that in the Supreme Court decision quoted above, an appraisal panel determined the question of “reasonable color match” and the appraisal did not use the term identical match to suggest that insurance policies require and identical match of color. I believe this assessment of reasonable match can also be determined and agreed to between a Public Adjuster and company adjuster.

Even when you can find replacement siding with the same specifications, fading over time can affect the ability to reasonably match the existing color with the replacement product.

In addition, the Supreme Court determined that a “wider view of damage” is correct, such as considering damage to the building as covered property in lieu of damage to “one side of a building”.