North Glenn Homeowners Association was an association of property owners in Johnston, Iowa. On July 15, 2009, North Glenn submitted a claim under a policy issued by State Farm Fire & Casualty for hail damage sustained to a roof. The claim, in excess of $125,000, was paid. North Glenn did not repair all of the damage, electing instead to use some of the money to make other repairs and improvements to the property.

On March 22, 2011, a second storm hit the development. North Glenn filed an additional claim for wind and hail damage. A State Farm employee inspected the property and determined the hail damage was from the 2009 storm and was not covered. The wind damage was estimated to be less than the policy deductible. A second roofing expert agreed with State Farm's assessment.

On November 11, 2011, North Glenn made a demand for appraisal, as provided for in the policy. State Farm agreed to an appraisal of the wind damage but refused an appraisal of the hail damage. North Glenn filed a petition for declaratory judgment on March 19, 2012, requesting a determination of coverage issues, seeking an order for appraisal, and alleging a breach of contract. On March 11, 2013, North Glenn filed a motion to compel appraisal, which the district court granted. State Farm appealed.

On appeal, State Farm claimed the district court erred in ordering an appraisal that required the appraisers to make causation determinations beyond their authority. The dispute was whether causation and coverage issues were to be determined by the appraisers or by the court. State Farm also claimed the motion to compel the appraisal should have been denied as there was no loss for the appraisers to examine.

The Iowa Court of Appeals stated: “As part of the appraisal process, appraisers must determine what the amount of ‘loss’ is, which often requires consideration of causation. Causation is an integral part of the definition of loss, without consideration of which the appraisers cannot perform their assigned function. During the appraisal process, the appraisers must consider what damage was caused by hail, and what damage was not, or damage with which they are unconcerned, such as normal wear and tear. We are convinced to hold otherwise would improperly limit the appraisal process to situations where the parties agree on all matters except the final dollar figure.”

The second question on appeal was whether the district court should have ordered the appraisal process to begin before the coverage disputes were resolved. Referring to the wording of the policy’s appraisal clause, the court held that where a party has demanded an appraisal, the process should go forward with other determinations waiting until after the process has been completed. Accordingly, the court found that the judicial determination of coverage need not be made before an appraisal was conducted. The court stated: “Having determined the appraisers must consider causation and engage in the appraisal process before coverage issues are determined by the district court, we do not address State Farm's claim that only the wind damage should be appraised.”

The judgment of the district court was affirmed.

North Glenn Homeowners Association vs. State Farm Fire & Casualty Co.-Iowa Court of Appeals-July 16, 2014-854 N.W.2d 67.