No. 22-10662
4
Unsatisfied with State Farm’s estimate, the Schnells invoked
appraisal, a process under the policy that allows appraisers appointed by each
party, along with an umpire, to set the amount of loss, without consideration
of causation or coverage. On March 3, 2020, the appraisers issued a final
award estimating the total amount of loss as $165,848.66. This award
consisted of $32,234.13 in “Building” damages—that is, costs to cover
accidental direct physical loss to the home—and $133,614.53 in “Building
Code” damages—that is, costs to cover the increased repair costs due to
building code enforcement. The appraisal included “Building Code”
damages because the Schnells’ homeowners association rejected their
application to replace only their broken tiles, instead requiring them to
replace the whole roof. Specifically, the Schnells discovered that the
manufacturer of their roof tiles, Monier Lifetile, had been purchased by Boral
Roofing, which did not make the same tile, and the homeowners association
refused to allow spot repairs with the new Boral tiles.
On April 2, 2020, State Farm sent a payment to the Schnells for
$21,277.28, reflecting the $32,234.13 appraisal award for “Building”
damages, less their $9,879.00 deductible. State Farm refused to pay the
Building Code appraisal award, stating the application rejection by the
homeowners association did not count as enforcement of an ordinance or law
under Option OL since “[b]uilding codes are enacted and enforced by state
and/or local governments.” As part of its payment, State Farm included the
statement, “Please be advised, neither participation in the appraisal process
nor subsequent payment of any sum of money constitutes or should be
construed as an admission of liability by State Farm. State Farm is not
waiving any of the policy’s coverage’s [sic], limitations, exclusion, or
provisions, all of which are specifically reserved.”
Following State Farm’s instruction that enforcement by state or local
government is required to trigger Option OL coverage, the Schnells sought a
Case: 22-10662 Document: 60-1 Page: 4 Date Filed: 04/02/2024