September 9, 2019

The Seventh Circuit Court of Appeals in affirming the ruling of the lower court, held that replacement cost coverage requires aesthetic matching in a hailstorm claim of damage to the siding. The case is Windridge of Naperville Condo. Ass'n v. Phila. Indem. Ins. Co., 932 F. 3d 1035 (7^th Cir. 2019).

In May 2014, a hail and wind storm damaged the aluminum sidings on the south and west sides of several buildings in the Windridge of Naperville Condominium Association (Windridge). Windridge was insured by Philadelphia Indemnity Insurance Company (Philadelphia Indemnity) at the time of the loss. The parties agree that there was coverage at the time of the loss and that the only parts of the buildings that were damaged were the south and west sides. At the time of replacement, siding that matched the undamaged north and east sides of the buildings was no longer available. Windridge asked for additional money to replace the siding on the north and east sides of the buildings and argues that it is under the policy to have the buildings repaired so that, as it was before the storm, the siding all matched. Philadelphia Indemnity refused to pay for these additional costs and argued that the policy required payment only to replace the siding that was directly hit and damaged by the wind and hail.

In the district court, the coverage issue was resolved in favor of Windridge, with the court concluding that Philadelphia Indemnity must replace or pay to replace the siding on all four sides of the buildings if the matching siding is not available. Philadelphia Indemnity appealed the determination and the Seventh Circuit Court of Appeals also found in favor of Windridge, rejecting the argument of Philadelphia Indemnity that only the south and west elevations suffered direct physical loss to covered property within the meaning of the policy's coverage, and thus only those sides needed to be replaced. The court found that the policy language failed to address aesthetic matching and whether or not matching is required for a physically damaged structure. The court addressed this ambiguity by interpreting the policy in favor of Windridge. The court ultimately found that if the siding did not match, Windridge would not be put in the same position it was before the storm.

The court also noted some limitations with this decision. The court focused very specifically on the relevant policy language and the facts of this case, insinuating if either were different, the interpretation would be affected.

Editor's Note: There is significant case law that refutes the ruling of the court in this case, but none of those cases dealt with insurance policies that used the same language.

This court decision affirmed the long-held stance of the FC&S Experts. To read more about Matching and Pre-Loss Conditions, visit the FC&S website at https://www.nuco.com/fcs/2014/02/11/the-matching-game-and-pre-loss-conditions-422-10181/