Seventh Circuit Holds That Replacement Cost Coverage Requires Aesthetic Matching in Hailstorm Claim

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In the latest entry of “matching” jurisprudence under first party property policies, the Seventh Circuit Court of Appeals, acknowledging that jurisdictions have reached conflicting results and applying Illinois law, held that a carrier was required to replace undamaged siding to match the panels replaced due to damage in a hailstorm.[1] In doing so, the court affirmed the Northern District of Illinois’ award of summary judgment in favor of the insured on that issue.

The parties’ dispute arose out of a May 2014 hailstorm that caused significant damage to the insured’s buildings. The parties largely agreed as to the scope of the damage but disagreed as to whether the insurer was required to pay to replace undamaged siding panels in order to match those needing replacement due to hail damage. The original matching siding was no longer available. The Seventh Circuit agreed with the policyholder and the district court, finding the policy language ambiguous as applied to the circumstances because each party’s interpretation was plausible. The policyholder argued the buildings as a whole were damaged and that, per the policy terms, all siding needed replacement to ensure a uniform appearance. The insurance company, on the other hand, argued that the policy language only required it to replace those panels actually damaged by the storm. In light of these arguments, the court found that the policy language failed to address specifically whether aesthetic matching was required for physically damaged structure. Facing this ambiguity, the court interpreted the policy in favor of coverage. Ultimately, the court found that the policyholder would not be placed into the same position it was before the storm if it were provided only with mismatched siding.

Importantly, the court recognized some limitations with its decision. The court’s language focused heavily on the exact policy language at issue and the factual scenario, implying that the analysis could very well be different if either changed. Also, the court stated that common sense should govern in situations such as minor damage to a roof where matching shingles were unavailable. In that situation (under the same policy language at issue), the court stated that the insured would be entitled to the value of repairs and compensation for the decrease in value resulting from the mismatched shingle. Finally, the court recognized the significant conflicting case law favoring the insurer’s position. However, none of the decisions the insurance company cited dealt with the specific policy language used in its policy and none were binding in Illinois.

[1] Windridge of Naperville Condominium Association v. Philadelphia Indemnity Insurance Co., No. 18-2103, 2019 WL 3720876 (August 7, 2019)