In an opinion issued today by the Minnesota Court of Appeals, it upheld an insurance company’s exclusion against repairing a policyholder’s hail-damaged property with reasonably matching materials in Pleasure Creek vs. American Family. The Court relied heavily on the recent decision from the Federal 8th Circuit in Noonan v. American Family that upheld a similar exclusion. In relevant part, the matching exclusion states that:

We will not pay to repair or replace undamaged material due to mismatch between undamaged material and new material used to repair or replace damaged material.

The Court found that this provision allows an insurance company to refuse to pay for a reasonable match between new and existing material when making repairs after a covered loss. In this case, hail damaged an Association’s siding and it could not be matched when making repairs of the hail damage. By the Court’s reading of this exclusion, American Family has no obligation to replace the damaged siding with matching material, meaning it would be acceptable to patch damaged white siding with black siding. Technically, it would be okay for the insurance company to make repairs with something that was not even siding material the way this exclusion is written.

While the exclusion in this case was buried in a single line of hundreds of pages of policy documents, the Court held that even if it was confusing, a policyholder still has a duty to read their policy. Hopefully the Minnesota Supreme Court will take this case and reverse course. For now, the rule of law is “buyer beware.”

Restoring the property to the condition it was in before the loss (with a reasonably uniform appearance) is perhaps the most fundamental reason property owners purchase replacement cost insurance. This case illustrates how important it is to ensure your policy has coverage for material matching as we explaining our prior post [ What’s the Right Insurance Policy for my Homeowners Association ]. No policyholder expects to be left in a worse condition after the loss by making repairs, but this provision allows for that very thing.

If you need help reviewing your policy, call the attorneys at Smith Jadin Johnson before it’s too late!


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