This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. ' 480A.08, subd. 3 (1994).


Henry Bonde,


Illinois Farmers Insurance Company,

Filed July 30, 1996
Crippen, Judge

Becker County District Court
File No. C695223

David S. Maring, Maring Law Office, P.A., P.O. Box 2103, Fargo, ND 58107 (for Appellant)

Kevin J. Kennedy, Hanson Lulic & Krall, Suite 500, 920 Second Avenue South, Minneapolis, MN 55402 (for Respondent)

Considered and decided by Amundson, Presiding Judge, Crippen, Judge, and Willis, Judge.



Appellant Henry Bonde's casualty insurer, respondent Illinois Farmers Insurance Company, paid a loss claim of $284,613.06 after a fire damaged appellant's property, but this represented $27,560.94 less than the $312,674.00 replacement cost of appellant's home, a reduction representing primarily depreciation. Appellant disputes the trial court's partial summary judgment for the insurer in appellant=s suit to recover the depreciation reduction. Respondent Illinois Farmers contends that the depreciation reduction was appropriate so long as actual repair or replacement was not completed. Because appellant has not made repair or replacement, or offered evidence justifying his failure to do so, we affirm.


In July 1993, during a one-year period of casualty coverage purchased from respondent, appellant's residence was substantially damaged by fire. Based on the estimates of a public adjuster, appellant submitted a Proof of Loss to respondent for $389,120.85 two months later. Respondent's independent estimate of appellant's building loss was approximately $220,000.00 to $225,000.00. Because of the large discrepancy between the estimates, respondent obtained a second estimate from another contractor, delaying payment on appellant's building loss claim. In November, respondent paid appellant $2,500.00 on the building loss claim, and in December it paid appellant an additional $206,279.47.

In January 1994, respondent rejected appellant's Proof of Loss "based on [its] obvious inaccuracies" and suggested invoking the appraisal clause in order to resolve their differences. Appellant then sought an independent appraisal of his losses pursuant to Minn. Stat. ' 65A.01, subd. 3. In July 1994, the appraisal panel found the building's replacement cost to be $312,674.00, with depreciation of $27,560.94. Neither party disputes the value placed on the building loss by the appraisal panel.

In August 1994, based on the appraisal panels's findings, respondent paid an additional $75,833.59 to appellant for the building loss, which included deductions for depreciation of $27,560.94 and appellant's $500.00 deductible. In total, respondent has paid appellant $284,613.06 for his building loss. Appellant alleges that respondent has not paid his full entitlement under the policy and seeks an additional $27,560.94, the amount of the depreciation. Appellant has not repaired or replaced his destroyed dwelling. The trial court granted partial summary judgment for respondent on the issue of building loss.


Both parties agree that the material facts are not in dispute. When reviewing a summary judgment, we need not defer to the trial court's application of the law. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989). The interpretation and construction of an insurance contract is a question of law, subject to de novo review. Iowa Kemper Ins. Co. v. Stone, 269 N.W.2d 885, 886-87 (Minn. 1978). Any reasonable doubt as to the policy's meaning must be resolved in favor of the insured, but the courts may not read an ambiguity into the plain language of an insurance policy in order to construe it against an insurer. Bobich v. Oja, 258 Minn. 287, 294, 104 N.W.2d 19, 24 (1960). Finally, although an appraisal panel's determination of loss is conclusive, questions of liability are to be judicially determined. Itasca Paper Co. v. Niagara Fire Ins. Co., 175 Minn. 73, 78, 220 N.W. 425, 427 (1928).

The trial court held that respondent was not liable for the replacement cost of appellant's home because appellant had not commenced repairs. Appellant's insurance policy with respondent provides that a building loss will be settled on either an actual cash value or a replacement cost basis. Actual cash value policy provisions apply "[i]f [the insured] do[es] not repair or replace at the same location." Actual cash value is defined as "replacement cost of the property at the time of loss, less depreciation."

Under respondent's policy, replacement cost provisions apply when the insured repairs or replaces at the same location; replacement cost provisions specify that respondent "will pay no more than the actual cash value until repair or replacement is completed." The policy also provides that an insured "may make a claim for an additional amount within 180 days after the loss on a replacement cost basis if the property has been repaired or replaced."

Appellant argues he is entitled to the full amount awarded by the appraisal panel for replacement cost of building loss, without reduction for depreciation, because (a) the appraisal panel's award obviates the need for the policy's provision requiring actual repair or replacement before payment for full replacement cost; (b) respondent frustrated appellant's compliance with the policy condition requiring actual repair or replacement before payment of full replacement cost of building loss, see, e.g., Zobel & Dahl Const. v. Crotty, 356 N.W.2d 42, 45 (Minn. 1984) (stating that performance under a contract is excused if a party hinders or renders performance of the contract impossible); and (c) the 180-day clause is void, as it is predictable that the majority of claims, even without delays attributable to dispute, could not be completed in 180 days, thus rendering the replacement cost benefit a mere illusion. See Jostens, Inc. v. Northfield Ins. Co., 527 N.W.2d 116, 119 (Minn. App. 1995) (holding that coverage is illusory "where part of [an insurance] premium is specifically allocated to a particular type or period of coverage and that coverage turns out to be functionally nonexistent"), review denied (Minn. Apr. 27, 1995).

1. Appraisal panel award

Appellant does not dispute that the repairs were not made, but suggests there is no need for them when an appraisal panel makes an award, citing Cornelius v. Badger Mut. Ins. Co., 354 N.W.2d 100 (Minn. App. 1984). Our examination of Cornelius leads to a different conclusion, namely, that a determination of liability substitutes under Cornelius only if it is adjudicated in a final decision that is binding on the parties; Cornelius involved a court order determining the replacement cost. Id. at 101. Equally as important, Cornelius represents a unique circumstance where the facts include no suggestion that repairs would not be made.

2. Delay

We have studied on review both the doctrines of impossibility and voidness and find merit in the general proposition that an insurer that relies strictly on a 180-day clause is vulnerable to these arguments in an appropriate case. There is merit in an impossibility argument where an insured demonstrates that the failure of full payment rendered it infeasible to repair or replace within 180 days. Likewise, it is imaginable on larger claims that the clause could be void as routinely frustrating. In fact, in defending the 180-day clause, the insurer on appeal relies on its supposed openness to a case where repairs start but are not finished within 180 days or the insured requests an extension of the 180-day limit. Nonetheless, we affirm because appellant's offer of evidence is insufficient to prove either impossibility or voidness.

Appellant alleged in its complaint that it was impossible to rebuild within a twelve-month span after the fire because respondent had not paid the "total amount owed for the building loss," and the record shows that appellant expressed an intent to rebuild once the "total amount owed by respondent" was recovered. But appellant has received a substantial amount of its claim from respondent and made no repairs, and appellant has produced no evidence, other than his general assertions, indicating his desire or intention to do so. No tie has been shown between appellant's rebuilding delay and the fact that additional monies have not been available.

3. Additional living expenses

Appellant also brings a claim for additional living expenses. The policy's additional living expense clause provides that the insured's necessary increases in living expenses will be covered for the "shortest time needed to (a) repair or replace the damaged property, or (b) permanently relocate, but in no event for more than 12 months." The appraisal panel determined appellant's additional living expenses to be $33,442.00, based on a period of fifteen months. Respondent paid $14,364.86 on the living expense claim. The trial court awarded an additional sum of $7,229.25, for a total of $21,594.11, premised on the conclusion that appellant should be paid for seven months needed for reconstruction and an additional three months, between September and December 1993, when respondent contributed to a delay in reconstruction.

Appellant claims he is entitled to the appraisal board's full fifteen-month expense assessment because respondent frustrated his ability to begin reconstruction by not advancing substantial funds until December, five months after the fire and during the winter, and by basing its payment on the actual cash value, rather than replacement value of appellant's home. Appellant submitted his Proof of Loss in September, nearly two months after the fire.

Alternatively, appellant argues that he is entitled, at a minimum, to twelve months of expenses, $4,422.89 more than the trial court awarded. Appellant arrives at his twelve-month claim by adding the seven months necessary to repair or rebuild and the five-month wait appellant experienced before receiving his first substantial building loss payment from respondent.

The trial court found that "the evidence demonstrates that the appraisers knowingly used the wrong figures [based on a fifteen-month time period] in figuring out the additional living expense award" and that "the reasonable time needed for repair or replacement should include the seven months required for the work and the three months delay in settlement [September through December] caused by [respondent]," resulting in an expense payment for 10 months. We find no basis for disputing the trial court's rationale.