Nashville Communications, Inc. v. Auto-Owners Insurance Company

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
NASHVILLE COMMUNICATIONS,
INC.,
Plaintiff,
v.
AUTO-OWNERS (MUTUAL)
INSURANCE COMPANY,
Defendant.
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Case No. 3:24-cv-01020
Judge Aleta A. Trauger
MEMORANDUM
Before the court are cross-Motions for Partial Summary Judgment. For the reasons set forth
herein, the plaintiff’s motion (Doc. No. 30) will be granted, and the defendant’s motion (Doc. No.
28) will be granted in part and denied in part.
I. 	LEGAL STANDARD
Under Federal Rule of Civil Procedure 56, any party “may move for summary judgment,
identifying each claim or defense . . . on which summary judgment is sought.” Fed. R. Civ. P.
56(a). “The court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id.
By its very terms, Rule 56 anticipates “that the mere existence of some alleged factual
dispute between the parties will not defeat an otherwise properly supported motion for summary
judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247–48 (1986) (emphasis in original). In other words, even if genuine,
a factual dispute that is irrelevant or unnecessary under applicable law is of no value in defeating
a motion for summary judgment. On the other hand, “summary judgment will not lie if the dispute
about a material fact is ‘genuine.’” Id. at 248.
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“[A] fact is ‘material’ within the meaning of Rule 56(a) if the dispute over it might affect
the outcome of the lawsuit under the governing law.” O’Donnell v. City of Cleveland, 838 F.3d
718, 725 (6th Cir. 2016) (citing Anderson, 477 U.S. at 248). A dispute is “genuine” “if the evidence
is such that a reasonable jury could return a verdict for the non-moving party.” Peeples v. City of
Detroit, 891 F.3d 622, 630 (6th Cir. 2018).
In ruling on a motion for summary judgment, it is not the judge’s function to make
credibility determinations, “weigh the evidence[,] and determine the truth of the matter, but to
determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249. In determining
whether a genuine issue of material fact exists, the court must assume as true the evidence of the
nonmoving party and draw all reasonable inferences in that party’s favor. Id. at 255; Tolan v.
Cotton, 572 U.S. 650, 660 (2014). However, the “mere existence of a scintilla of evidence in
support of the” nonmoving party is not sufficient to avoid summary judgment. Anderson, 477 U.S.
at 252. “There must be evidence on which the jury could reasonably find for the [nonmoving
party].” Id. The inquiry, therefore, “asks whether reasonable jurors could find by a preponderance
of the evidence that the” nonmoving party is entitled to a verdict. Id.
The standard of review for cross-motions for summary judgment does not differ from the
standard applied when a motion is filed by only one party to the litigation. Ferro Corp. v. Cookson
Grp., PLC, 585 F.3d 946, 949 (6th Cir. 2009); Taft Broad. Co. v. United States, 929 F.2d 240, 241
(6th Cir. 1991). On cross-motions for summary judgment, “the court must evaluate each party’s
motion on its own merits, taking care in each instance to draw all reasonable inferences against
the party whose motion is under consideration.” Taft, 929 F.2d at 248.
II. 	FACTS
This lawsuit concerns coverage for damage to property owned by plaintiff Nashville
Communications, Inc. (“NashComm”) and insured by Auto-Owners (Mutual) Insurance Company
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(“Auto-Owners”). While the parties’ interpretations of the facts relevant to the dispute differ, the
operative facts in this case, as set forth below, are basically undisputed.1
A. 	The Policy
Auto-Owners issued Policy No. 194619-80173260-22 (the “Policy”) to NashComm with a
term of May 29, 2022 to May 29, 2023. (Doc. No. 8-1 at 7.)2 The Policy insured NashComm’s
commercial building, located at 330 Plus Park Boulevard, Nashville, Tennessee 37217, as
Location 0001 – Building 0001 (the “Building” or the “Property”). (See id. at 9, 15.)
The applicable “Coverage” provision of the Policy states in relevant part:
BUILDING AND PERSONAL PROPERTY
COVERAGE FORM
. . . .
A. COVERAGE
We will pay for direct physical loss of or damage to the Covered Property at the
premises described in the Declarations caused by or resulting from any Covered
Cause of Loss.
1. Covered Property
Covered Property, as used in this Coverage Part, means the type of property
described in Section A.1., and limited in A.2., Property Not Covered, if a Limit of
Insurance is shown in the Declarations for that type of property.
a. 	Building, 	meaning 	the 	building 	or 	structure 	described 	in 	the
Declarations . . . .
(Id. at 71.)
1 The facts for which no citation is provided are derived either from the plaintiff’s Response
to the Defendant’s Statement of Undisputed Facts (“DSUMF”) (Doc. No. 40) or the defendant’s
Response to the Plaintiff’s Statement of Undisputed Facts (“PSUMF”) (Doc. No. 37) and are
undisputed, at least for purposes of summary judgment.
2 The Policy is in the record in multiple locations, and the parties cite it differently. The
plaintiff cites the PDF pagination of its “Exhibit 2.” The defendant cites the CM/ECF-assigned
PageID#. The court finds that both of these methods make it difficult to find the cited page and
cites the Policy filed at Doc. No. 8-1 by the document page numbers assigned by the CM/ECF
system.
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In the same Building and Personal Property Coverage Form, the Policy contains a provision
(“Appraisal Provision”), which sets out the procedure for resolving a dispute between Auto-
Owners and an insured regarding “the value of the property or the amount of loss,” as follows:
E. LOSS CONDITIONS
. . . .
2. Appraisal
If we and you disagree on the value of the property or the amount of loss, either
may make written demand for an appraisal of the loss. In this event, each party will
select a competent and impartial appraiser. The two appraisers will select an
umpire. . . . The appraisers will state separately the value of the property and amount
of loss. If they fail to agree, they will submit their differences to the umpire. A
decision agreed to by any two will be binding. . . .
If there is an appraisal, we will still retain our right to deny the claim.
(Id. at 79.)
The Policy defines “Covered Causes of Loss” as follows:
CAUSES OF LOSS – SPECIAL FORM
A. COVERED CAUSES OF LOSS
When Special is shown in the Declarations, Covered Causes of Loss means
Risks of Direct Physical Loss unless the loss is:
1. Excluded in Section B., Exclusions; or
2. Limited in Section C., Limitations that follow.
(Id. at 94.)
Regarding exclusions and limitations, the Policy contains the following potentially relevant
provisions:
B. EXCLUSIONS
1. We will not pay for loss or damage caused directly or indirectly by any of the
following. Such loss or damage is excluded regardless of any other cause or event
that contributes concurrently or in any sequence to the loss.
. . . .
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g. Water
(1) Flood, surface water, waves (including tidal wave and tsunami), tides,
tidal water, overflow of any body of water, or spray from any of these, all
whether or not driven by wind (including storm surge);
(2) Mudslide or mudflow;
(3) Water that backs up or overflows or is otherwise
discharged from a sewer, drain, sump, sump pump or related equipment;
(4) Water under the ground surface pressing on, or flowing or seeping
through:
(a) Foundations, walls, floors or paved surfaces;
(b) Basements, whether paved or not; or
(c) Doors, windows or other openings . . . .
. . . .
2. We will not pay for loss or damage caused by or resulting from any of the
following:
. . . .
d.(1) Wear and tear[.]
. . . .
f. Continuous or repeated seepage or leakage of water, or the presence or
condensation of humidity, moisture or vapor, that occurs over a period of 14
days or more.
. . . .
C. LIMITATIONS
The following limitations apply to all Policy forms and endorsements, unless
otherwise stated.
1. We will not pay for loss of or damage to property, as described and limited in
this section. In addition, we will not pay for any loss that is a consequence of loss
or damage as described and limited in this section.
. . . .
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c. The interior of any building or structure, or to personal property in the
building or structure, caused by or resulting from rain, snow, sleet, ice, sand or
dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a Covered Cause of
Loss to its roof or walls through which the rain, snow, sleet, ice, sand or
dust enters; or
(2) The loss or damage is caused by or results from thawing of snow, sleet
or ice on the building or structure.
(Id. at 94–96, 98.)
It is undisputed that wind is a covered cause of loss under the Policy, subject to Policy
exclusions and limitations. (See Doc. No. 32-1 at 4, Walker 30(b)(6) Dep. 17.)
B. 	The Covered Event
On March 3, 2023, a windstorm (the “wind event”) struck the Building, resulting in damage
(the “Loss”). The Loss occurred during the Policy term. On March 6, 2023, NashComm reported
wind damage to Auto-Owners resulting from the wind event and submitted a claim to Auto-
Owners for coverage under the Policy of the Loss, including damage to the roof and interior water
leakage. Auto-Owners acknowledged that there was some amount of wind damage to the Building
from the wind event.
C. 	The Appraisal Process
Auto-Owners initially took the position that the “wind damage from the Loss was limited
to displacement of one section of rubberized membrane covering the parapet wall along the north
roof edge and one metal joint covering the east parapet wall.” (Doc. No. 32-3 at 2, Def.’s Answer
to Pl.’s Interrog. No. 10.) Auto-Owners’ engineer also determined that any “water intrusion
through the roof was due to general aging of the roof membrane and failing sealant, which resulted
in widespread deterioration-related openings throughout the roof surface and was not attributable
to wind or hail.” (Id. at 2–3.) Auto-Owners estimated the amount of loss to the Property caused by
the wind event to be $2,204.75. (Doc. No. 38-1 at 2, Def.’s Am. Answer to Pl.’s Interrog. No. 12.)
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Auto-Owners offered coverage to NashComm based upon its estimate of the actual cash value
(“ACV”) of the Loss.
NashComm disagreed with Auto-Owners as to the “amount of loss”3 and, accordingly,
invoked the Policy’s Appraisal Provision. (See Doc. No. 33-5, Demand for Appraisal; see also
Doc. No. 8 ¶ 14.)4 Auto-Owners responded to the Demand for Appraisal by letter dated September
18, 2023, reiterating its position that the only observable wind damage was to “approx. 12ft of
membrane cap on the parapet wall which is reparable,” that there was no other “wind / hail / tree
or other damage” to the roof from a “covered cause of loss,” and that Auto-Owners’ “position on
the amount of damage[] sustained in the loss remains unchanged.” (Doc. No. 33-6 at 1.) It
nonetheless accepted the demand for appraisal, while stipulating that it was “only agreeing to
appraise the amount of loss to the roof of your structure due to the loss on March 3rd, 2023 storm
[sic]. These are the only items that will be considered as part of the covered loss under the
policy. . . . Any coverage issues or non-damaged items will not be considered.” (Id.)
In accordance with the procedure set forth in the Appraisal Provision, Auto-Owners
selected Paul Vitolins as its appraiser; NashComm selected Zachary Baker as its appraiser; and the
two appraisers selected Stuart McDiarmid as their umpire. Baker and Vitolins both inspected the
roof and performed appraisals to estimate the cost of repairing the storm damage. It appears to be
undisputed for purposes of both parties’ Motions for Summary Judgment that the two appraisers
understood that it was not their role to assess exactly what damage to the roof was caused by the
3 The plaintiff’s damages position at that time is not set forth in the parties’ fact statements,
but the plaintiff apparently maintained that, contrary to Auto-Owners’ engineer’s assessment, the
wind event caused extensive damage to the entire roof. (See Doc. No. 39-1, Prosser & Assocs.
Storm Damage Inspection Report at 3, 9–10.)
4 In its Response to the DSUMF ¶ 10, NashComm states that this fact is undisputed for
purpose of summary judgment only. The court has difficulty fathoming in what context this
statement might be disputed. The crux of the present motions is the parties’ disagreement as to the
amount of loss and the plaintiff’s invocation of the Appraisal Provision.
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wind event or to assess the extent to which the entire roof was damaged (by the wind event or other
cause). Rather, they accepted Auto-Owners’ initial assessment that the only direct storm damage
was to the “approx. 12ft of membrane cap on parapet wall” that runs the perimeter of the Building.
(See Doc. No. 33-7 at 4, Baker Dep. 13 (“My position on what has suffered direct physical loss . . .
is derived from what the carrier has determined is direct physical loss. And then I build my scope
and my appraisal of damages based on the causal elements they have established.”); Doc. No. 32-
6 at 3, Baker Dep. 22 (“Q. Did you ever develop any opinions that something other than what the
carrier conceded was direct physical loss actually suffered direct physical loss? A. I didn’t consider
it.”); Doc. No. 38-2 at 3, Baker Dep. 23 (“[W]e are there not to determine cause or coverage but
the means and methodology of the scope [of repair] as a direct result of what the carrier has
determined was damaged. And that’s what we were doing.”); Doc. No. 33-9, Vitolins Appraisal
(addressing repair of parapet wall).)
Vitolins’ appraisal of the total amount of the Loss was $2,204.75. This figure was limited
to that portion of the damage to the roof that Auto-Owners agreed was related to the wind event—
i.e., the cost to repair the “cap flashing on north portion of parapet wall” and to “resecure metal
joint cover on the east parapet.” (Doc. No. 33-9.) Baker’s appraisal is not in the record, but he
apparently disagreed, thus triggering the need for the umpire to resolve the disagreement. On April
30, 2024, the umpire, joined by Baker, issued an Appraisal Award of $187,469.10, which includes
the cost to replace the entire roof of the Building. (Doc. No. 33-10.) According to the Appraisal
Award, this figure represents the “Total Amount of Loss” minus depreciation, yielding the “Actual
Cash Value of Loss.” (Id.)
MacDiarmid explained the rationale for his decision in an email he sent to the two
appraisers along with his repair estimate and the Appraisal Award, as follows:
I have to admit, this one was difficult for me. While the roof is certainly in poor
condition and much of the moisture to the roof is likely due to maintenance issues,
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I could not ignore the 2 areas which had agreed wind damage and were allowing
water intrusion to the interior. With that, the moisture has to pass through the
roofing system to get to the inside of the building. After the thermography report,
it was very clear that the areas at the agreed wind damage were indeed wet and with
the current condition of the roof, attempted repairs would lead to a domino effect
of damaging the surrounding materials while attempting to manipulate. The other
option would have been a partial replacement of the roof, but that would have left
migrating moisture to seep back into the new materials and certainly would not be
pre-loss condition. I thought you both might like to know my thought process.
(Doc. No. 33-11.) MacDiarmid further attests in a Declaration his understanding that, as umpire,
he, in conjunction with the appraisers, was “tasked with determining the amount of loss to the
Property following a storm event that occurred on or about March 3, 2023.” (Doc. No. 32-5,
MacDiarmid Decl. ¶ 4.) According to MacDiarmid:
5. 	In my determination of the amount of the loss, I considered only the scope
of damage that Owners agreed had sustained damage, and I determined the
necessary means and methods of repairing the same.
. . . .
7. 	My email dated April 30, 2024 provides an explanation as to how I arrived
at my determination as to the amount of loss, which did not include any
considerations of insurance policy coverage or cause of loss determinations.
8. 	I did not engage in any considerations of policy coverage or liability as part
of the appraisal.
9. 	I did not engage in any cause of loss determinations as part of the appraisal.
(Id. ¶¶ 5, 7–9.)
Vitolins emailed Baker and MacDiarmid to “go on record as to [his] disagreement with the
decision to replace the roof and why.” (Doc. No. 33-12.) He explained his understanding that Auto-
Owners had “extend[ed] coverage, but only for the parapet wall covering,” which Vitolins believed
was “rather insignificant to the roof itself and the moisture survey does not support related water
intrusion to the roof system.” (Id.) Because he believed that the damage to the parapet was “not
integral to the roof system itself,” he did not agree that replacement of the roof as a whole was
warranted, and he further noted findings by an engineer retained by Auto-Owners, who found that
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the roof had “long exceeded its serviceable life” and concluded that roof leaks following the storm
were not caused by the storm or the “displaced membrane and the parapet wall or displaced metal
joint covering the parapet wall on the east edge of the roof,” which were caused by the storm. (Id.)
Specifically, Vitolins disagreed with MacDiarmid’s conclusion that “the moisture has to pass
through the roofing system to get to the inside of the building,” because Vitolins believed that
“moisture can enter the gap between the roof and the parapet wall with or without the parapet
covering and without passing through the roof system, in both locations of parapet covering
damage and at almost any point around the perimeter of the roof structure.” (Id.)
D. 	Auto-Owners’ Refusal of the Appraisal Award
NashComm requested that Auto-Owners make payment in accordance with the Appraisal
Award. Auto-Owners disputed the Appraisal Award and declined to pay for a full roof
replacement, reasserting its original coverage position and stating that the umpire exceeded his
authority in the appraisal process, specifically by “improperly consider[ing] causation of the loss
in determining the award.” (Doc. No. 33-13 at 2.) In its letter responding to the Appraisal Award,
Auto-Owners emphasized the last sentence of the Appraisal Provision in the Policy, pursuant to
which Auto-Owners retained its right to “deny the claim” even if it was submitted to an appraisal.
(Id. at 1.)5 Auto-Owners stated:
Per the policy language above, there is no evidence in this case there was damage
to roof or exterior elevations from a “covered cause of loss.” The policy language
cited above, specifically C(1)(c), requires first an opening in the roof or exterior
elevations created by a “covered cause of loss” for coverage to extend to the interior
of the structure for water damage. Here, unfortunately, it seems the appraisal panel
improperly evaluated causation based on thermal imaging that showed some water
5 The letter also sets forth verbatim several provisions of the Policy, including many of
those cited above: the “Coverage” provision, the “Water” Exclusion, and the “Limitations”
provision. (Doc. No. 33-13 at 3–4.) Auto-Owners’ Rule 30(b)(6) representative acknowledged
during his deposition, however, that the Water Exclusion did not apply to NashComm’s claim and
had “no opinion” as to whether the Building suffered damage due to snow or ice melt. (Doc. No.
32-1 at 15, 11, Walker 30(b)(6) Dep. 59, 48.)
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present in the roof structure. There is no evidence that the presence of water was
caused by a “covered cause of loss” as required by the policy.
. . . . As described above, our engineer determined the water intrusion through the
roof was the result of general aging of the roof membrane and failing sealant, not
from a “covered cause of loss” and as such, we respectfully deny coverage for the
appraisal award as the panel improperly evaluated causation contrary to the
engineering evidence.
(Id. at 4.)
Auto-Owners’ Rule 30(b)(6) witness conceded, during his deposition, that he could not
point to any “coverage or causation determinations that were made in the appraisal award.” (Doc.
No. 32-1 at 13, Walker 30(b)(6) Dep. 50.) Vitolins agreed that an appraisal panel should not “make
coverage decisions” but that it is the appraisal panel’s job to “determine the proper means and
methods of repair” and to “determine the scope of the damage that they are appraising.” (Doc. No.
32-7 at 3, Vitolins Dep. 79.)
On June 11, 2024, NashComm’s counsel sent a letter to Auto-Owners with a formal
demand for payment of the Appraisal Award amount, pursuant to Tenn. Code Ann. § 57-7-105,
and giving notice of its “intent to assert a cause of action for bad faith if this claim is not paid in
full.” (Doc. No. 33-14 at 5.) This lawsuit was filed on August 21, 2024. (See Doc. No. 1.)6
III. 	PROCEDURAL HISTORY
NashComm’s Amended Complaint asserts claims for breach of contract and statutory bad
faith, under Tenn. Code Ann. § 56-7-105, based on Auto-Owners’ refusal to pay the full cost of
repairing the damages to the Building. NashComm seeks compensatory and punitive damages, as
well as the 25% bad faith penalty. (Doc. No. 8.) Auto-Owners filed an Answer (Doc. No. 12),
admitting that a wind storm damaged NashComm’s insured Building, giving rise to a covered loss.
6 The plaintiff originally filed suit on August 21, 2024 (Doc. No. 1) and then filed an
Amended Complaint on August 26, 2024 (Doc. No. 8), correcting the defendant’s name and
attaching a copy of the underlying insurance policy.
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It maintains, however, that a dispute between the parties exists as to causation and coverage, rather
than merely a dispute about the amount of loss (monetary value of covered damages), and it denies
breaching the contract or engaging in bad faith.
Each party filed a motion seeking partial summary judgment in its favor in August 2025.
Both have filed supporting Memoranda of Law, Statements of Undisputed Material Facts,
Responses to the opposing party’s statements and motions, Reply briefs in further support of their
own, and evidentiary material they believe supports their position. In addition, Auto-Owners filed
a Statement of Undisputed Material Facts in Support of its Response to Plaintiff’s Motion for
Partial Summary Judgment. (Doc. No. 38.) Although this court’s Local Rules formerly authorized
a party opposing summary judgment to file of a statement of additional facts that the party believed
created a material factual dispute precluding summary judgment, that provision was eliminated in
the 	May 	2025 	amendments
to 	the 	Local 	Rules. 	See 	L.R. 	56.01(e) 	(eff. 	May 	15, 	2025) 	(available 	at
https://www.tnmd.uscourts.gov/court-info/local-rules-and-orders/local-rules). In other words, a
party opposing summary judgment is no longer authorized to file a separate statement of facts,
and, in any event, the Local Rules never authorized a party opposing summary judgment to file a
separate statement of additional undisputed facts in support of that party’s opposition to summary
judgment. The plaintiff filed Objections to the defendant’s statement of additional facts, asking the
court to exercise its discretion to disregard the filing in its entirety. (Doc. No. 43.) In the alternative,
and in an abundance of caution, the plaintiff also responded to the additional facts.
The court finds that the defendant’s improper statement of additional facts largely reiterates
facts raised elsewhere in the parties’ briefing—or that could and should have been set forth in
support of Auto-Owners’ own motion—and adds little to the factual landscape. The statement is
both unnecessary and redundant, aside from being unauthorized by the Local Rules. The court,
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therefore, in the exercise of its discretion, declines to take the document into consideration in
addressing either party’s motion.
IV. 	THE MOTIONS FOR PARTIAL SUMMARY JUDGMENT
NashComm’s motion asks the court to find that the Appraisal Award is “binding and
enforceable” and “has thus set the amount of the Loss as a matter [of] law.” (Doc. No. 30 at 1.) It
seeks partial summary judgment to that effect and “allowing this action to proceed to trial on
NashComm’s claim for breach of contract, as well as its claims for extracontractual and
consequential damages, without the need for proof on the amount of the Loss.” (Id.)
NashComm’s argument is this: (1) the parties agree, at a minimum, that the wind event
damaged the membrane covering a portion of the Building’s parapet wall; (2) its appraiser and the
umpire agreed that repairing the parapet membrane requires replacement of the entire roof; and (3)
under the Policy terms, an appraisal setting the amount of loss is binding on both parties, under
Tennessee law. NashComm therefore asks the court to hold that the Appraisal Award is binding
and enforceable. Auto-Owners responds that it is not bound by the Appraisal Award, because the
appraisal panel (comprised of the two appraisers and the umpire) (“Panel”) “exceeded the scope
of its authority in rendering such award.” (Doc. No. 41 at 1.) Specifically, it contends that the Panel
erroneously made “determinations of means and methods, scope of repair, and causation” and thus
exceeded the scope of its authority under Tennessee law. (Id. at 5.)
In its own motion, Auto-Owners seeks a ruling that “Auto-Owners has no obligation to pay
the umpire’s appraisal award” and, “[a]dditionally, or in the alternative,” partial summary
judgment that it did not breach its contractual obligations or act in bad faith. (Doc. No. 28 at 1.)
The plaintiff’s response essentially mirrors the arguments in support of its motion. (Doc. No. 39.)
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V. 	DISCUSSION
This situation is unusual only in that, typically, appraisers assess the cost of repairing all
of the alleged damage to an insured property—that is, the damage the insured party asserts was
caused by a covered event, regardless of whether the defendant disputes coverage—without trying
to parse out and assess only that part of the damage the parties agree was caused by a covered
event. Ordinarily, then, an appraisal itemizes the damage to each part of the property, leaving it to
the parties to litigate, and the court to decide, what elements of the damage were caused by a
covered event and, thus, what parts of the itemized appraisal are binding on the parties.
Here, the parties did not do that. Instead, the defendant insisted—and the plaintiff agreed—
that the appraisal would only pertain to that part of the damage that the defendant conceded was
attributable to the wind event—the damage to a portion of the parapet wall. In rejecting the
Appraisal Award, Auto-Owners does not argue that the Panel exceeded the scope of its authority
by misunderstanding what part of the roof the defendant agreed was damaged. Instead, the
defendant argues that the Panel exceeded the scope of its authority by reaching an issue of
causation. Auto-Owners insists that no damage to the roof causing leaks was caused by the wind
event, and it does not agree that damage to the parapet, per se, caused water incursion in other
parts of the roof, including (apparently), at the joint where the parapet wall meets the flat roof.
A. 	Construing Appraisal Provisions
Tennessee law governs this diversity dispute. Under Tennessee law, “[i]nsurance contracts
are subject to the same rules of construction and enforcement as apply to contracts generally.”
McKimm v. Bell, 790 S.W.2d 526, 527 (Tenn. 1990). “An insurance policy must be interpreted
fairly and reasonably, giving the language its usual and ordinary meaning.” Naifeh v. Valley Forge
Life Ins. Co., 204 S.W.3d 758, 768 (Tenn. 2006). Additionally, “insurance policies should be
construed as a whole in a reasonable and logical manner.” Travelers Indem. Co. of Am. v. Moore
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& Assocs., 216 S.W.3d 302, 305–06 (Tenn. 2007). Tennessee courts have long recognized the
validity of appraisal provisions in insurance policies. See Bard’s Apparel Mfg., Inc. v. Bituminous
Fire & Marine Ins. Co., 849 F.2d 245, 249 (6th Cir. 1988) (citing Hickerson v. Ger.-Am. Ins. Co.,
33 S.W. 1041 (Tenn. 1896)). Neither party here disputes the enforceability of appraisal provisions
generally.
Tennessee courts recognize that “[a]n appraiser’s authority is limited to the authority
granted in the insurance policy or granted by some other express agreement of the parties.”
Merrimack Mut. Fire Ins. Co. v. Batts, 59 S.W.3d 142, 159 (Tenn. Ct. App. 2001). Typically,
unless the parties agree otherwise, “the object of appraisal in cases of casualty insurance is to
quantify the monetary value of a property loss[,] not to decide questions of liability.” Id. at 152.
In Merrimack, for example, the appraisers selected by the parties had widely disparate
estimates as to the amount of the plaintiff’s loss, based on their differing views as to what damage
to the insured plaintiff’s house was actually traceable to the covered event—a tornado in that case.
Id. at 146. The umpire they appointed agreed with the plaintiff’s appraiser, while the defendant’s
appraiser protested that the other two panel members were “attempting to decide whether the
policy covered certain items of damage and whether [the plaintiff’s] claims might exceed the limits
of her policy.” Id. The defendant’s appraiser took the position that it was the appraisers’ job to
“place a dollar amount on the property damage and that it was Merrimack’s prerogative to
determine which items of damage were covered by [the] policy.” Id. The plaintiff’s appraiser
countered that “the appraisers could not intelligently determine the amount of damage without also
determining whether the damage had been caused by the tornado,” and the umpire agreed. Id. The
defendant filed a declaratory judgment action, asking the court to declare that it was not bound by
the appraisal award. The Tennessee Court of Appeals held that the appraisal panel’s authority was
confined to “determining the ‘amount of the loss’” and that the panel “did not have the prerogative
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to determine whether any particular loss claimed by [the insured homeowner] was caused by the
tornado or whether Merrimack was ultimately liable under its policy for the loss.” Id. at 153. The
court further observed that “[t]he final responsibility for resolving disputes” over causation and
liability, “assuming the parties cannot reach an agreement on their own, rests with the courts.” Id.
Similarly, this court has recognized that, when the issue of liability is resolved, the
appraisal process resolves any dispute as to the monetary amount of the loss. “However, if liability
is disputed, an appraisal on the ‘amount of loss’ would not ‘vest the appraisers with the authority
to decide questions of coverage and liability.’” Khushi P’ship v. Berkshire Hathaway Homestate
Ins. Co., No. 3:22-cv-00265, 2023 WL 186863, at *3 (M.D. Tenn. Jan. 13, 2023) (quoting
Merrimack, 59 S.W.3d at 152). Disputes as to coverage and liability must always be resolved by
the courts, even when the amount of the loss is decided through the appraisal process. Id.
On the other hand, in Thomas v. Standard Fire Ins. Co., No. E2015-01224-COA-R3-CV,
2016 WL 638559, at *6 (Tenn. Ct. App. Feb. 17, 2016), the Tennessee Court of Appeals affirmed
summary judgment for the defendant, finding that both parties were bound by an appraisal award.
There, the parties agreed that the damage in question was caused by a tornado and disagreed only
as to the amount of damages. On appeal, the plaintiffs did “not suggest the appraisal was
improperly conducted or [that] there were any coverage issues with the award. They simply
desire[d] more money.” Id. The court found no basis for setting aside the appraisal award. And
generally, courts agree that an appraisal panel’s assessment of the amount of loss is binding on the
parties, even when one party contends the amount is erroneous (whether too high or too low). See,
e.g., 	Westchester 	Surplus 	Lines 	Ins. 	Co. 	v. 	Portofino 	Master 	Homeowners 	Ass’n, 	No.
3:23CV00453-MCR-HTC, 2025 WL 2697481, at *5 (N.D. Fla. Sept. 22, 2025) (“[M]ere errors of
fact or law by an appraiser are not enough to set aside an appraisal award.” (collecting cases)).
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In addition, the question of how to conduct repairs—that is, the “scope of work” necessary
to repair covered damage and the appropriate “manner and means” of repair—clearly falls within
the scope of an appraisal panel’s authority. Accord, e.g., State Farm Fire & Cas. Co. v. Harper,
596 F. Supp. 3d 1032, 1038 (M.D. Tenn. 2022) (Campbell, J.). In Harper, there was no dispute
that damage to an insured’s house was caused by a tornado, a covered event, but the parties
disagreed about whether the damage could be repaired or whether, instead, the house had to be
demolished and rebuilt. The plaintiff sought an appraisal under the policy, but the insurance
company refused to participate in the appraisal process on the grounds that the parties disputed the
“scope of work” rather than merely the “amount of loss.” Id. The court disagreed and granted the
plaintiff’s motion to compel an appraisal, stating:
State Farm does not dispute that the damage to the premises is a covered loss. The
only dispute is what work needs to be done to return the property to its pre-loss
condition. Under these circumstances, defining the “scope of work” is inherent in
determining the value of the property damages—i.e., the cost to return the property
to its pre-loss condition.
Id. Accord Higgins v. State Farm Fire & Cas. Co., No. 22-C-198, 2022 WL 4016972, at *2 (E.D.
Wis. Sept. 2, 2022) (“The parties’ dispute over the cost of repair or replacement of certain items
is not a coverage question but rather a factual dispute over the means and cost of correcting the
damage. These are disputes over the amount of loss which, under the terms of the policy, are to be
resolved by the appraisal process when either party so demands.”); Quick Response Com. Div. v.
Cincinnati Ins. Co., No. 1:14-CV-779 GLS/DEP, 2015 WL 5306093, at *3 (N.D.N.Y. Sept. 10,
2015) (finding that a “dispute [about] the extent of work required to repair the damage caused by
the fire and the necessary methods of such repair . . . are factual questions that fall squarely within
the scope of the policy’s appraisal clause”); UrbCamCom/WSU I, LLC v. Lexington Ins. Co., No.
12-CV-15686, 2014 WL 1652201, at *5–6 (E.D. Mich. Apr. 23, 2014) (holding that a dispute
regarding the necessary repairs to reopen a building and the length of time it should have taken to
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make those repairs goes to the amount of loss, which falls within the ambit of an appraisal);
Williamson v. Chubb Indem. Ins. Co., No. 11-cv-6476, 2012 WL 760838, at *4 (E.D. Pa. Mar. 8,
2012) (concluding that a disagreement over the necessary repairs and methods of repair from a
covered loss are subject to appraisal because they represent a dispute as to amount of loss, not
coverage); State Farm Lloyds v. Johnson, 290 S.W.3d 886, 887 (Tex. 2009) (“Sometimes it may
be unreasonable or even impossible to repair one part of a roof without replacing the whole. The
policy provides that State Farm will pay reasonable and necessary costs to ‘repair or replace’
damaged property, and repair or replacement is an ‘amount of loss’ question for the appraisers.”
(footnoted citations omitted)); Gulf Ins. Co. of Dallas v. Pappas, 73 S.W.2d 145 (Tex. Civ. App.
1934) (holding that appraisers’ determination that damages to a building caused by a fire could be
repaired and the building restored to its original condition, instead of by “the complete
reconstruction or replacement of the whole interior of the building,” as the building owner claimed,
was a decision within the scope of the appraisers’ authority).
B. 	The Plaintiff’s Motion
The plaintiff’s position in this case is that the Panel reached the Appraisal Award “through
consideration of only the appropriate means and methods of repair for the damages agreed to by
[Auto-Owners]” and, therefore, that the award is “binding and enforceable.” (Doc. No. 31 at 15.)
The plaintiff points out that both Baker and MacDiarmid testified that they did not consider
causation, did not consider damages to any part of the roof with respect to which Auto-Owners
contests liability, and focused only on the parapet, which the parties agreed had been damaged in
the storm. NashComm also points out that Auto-Owners’ Rule 30(b)(6) witness could not identify
any evidence in the record suggesting that Baker or MacDiarmid considered anything other than
the repairs necessary to repair the parapet which, in their view, required replacement of the entire
roof.
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The defendant contests the Appraisal Award on the grounds that the Appraisal Provision
did not authorize the Panel to “determine means and methods or scope of repair.” (Doc. No. 41 at
6.) As demonstrated by the cases cited above, however, courts universally agree that appraisal
panels charged with assessing the amount of loss are authorized to decide the appropriate means
and methods for repairing damages and the scope of work required. Thus, as noted in Harper and
Johnson, the question of whether damage to a roof requires replacement or repair is well within an
appraisal panel’s purview.
Somewhat more persuasively, Auto-Owners argues that the appraisal panel improperly
considered issues of causation, including the scope of damages caused by the storm.7 This issue
presents a closer call. Auto-Owners’ position all along has been that the storm caused minor
damage to the membrane covering of a portion of the parapet wall and that any water incursion
and damage to the roof per se was caused by wear and tear and/or poor maintenance. (See Doc.
No. 41 at 10 (“Owners also stated [in its August 8, 2023 letter to NashComm that] the parapet wall
damage ‘is repairable and does not affect the functionality of the roof system.’”); Doc. No. 32-3
at 2–3, Def.’s Answer to Pl.’s Interrog. No. 10 (referencing Auto-Owners’ engineer’s finding that
any “water intrusion through the roof was due to general aging of the roof membrane and failing
sealant, which resulted in widespread deterioration-related openings throughout the roof surface
and was not attributable to wind or hail”).) As evidence that the Panel improperly considered
causation, Auto-Owners points to MacDiarmid’s email to the other Panel members, explaining
that he considered “the 2 areas which had agreed wind damage and were allowing water intrusion
7 Auto-Owners does itself no favor by asserting—with no basis in fact—that “the members
of the Panel signing the award admitted that the only damage to the roof was this area of the parapet
wall.” (Doc. No. 41 at 3.) Auto-Owners’ record citations do not support this statement. Moreover,
as set forth above, the record is clear that Baker and MacDiarmid were attempting to confine their
appraisals to that part of the roof that Auto-Owners agreed was damaged by the wind event. (See
(Doc. No. 32-5, MacDiarmid Decl. ¶ 5; Doc. No. 38-2 at 3, Baker Dep. 23.)
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to the interior.” (Doc. No. 33-11.) As the plaintiff points out, however, MacDiarmid’s full
explanation 	establishes 	that 	he was 	focused 	on 	repair 	rather 	than 	causation: 	“After 	the
thermography report, it was very clear that the areas at the agreed wind damage were indeed wet
and with the current condition of the roof, attempted repairs would lead to a domino effect of
damaging the surrounding materials while attempting to manipulate.” (Id.) In other words, the wet
areas around the damaged area established for MacDiarmid that replacement of the roof as a whole
was required in order to effectively address the damage to the parapet. And both MacDiarmid and
Baker disavow having considered anything other than damage to the area of the roof that the
defendant agreed had been caused by the wind event. They accepted as a given that the damage to
the parapet wall expressly admitted by Auto-Owners was caused by the wind event, and the
defendant has presented no evidence that the Panel went beyond that express limitation in
computing damages.8
As already stated, the law is clear that it is well within an appraisal panel’s job description
to assess the appropriate manner and means of repair in appraising the cost to repair a loss. Here,
the panel appears to have done just that: it was tasked with determining the appropriate means of
repairing the admitted damage to the parapet wall, and it determined that replacement of the roof
as a whole is required in order to correctly remediate the damage admittedly caused by the storm.
The factual circumstances are effectively the same as those presented in Harper and Johnson. In
each of those cases, the parties agreed that the entire roof had been damaged by a covered event
8 Even if they tangentially considered causation, “appraisers must always consider
causation, at least as an initial matter. An appraisal is for damages caused by a specific occurrence
. . . . Any appraisal necessarily includes some causation element, because setting the ‘amount of
loss’ requires appraisers to decide between damages for which coverage is claimed from damages
caused by everything else.” Johnson, 290 S.W.3d at 893; see also Hill v. Auto-Owners (Mut.) Ins.
Co., No. 4:19-cv-78, 2020 WL 7034321, at *10 (E.D. Tenn. Nov. 30 2020) (“[P]ractically
speaking, it would be difficult to completely divorce causation and coverage findings from an
appraised loss.”).
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but disagreed as to the best means of repairing it. Here, the parties agree (for purposes of summary
judgment) that the parapet wall was damaged and disagree as to the appropriate manner and means
of repairing that damage. MacDiarmid attests that his “determination of the amount of the loss”
was based “only the scope of damage that Owners agreed had sustained damage, and [he]
determined the necessary means and methods of repairing the same.” (Doc. No. 32-5, MacDiarmid
Decl. ¶ 5.) Moreover, even if MacDiarmid is wrong as a factual matter about whether repairing
the parapet requires replacement of the entire roof to return the property to its pre-loss condition,
this is a risk the parties accepted when they agreed to an appraisal procedure in the Policy. Accord
Westchester Surplus Lines Ins. Co., 2025 WL 2697481, at *5 (“So, when parties run to the courts
following an appraisal and complain that an award is supernaturally high or riddled with
duplicative costs, judges generally react with a shoulder shrug—after all, this is the process the
parties knowingly bargained for, and appraisers are often better equipped to measure these sorts
of damages.”).
Finally, regarding Auto-Owners’ protests about the condition of the roof, wear and tear is
simply part of the consideration an appraisal panel takes into account in appraising a loss. See
Johnson, 290 S.W.3d at 892–93 (“If State Farm is correct that appraisers can never allocate
damages between covered and excluded perils, then appraisals can never assess hail damage unless
a roof is brand new. That would render appraisal clauses largely inoperative, a construction we
must avoid.” (footnoted citations omitted)). Indeed, the depreciation assessed as part of the
Appraisal Award likely took into account the age and state of the roof at the time of the wind event.
As discussed above, an appraisal panel’s authority is “limited to the authority granted in
the insurance policy or granted by some other express agreement of the parties.” Artist Bldg.
Partners v. Auto-Owners Mut. Ins. Co., 435 S.W. 3d 202, 217 (Tenn. Ct. App. 2013) (quoting
Merrimack, 59 S.W.3d at 152). An appraisal award made in accordance with an appraisal provision
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of an insurance contract is binding and enforceable, and “courts will indulge every reasonable
presumption to sustain an appraisal award.” Beaty v. Homeowners of Am. Ins. Co., No. 01-23-
00844-CV, 2025 WL 2446008, at *4 (Tex. App. Aug. 26, 2025) (citing Zhu v. First Cmty. Ins.
Co., 543 S.W.3d 428, 433 (Tex. Ct. App. 2018)). Auto-Owners has failed to show that the Panel
exceeded the authority granted by the Policy and limited by the parties’ express agreement. The
court therefore finds that the Appraisal Award is enforceable. The plaintiff’s Motion for Partial
Summary Judgment will be granted, thus “setting the amount of the Loss as a matter of law.” (Doc.
No. 30 at 1.)
C. 	The Defendant’s Motion
Auto-Owners seeks partial summary judgment that it has no obligation to pay the Appraisal
Award, or, in the alternative, a ruling that Auto-Owners did not act in bad faith under its insuring
agreement with NashComm by contesting and refusing to pay the Appraisal Award. The court’s
determination that NashComm is entitled to a judgment that the Appraisal Award is binding and
enforceable requires the denial of Auto-Owner’s request for a judgment in its favor on that issue.9
However, the court must consider Auto-Owners’ alternative argument that is entitled to partial
summary judgment on the issue of whether it acted in bad faith.
To recover for bad faith under Tenn. Code Ann. § 56-7-105, NashComm must prove that
(1) the Policy, by its terms, has become due and payable; (2) NashComm made a formal demand
for payment; (3) it waited 60 days after making demand before filing suit (unless there was a
refusal to pay prior to the expiration of the 60 days); and (4) the refusal to pay was not in good
9 Even if the court had not ruled in the plaintiff’s favor on this issue, summary judgment in
favor of the defendant would not be warranted, as there is clearly a factual dispute as to whether
the wind event damaged the roof as a whole and caused the leaks at issue. This dispute is no longer
material, but only because affirming the Appraisal Award effectively moots it.
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faith. Ginn v. Am. Heritage Life Ins. Co., 173 S.W.3d 433, 443 (Tenn. Ct. App. 2004) (citations
omitted). The burden of proving bad faith lies with the plaintiff. Id.
“The bad faith penalty is not recoverable in every refusal of an insurance company to pay
a loss. An insurance company is entitled to rely upon available defenses and refuse payment if
there is substantial legal grounds that the policy does not afford coverage for the alleged loss. If
an insurance company unsuccessfully asserts a defense and the defense was made in good faith,
the statute does not permit the (sic) imposing of the bad faith penalty.” Id. (alteration in original)
(quoting Sisk v. Valley Forge Ins. Co., 640 S.W.2d 844, 852 (Tenn. Ct. App. 1982)).
In this case, the only disputed element of the plaintiff’s bad faith claim is whether Auto-
Owners’ refusal to pay was in bad faith. NashComm insists that it was—or that there is at least a
jury question as to Auto-Owners’ good faith. To be clear, NashComm does not appear to contend
that Auto-Owners’ initial investigation of the claim and assessment of the damage were in bad
faith. Instead, NashComm argues that, once Auto-Owners agreed to an appraisal, it had no
legitimate basis for contesting the enforceability of the Appraisal Award. NashComm asserts that
Auto-Owners admittedly raised exclusions and limitations that have no relevance in this case and
that, despite its contention that the Panel improperly considered causation, its Rule 30(b)(6)
witness effectively admitted during his deposition that he could not point to any evidence in the
record supporting that contention. The plaintiff also emphasizes that Auto-Owners’ appraiser
testified that determining the appropriate manner and means of repair was part of the Panel’s job.
The court finds that there is insufficient proof of bad faith in this case. On a motion for
summary judgment, the court must assume as true the evidence of the nonmoving party and draw
all reasonable inferences in that party’s favor. Anderson, 477 U.S. at 255. However, the “mere
existence of a scintilla of evidence in support of the” nonmoving party is not sufficient to avoid
summary judgment. Id. at 252. “There must be evidence on which the jury could reasonably find
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for the [nonmoving party].” Id. The inquiry, therefore, “asks whether reasonable jurors could find
by a preponderance of the evidence that the” nonmoving party is entitled to a verdict. Id. Here,
although the court has found that Auto-Owners’ defense and objections to the Appraisal Award
are without merit, Auto-Owners has maintained from the beginning that the damage to the majority
of the roof was caused by the condition of the roof and not the wind event. It has an engineer’s
report supporting its position as to causation, and its appraiser’s opinion regarding the cost to repair
the parapet was that the “interior water intrusion was not coincident with the aforementioned
displaced membrane or displaced metal joint covering the parapet wall” and that “the parapet
covering . . . is rather insignificant to the roof itself.” (Doc. No. 33-12.) That is, Auto-Owners had
“substantial legal grounds,” Ginn, 173 S.W.3d at 443, for arguing that the Panel exceeded its
authority in assessing damages by improperly considering causation. The evidence in the record—
including that Auto-Owners’ denial letter asserted limitations and exclusions that clearly do not
apply—is not sufficient to permit a reasonable jury to conclude that Auto-Owners acted in bad
faith in objecting to the Appraisal Award.
The defendant’s Motion for Partial Summary Judgment in its favor will be granted, insofar
as it seeks a judgment that the plaintiff will not be entitled to recover under the Tennessee bad faith
statute, Tenn. Code Ann. § 56-7-105(a).10
VI. 	CONCLUSION
For the reasons set forth herein, the plaintiff’s motion (Doc. No. 30), seeking judgment that
the Appraisal Award is binding and enforceable as to the amount of Loss, will be granted. The
defendant’s motion (Doc. No. 28) will be denied, insofar as it seeks a judgment setting aside the
10 The court will not address the issue of punitive damages, which was raised only in the
plaintiff’s Response to Auto-Owners’ Motion for Partial Summary Judgment and not in Auto-
Owners’ motion.
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Appraisal Award as outside the scope of the appraisal panel’s authority, and granted, insofar as it
seeks a judgment that the plaintiff has not established that the defendant’s refusal to pay the
Appraisal Award is in bad faith.
An appropriate Order is filed herewith.
ALETA A. TRAUGER
United States District Judge
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