Badgerland Restoration & Remodeling, Inc. v. Federated Mutual Insurance Company

2024 WI App 36

COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION

Case No.: 2023AP2109

Complete Title of Case:

BADGERLAND RESTORATION & REMODELING, INC.,

PLAINTIFF-APPELLANT,

V.

FEDERATED MUTUAL INSURANCE COMPANY,

DEFENDANT-RESPONDENT.

Opinion Filed: May 9, 2024
Submitted on Briefs: March 14, 2024

JUDGES: Kloppenburg, P.J., Blanchard, and Taylor, JJ.

Appellant
ATTORNEYS: On behalf of the plaintiff-appellant, the cause was submitted on the
briefs of Erik L. Fuehrer of Gabert, Williams, Konz & Lawrynk, LLP,
Appleton.

Respondent
ATTORNEYS: On behalf of the defendant-respondent, the cause was submitted on the
brief of Stephen O. Plunkett and Tal A. Bakke of Bassford Remele,
P.A., Minneapolis, Minnesota.
2024 WI App 36

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
May 9, 2024
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.

Appeal No. 2023AP2109 Cir. Ct. No. 2023CV67

STATE OF WISCONSIN IN COURT OF APPEALS

BADGERLAND RESTORATION & REMODELING, INC.,

PLAINTIFF-APPELLANT,

V.

FEDERATED MUTUAL INSURANCE COMPANY,

DEFENDANT-RESPONDENT.

APPEAL from an order of the circuit court for Waupaca County:
VICKI L. CLUSSMAN, Judge. Reversed and cause remanded for further
proceedings.

Before Kloppenburg, P.J., Blanchard, and Taylor, JJ.

¶1 KLOPPENBURG, P.J. This breach of contract action arises out of a
dispute over the amount that Federated Mutual Insurance Company (“Federated”)
owes for hail damage to property that is owned by Maple Crest Funeral Home, Inc.
No. 2023AP2109

(“Maple Crest”), pursuant to the insurance policy issued by Federated to Maple
Crest in effect at the time of the damage. Maple Crest assigned its insurance policy
claim to Badgerland Restoration & Remodeling, Inc. (“Badgerland”), which
repaired the property after it was damaged. In this action, Badgerland alleges that
Maple Crest demanded an appraisal pursuant to the appraisal clause in the insurance
policy that Federated issued to Maple Crest, and that Federated refused to participate
in the appraisal process. Badgerland argues that Federated breached the policy by
refusing to participate in the appraisal process.

¶2 The circuit court granted Federated’s motion to dismiss Badgerland’s
complaint for failure to state a claim on which relief can be granted, and Badgerland
appeals. We conclude that, under the well-established legal standards governing
motions to dismiss and governing appraisal clauses in property insurance policies,
the allegations in the complaint state a claim that Federated breached the policy by
refusing to participate in the appraisal process after Maple Crest invoked the
policy’s appraisal clause. Accordingly, we reverse and remand for further
proceedings.

BACKGROUND

¶3 When considering a motion to dismiss, all well-pleaded facts in a
complaint must be accepted as true. Cattau v. National Ins. Servs. of Wis., 2019
WI 46, ¶4, 386 Wis. 2d 515, 926 N.W.2d 756. As explained later in this opinion,
the allegations stated here and throughout this opinion are taken from the complaint

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No. 2023AP2109

and three uncontested documents that are referenced in the complaint and attached
to Federated’s motion to dismiss.1

¶4 Maple Crest’s property was damaged by hail on April 12, 2022, when
the property was insured by a policy issued by Federated. Pertinent here, the policy
includes the following appraisal clause:

2. Appraisal

If we and you disagree on 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. If they
cannot agree, either may request that selection be made by a
judge of a court having jurisdiction. The appraisers will state
separately the 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 ….

Maple Crest immediately notified Federated of its claim for hail damage. Federated
retained ProStar Adjusting, which issued a report on July 28, 2022, titled “ProStar
Statement of Loss,” in which it estimated the replacement cost of the roof to be
$58,311.21.2

¶5 On August 5, 2022, Maple Crest signed a contract with Badgerland
for installation of a new roof. The contract states, “All work to be completed as per

1
See Soderlund v. Zibolski, 2016 WI App 6, ¶37, 366 Wis. 2d 579, 874 N.W.2d 561
(adopting the incorporation-by-reference doctrine, which permits a court to consider a document
attached to a motion to dismiss without converting the motion to one for summary judgment, so
long as the document is referred to in the plaintiff’s complaint, it is central to the plaintiff’s claim,
and its authenticity has not been disputed). The uncontested documents here are the insurance
policy that Federated issued to Maple Crest, the “ProStar Statement of Loss” (prepared for
Federated in response to Maple Crest’s initial submission of its claim for loss), and the Badgerland
contract with Maple Crest for the repair work.
2
The complaint contains a typographical error in that it alleges that Maple Crest retained
ProStar. As the parties made clear in the circuit court, and as ProStar’s report indicates, ProStar
was retained by Federated.

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No. 2023AP2109

allowed Replacement Cost Value Scope of loss plus any approved supplements,”
and “AGREED CONTRACT AMOUNT BETWEEN BRR & H/O INS CO.
$58,311.21 plus any approved supplements.” The contract does not define the term
“supplements.”

¶6 Badgerland completed the work on October 10, 2022, and submitted
an invoice in the total amount of $110,972.20 to Federated on October 12, 2022.
This invoice appears to treat all amounts over $58,311.21 as attributable to
“supplements.”

¶7 A dispute arose as to whether the cost of the necessary repairs on the
Maple Crest property totaled $58,311.21 or instead $110,972.20.

¶8 On November 15, 2022, Maple Crest sent a written Request for
Appraisal to Federated, invoking the insurance policy’s appraisal clause and naming
its selection of an appraiser as required by the appraisal clause. By letter dated
December 15, 2022, Federated denied Maple Crest’s appraisal demand on the
ground that the amount of loss was not disputed.

¶9 Federated breached the policy by refusing to abide by the terms of the
appraisal clause.

¶10 On January 31, 2023, Maple Crest assigned to Badgerland its breach
of contract claim against Federated.

¶11 Turning to the procedural history of this case, Badgerland filed a
complaint against Federated alleging breach of contract and seeking specific
performance by requiring Federated to participate in the appraisal process, along

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No. 2023AP2109

with damages and costs and fees.3 Federated filed an answer and then moved to
dismiss the complaint for failure to state a claim. After the parties completed
briefing on the motion to dismiss, the circuit court granted the motion. Badgerland
appeals.

DISCUSSION

¶12 The standard of review of a motion to dismiss is well established:

A motion to dismiss tests the legal sufficiency of the
complaint. Upon a motion to dismiss, we accept as true all
facts well-pleaded in the complaint and the reasonable
inferences therefrom. However, a court cannot add facts in
the process of construing a complaint. Moreover, legal
conclusions asserted in a complaint are not accepted, and
legal conclusions are insufficient to withstand a motion to
dismiss. Therefore, our focus is on factual allegations made
in the complaint. We determine whether the facts alleged
state a claim for relief, which is a legal question that we
review independently.

Townsend v. ChartSwap, 2021 WI 86, ¶10, 399 Wis. 2d 599, 967 N.W.2d 21
(citations omitted).

¶13 As already noted, in addition to considering the allegations in the
complaint, a court may also consider, under the doctrine of incorporation by
reference, a document attached to a motion to dismiss without converting the motion
to one for summary judgment, so long as the document is referred to in the plaintiff’s

3
We observe that in its appellant’s brief, Badgerland represents that it seeks different relief
from that stated in its complaint. In contrast to the relief sought in the complaint, as summarized
in the text, on appeal Badgerland argues that Federated, by breaching the policy’s appraisal clause,
has forfeited its right to participate in the appraisal process and, consequently, must pay the amount
invoiced by Badgerland, minus the amount already paid to Maple Crest, for a resulting amount of
$52,661.09. See Chapman v. Rockford Ins. Co., 89 Wis. 572, 584, 62 N.W. 422 (1985) (party that
breaches appraisal clause waives the right to an appraisal). This discrepancy does not affect any
issue that we decide in this appeal. The form of relief to which Badgerland would be entitled, if it
prevails in the circuit court following remittitur, would be decided in the circuit court.

5
No. 2023AP2109

complaint, it is central to the plaintiff’s claim, and its authenticity has not been
disputed. Soderlund v. Zibolski, 2016 WI App 6, ¶37, 366 Wis. 2d 579, 874
N.W.2d 561. The purpose of the doctrine is to “prevent[] a plaintiff from evad[ing]
dismissal … simply by failing to attach to [the] complaint a document that prove[s]
[plaintiff’s] claim has no merit.” Id., ¶38 (citation omitted).

¶14 As a preliminary matter, we clarify which of the documents, in
addition to the complaint, that were filed by the parties in the circuit court are
properly considered under the incorporation by reference doctrine in deciding
Federated’s motion to dismiss. Federated filed along with its motion to dismiss the
insurance policy that Federated issued to Maple Crest, the ProStar Statement of Loss
(prepared for Federated in response to Maple Crest’s initial submission of its claim
for hail damage), and the Badgerland contract with Maple Crest (entered into for
the repair work). These three documents are referred to in the complaint, integral
to Badgerland’s claim, and uncontested, and, therefore, they are properly part of a
court’s review under the incorporation by reference doctrine described above.

¶15 Each party also filed additional documents in support of and in
opposition to Federated’s motion to dismiss. As we now explain, none of these
additional documents are properly part of a court’s review under the incorporation
by reference doctrine.

¶16 Federated filed, with its motion to dismiss, a copy of the letter it used
to deny Maple Crest’s demand for appraisal. Badgerland filed, with its response
brief, additional letters and emails among the parties. In each instance, these
documents were accompanied by an affidavit purporting to establish the authenticity
of the documents. However, in each instance, these documents allege facts that are
not referred to in the allegations in the complaint, except for Maple Crest’s demand

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No. 2023AP2109

for appraisal and Federated’s refusal to participate in the appraisal process. In
addition, Badgerland filed its itemized statement of the work it claimed to have
completed for Maple Crest, which it submitted to Federated after the work was
completed. Other than the total amount presented in that statement, which is alleged
in the complaint as including the amount of the “supplements” that Badgerland
submitted to Federated, the detailed information contained in that statement
similarly alleges facts that are not referred to in the complaint. Accordingly, none
of these additional documents are properly considered on review of Federated’s
motion to dismiss.

¶17 Relatedly, Badgerland argues that the circuit court improperly relied
on allegations of fact in Federated’s briefs. Specifically, the circuit court said that
it based its ruling dismissing the complaint in part on the following allegations of
fact that the court “was told in the [parties’] briefs”: (1) “there wasn’t any request
[for approval of any supplements] during the pendency of the repairs”;
(2) “Federated never approved any supplement[s]”; and (3) Federated can no longer
access “the damaged property to evaluate the loss.” Federated likewise relies in part
on these three allegations of fact in its arguments on appeal. However, these three
allegations are neither alleged in the complaint nor included in the documents
incorporated by reference. Reliance on allegations of fact contained in the parties’
briefs is not appropriate on a motion to dismiss. See Soderlund, 366 Wis. 2d 579,
¶37 (on a motion to dismiss, a court may consider only the allegations in the

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No. 2023AP2109

complaint and documents properly incorporated by reference). On our de novo
review, we do not rely on allegations of fact contained in the briefs.4

¶18 We now address the merits of Badgerland’s appeal of the circuit
court’s order granting Federated’s motion to dismiss the complaint for failure to
state a claim. Federated makes various arguments disputing the right of Maple Crest
to claim a breach of the appraisal clause, which we address below. But Federated
does not dispute that, assuming there was a dispute over the value of the loss, and
further assuming that waiver or estoppel principles do not apply, the appraisal clause
here required Federated to participate in the process described in the clause if
demanded by Maple Crest and Maple Crest unambiguously demanded an appraisal.
With that clarification, we begin with an overview of the law applicable to appraisal

4
Badgerland raises two additional issues that, for the reasons we now state, we do not
consider further.

First Badgerland argues that “it appears” that the circuit court erred by considering material
outside the complaint because, in doing so, it improperly converted Federated’s motion to dismiss
to a motion for summary judgment. See WIS. STAT. § 802.06(3) (2021-22) (providing that, if a
court on a motion for judgment on the pleadings considers matters outside the pleadings, the court
shall treat the motion as one for summary judgment). To the extent that Badgerland faults the court
for considering any of the three documents that we have concluded are properly considered on a
motion to dismiss under the incorporation by reference doctrine, such an argument fails. To the
extent that Badgerland faults the court for considering the allegations of fact in Federated’s briefs,
we have explained why we do not consider those allegations of fact on our de novo review of
Federated’s motion to dismiss. In addition, just as consideration of allegations of fact in a brief are
not properly considered on a motion to dismiss, so they are not properly considered on a motion
for summary judgment. See WIS. STAT. § 802.08(2) (a party is entitled to summary judgment, “if
the pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law”).

Second, Badgerland argues that “it appears” that the circuit court improperly applied the
standard for sanctioning a party for spoliation. See American Fam. Mut. Ins. Co. v. Golke, 2009
WI 81, ¶21, 319 Wis. 2d 397, 768 N.W.2d 729 (“Spoliation is the intentional destruction,
mutilation, alteration, or concealment of evidence.”) (internal quotation marks and quoted source
omitted). The record establishes that Federated did not seek a sanction based on, and the court did
not take up on its own, the topic of spoliation.

All references to the Wisconsin Statutes are to the 2021-22 version unless otherwise noted.

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No. 2023AP2109

clauses in insurance policies. We then explain our conclusion that, consistent with
that law, the complaint here states a breach of contract claim and Federated’s
arguments to the contrary fail.

A. Overview of applicable legal principles.

¶19 The appraisal clause here is stated in full supra, ¶4.

¶20 Appraisal clauses have long been included in property insurance
policies. See, e.g., Canfield v. Watertown Fire Ins. Co., 55 Wis. 419, 420, 12
N.W.2d 252 (1882) (involving a lawsuit filed by the insured to set aside an appraisal
that was made pursuant to the insurance policy’s appraisal clause). Appraisal
clauses are also ubiquitous. See State Farm Lloyds v. Johnson, 290 S.W.3d 886,
888 (Tex. 2009) (“[A]ppraisal clauses are uniformly included in most forms of
property insurance policies. Virtually every property insurance policy for both
homeowners and corporations contains a provision specifying ‘appraisal’ as a
means of resolving disputes about the ‘amount of loss’ for a covered claim.”)
(citations omitted).5

¶21 When a policy contains an appraisal clause and one party demands an
appraisal, the other party is required to participate in the appraisal process unless
certain defenses apply. Chapman v. Rockford Ins. Co., 89 Wis. 572, 584, 62 N.W.
422 (1895) (stating that, when an appraisal has been properly demanded,
participation in an appraisal is a condition precedent to the commencement of a

5
While non-Wisconsin opinions are not binding on us, the few Wisconsin opinions that
have discussed insurance policy appraisal clauses generally do not address the issues raised in this
appeal. Further, the opinions that we identify from other state courts and federal courts (interpreting
state laws) are instructive and persuasive on these issues. See Dostal v. Strand, 2023 WI 6, ¶31,
405 Wis. 2d 572, 984 N.W.2d 382 (stating that, when there is no Wisconsin case law directly on
point,” we may look to case law of other states for guidance”).

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No. 2023AP2109

lawsuit, absent waiver based on prejudicial and unreasonable delay, bad faith, or
illegality; citing with approval a New York case stating that if either party refuses
to proceed with the appraisal once demanded, the other party is “absolved”;
concluding that Chapman, therefore, is entitled to the full amount of his claim when
the insurer refused to proceed with an appraisal); Farmers Auto. Ins. Ass’n v.
Union Pac. Ry. Co., 2009 WI 73, ¶34, 319 Wis. 2d 52, 768 N.W.2d 596 (“If and
when one party invokes [the arbitration] clause, the other side must abide by it.”);
State Farm Lloyds, 290 S.W.3d at 889 (Tex. 2009) (an appraisal clause when
invoked “binds the parties to have the extent or amount of the loss determined in a
particular way”).

¶22 An appraisal clause may be invoked when the insured and the insurer
provide differing estimates of the damage incurred before any repair work is done.
See, e.g., Farmers Auto Ins., 319 Wis. 2d 52, ¶¶11-14; State Farm Lloyds, 290
S.W.3d at 887 (Tex. 2009). An appraisal clause may also be invoked when the
insured submits, as its claim for the damage incurred, the cost of the repair or
replacement work after the work has been completed. See, e.g., Cimino v. State
Farm Fire & Cas. Co., No. 21-cv-01905-CMA-MDB, 2023 WL 3044765, *2 (D.
Colo. Apr. 21, 2023) (after walls were damaged by hail and wind storm and parties
disputed amount of loss, plaintiffs removed and replaced all of the stucco on their
home before demanding appraisal); Creekview of Hugo Ass’n, Inc. v. Owners Ins.
Co., 386 F.Supp.3d 1059, 1063 (D. Minn. 2019) (all repairs to property damaged by
wind and hail were completed by time of appraisal); Deuto v. State Farm Fire &
Cas. Co. 635 F.Supp.3d 1142, 1144 (D. Colo. 2022) (fire damage was repaired when
appraisal was demanded); First Call 24/7 v. Citizens Prop. Ins. Corp., 333 So.3d
1180, 1184-85 (Fla. Dist. Ct. App. 2022) (plaintiff contractor, as assignee of right

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No. 2023AP2109

to insurance benefits by owners of home damaged by hurricane, completed repairs
before insurer invoked appraisal clause).

¶23 A party may sue to set aside an appraisal that has been determined
pursuant to an appraisal clause “only upon the showing of fraud, bad faith, a material
mistake, or a lack of understanding or [lack of] completion of the” appraisal
assignment. Farmers Auto Ins., 319 Wis. 2d 52, ¶44 (citing Dechant v. Globe &
Rutgers Fire Ins. Co., 194 Wis. 579, 581, 217 N.W. 322 (1928)); State Farm
Lloyds, 290 S.W.3d at 895 (Tex. 2009) (“[I]f an appraisal is not an honest
assessment of necessary repairs, that can be proved at trial and the award set
aside.”).

B. The complaint states a claim for breach of the policy.

¶24 To recap, the complaint alleges that Maple Crest’s property suffered
hail damage that was covered by a Federated insurance policy, that Federated
determined the amount of loss as estimated by ProStar ($58,311.21), and that Maple
Crest determined the amount of loss as its actual cost of repair or replacement
($110,972.20). Thus, the complaint alleges that the parties disputed the amount of
loss, which, under the legal standards we have just summarized, entitled Maple
Crest to demand and obtain an appraisal under the policy’s appraisal clause.

¶25 The complaint further alleges that Federated breached the policy by
refusing to participate in the appraisal process in response to Maple Crest’s demand
for appraisal. As noted above, our supreme court has stated, “If and when one party
invokes this clause, the other side must abide by it.” Farmers Auto. Ins., 319 Wis.
2d 52, ¶36. As also noted above, the other side may, instead of abiding by the
appraisal clause, seek relief in circuit court by arguing that the clause is
unenforceable because it was untimely or otherwise improperly invoked. See

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No. 2023AP2109

Chapman, 89 Wis. at 584 (party opposing invocation of appraisal clause must show
waiver, bad faith, or illegality); Lynch v. American Fam. Mut. Ins. Co., 163 Wis.
2d 1003, 1013, 473 N.W.2d 515 (Ct. App. 1991) (insurer improperly invoked
appraisal clause after insured filed suit when insurer “had ample opportunity” to do
so before suit was filed); Coleman v. AmGuard Ins. Co., No. 4:22-cv-03442, __
F.Supp.3d__, 2023 WL9052250 at *1-*3 (S.D. Tex. Dec. 28, 2023) (party opposing
invocation of appraisal clause must show waiver through unreasonable delay and
prejudicial conduct or illegality); Be Rios, Ltd. v. Nationwide Prop. & Cas. Ins.
Co., No. 5:18-cv-01297-OLG, 2020 WL 6123129, *2 (W.D. Tex. June 12, 2020) (a
party opposing invocation of insurance policy appraisal clause must show that the
clause is unenforceable based on waiver through the conduct of the party seeking
appraisal and resulting prejudice); Kelly Greens Veranda VI Condo. Ass’n, Inc. v.
Blackboard Specialty Ins. Co., 2:21-cv-72-SPC-NPM, 2022 WL 4464825 at *2-*3
(M.D. Florida Sept. 26, 2022) (a party can forfeit its right to appraisal by acting
inconsistently with its appraisal rights, such as by invoking appraisal clause after
unreasonable delay and active litigation).

¶26 Here, the allegations are that there was a dispute over the value of the
loss, Federated refused to abide by the appraisal clause when it was invoked by
Maple Crest following the completion of the roof repair work, and Federated did
not seek relief in court. Accordingly, the complaint states a claim for breach of the
policy. See Pottenburgh v. Dryden Mut. Ins. Co., 55 Misc.3d 775, 776, 48
N.Y.S.3d 885 (2017) (insured’s petition to compel appraisal stated necessary
elements of right to enforce appraisal clause, namely: (1) an insurance policy that
contains an appraisal clause; (2) damage to the property covered by the policy; (3) a
dispute between parties regarding the value of damages; (4) the insured’s demand
for appraisal; and (5) the insurer’s refusal to participate in the appraisal process);

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No. 2023AP2109

Pagoudis v. Keidl, 2023 WI 27, ¶12, 406 Wis. 2d 542, 988 N.W.2d 606 (“The
elements of any breach of contract claim are (1) the existence of a contract between
the plaintiff and the defendant; (2) breach of that contract; and (3) damages.”).

C. Federated’s arguments to the contrary fail.

¶27 Federated asserts that the complaint fails to state a claim for breach of
the appraisal clause because Maple Crest had no right to invoke the appraisal clause
for three reasons: (1) the parties did not dispute the value of the loss; (2) Maple
Crest waived the right to invoke the appraisal clause; and (3) Maple Crest is
estopped from demanding appraisal.

1. No dispute

¶28 The complaint alleges a dispute, and we take that allegation as true on
a motion to dismiss.

¶29 Federated argues that Maple Crest did not dispute Federated’s “loss
valuation” (the ProStar estimate of the cost to replace the roof) because Maple Crest
entered into a contract for the exact amount of that valuation, plus approved
“supplements,” and Federated did not approve any “supplements.” There are at
least two sets of problems with this argument. The first is that Federated assumes
facts that have yet to be proven on summary judgment or at trial; it ignores the fact
that a motion to dismiss is decided based on the allegations in the complaint and any
documents properly incorporated by reference. All of the following issues require
the development of a factual record: whether Badgerland or Maple Crest
communicated with Federated before Badgerland completed the work; whether
Federated approved any “supplements” before the work was completed; and the
meaning of the “approved supplements” language in the contract.

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No. 2023AP2109

¶30 The second problem is the absence of legal authority. Federated does
not identify any legal authority supporting the proposition that any provision in the
policy required Maple Crest to submit its own estimate or to obtain Federated’s
approval of any estimate, before commencing or completing the repair work.
Further, as noted in the waiver section below, case law from other jurisdictions that
we consider persuasive is to the contrary.

¶31 Federated also may intend to argue that there is no dispute over the
value of the loss because it paid Maple Crest what Maple Crest paid Badgerland,
and Badgerland cannot assert its own claim for more. However, again Federated
lacks the proven facts or the legal authority to advance this argument at the motion
to dismiss stage. Factually, what Federated paid Maple Crest is not alleged in the
complaint; this would have to be proven. Legally, Federated does not cite authority
supporting the proposition that Maple Crest accepted Federated’s loss valuation by
accepting payment in the amount of that valuation. See Coleman, 2023 WL
9052250 at *2 (S.D. Tex. 2023) (noting that the insurer cited no cases “suggesting
that an insured accepting payment in part constitutes agreement to a total amount of
loss”). Nor does Federated cite legal authority supporting the proposition that
Badgerland, as Maple Crest’s assignee, cannot contest Federated’s loss valuation by
invoking the appraisal clause. See First Call 24/7, 333 So.3d (Fla. Dist. Ct. App.
2022) at 1184-85 (plaintiff contractor, as assignee of right to insurance benefits by
owners of home damaged by hurricane, completed repairs before insurer invoked
appraisal clause).

¶32 Given the allegation of a dispute, and because this case has not yet
reached the fact-development stage, Federated’s asserted reasons for refusing to
participate in the appraisal process do not entitle Federated to dismissal of
Badgerland’s complaint for failure to state a claim.

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No. 2023AP2109

2. Waiver and equitable estoppel

¶33 Federated renews the arguments it made in the circuit court that Maple
Crest’s invocation of the appraisal clause is barred by waiver and equitable estoppel.
Therefore, Federated argues, it did not breach the policy by refusing to participate
in the appraisal process.6

¶34 Federated argues that Maple Crest waived the right to demand an
appraisal by waiting to do so until after the repair work was completed. Federated
folds this argument into its broader argument that Maple Crest failed to demand an
appraisal within a reasonable time, i.e., before Badgerland undertook the work.
Neither argument supports dismissal of the complaint for failure to state a claim.

¶35 Broadly, case law states that, when an insurance policy provision such
as an appraisal clause does not set a time for invoking the provision, a party must
do so within a “reasonable time” after a dispute. See Terra Indus., Inc. v.
Commonwealth Ins. Co. of Am., 981 F. Supp. 581, 597 (N.D. Iowa 1997) (“courts
interpret an ‘appraisal’ clause lacking a specific time for demand to be made to
require that the demand be made within a ‘reasonable time’” (collecting cases));
Rats Nest Condo. Ass’n, Inc. v. Allstate Ins. Co., No. 07-04174, 2008 WL
11354935 at *2 (E.D. La. Apr. 23, 2008) (same).

¶36 In the specific context of waiver of the right to invoke an appraisal
clause, cases have defined “reasonable time” as encompassing both delay resulting
in prejudice to the party opposing appraisal and conduct inconsistent with the right

6
Federated asserts that Badgerland forfeited opposition to Federated’s waiver and
estoppel arguments by not raising these arguments in the circuit court. But Badgerland accurately
points out in reply that the circuit court did not address the topics of waiver or estoppel in the circuit
court. Further, Federated’s arguments depend on the development of facts outside the complaint.
For these reasons, we decline to apply forfeiture against Badgerland on these issues.

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No. 2023AP2109

to appraisal. See, e.g., Kelly Greens, 2022 WL 4464825 at *1-*3 (M.D. Fla. 2022)
(determining that insured forfeited, or waived, right to invoke appraisal clause by
engaging in extensive litigation and failing to invoke it until one year after initiating
suit, thereby “act[ing] inconsistent[ly] with having the amount-of-loss question
resolved by an appraisal panel rather than a jury or the court”); Coleman, 2023 WL
9052250 at *1 (S.D. Tex. 2023) (“The party challenging the validity or
enforceability of an appraisal clause based on waiver bears the burden of
establishing both waiver by conduct of the party seeking appraisal and prejudice to
itself.”). Showing delay resulting in prejudice and conduct inconsistent with the
right to appraisal generally requires the development of a factual record. See id.
(“Whether certain circumstances constitute waiver is a question of law that a court
may decide, but the inquiry implicates questions of fact.”); Keesling v. Western Fire
Ins. Co. of Fort Scott, Kan., 520 P.2d 622 (Wash. App. 1974) (stating that
“[w]hether a demand for appraisal has been made within a reasonable time depends
upon the circumstances of each case … [including the two main factors of] prejudice
resulting from the delay, and the breakdown of good-faith negotiations concerning
the amount of loss,” and determining that appraisal demand made eight months after
date of loss was timely).

¶37 To recap, here the complaint alleges that Maple Crest demanded
appraisal six months after the roof was damaged and before Badgerland filed suit.
Federated cites no authority supporting the proposition that this alleged timing
constitutes a delay as a matter of law. Cf. Coleman, 2023 WL 9052250 at *2 (S.D.
Tex. 2023) (ruling that insured unreasonably delayed in invoking, or even indicating
the possibility of invoking, appraisal clause until over two and one-half years after
the damage, 22 months after the insurer made its final payment, and eight months
after filing suit, during which time the insured engaged in active litigation and

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multiple litigation deadlines passed). Nor, according to the complaint, did Maple
Crest, having unambiguously invoked the appraisal clause before filing suit, engage
in protracted litigious conduct, or require Federated to do so, before making its
demand. Cf. id. at *3 (determining that insured’s conduct throughout the litigation
indicated that insured intended to go to trial rather than resolve the dispute via
appraisal). Thus, waiver based on unreasonable delay and litigious conduct
inconsistent with the right of appraisal cannot be shown based on the allegations in
the complaint.

¶38 Federated more specifically argues that Maple Crest unreasonably
delayed demanding appraisal, to Federated’s prejudice, by making its demand after
the repair work was completed. However, case law indicates that completion of the
work, while potentially relevant to a claim of unreasonable delay, does not
necessarily suffice to establish prejudice or waiver. Here the complaint does not
establish that Federated has been prejudiced. See Deuto, 635 F.Supp.3d at 1148 (D.
Colo. 2022) (noting that, while repairs may make it more difficult to determine the
amount of loss, they do not make it impossible and appraisal after repairs are
completed is neither precluded by the terms of the policy nor by case law) (citing
Church Mut. Ins. Co. v. Rocky Mountain Christian Church, 20-cv-1769-WJM-
KLM, 2021 WL 1056515 (D. Colo. Mar. 19, 2021), which “reject[ed] the argument
that replacement of a roof destroyed evidence and prevented a fair appraisal and
rel[ied] on the declaration of a certified insurance counselor and risk manager who
declared that at least 20% of his appraisals involved properties that had undergone
repair before the appraisal”); First Call 24/7, 33 So.3d at 1185 (Fla. Dist. Ct. App.
2022) (“nothing in the policy suggests that the damaged property must remain in its
damaged state for an appraisal to take place” and it cannot be reasonably presumed
that the appraisal panel would have reason to inspect after the repairs have been

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completed); Cimino, 2023 WL 3044765 at *4-*5 (D. Colo. 2023) (the appraisal
clause unambiguously permits the appraisal panel to determine the amount of loss
of the property that has been repaired prior to the appraisal, and, therefore, permits
appraisal for repaired property); Pottenburgh, 48 N.Y.S.3d at 888 (stating that
“there is no apparent prejudice to [insurer] from compelling an appraisal, even if the
property has been partially or completely repaired,” given that the insurer had timely
notice of the claim and the opportunity to inspect and photograph soon after the
loss).

¶39 Federated cites the determination in Jadick v. Nationwide Prop. &
Cas. Ins. Co., 98 So. 3d 5, 14-15 (Ala. Civ. App. 2011), that an insured waived the
right to an appraisal when the insured demanded it 15 months after repairs to
property damaged by fire were completed, at which time the extent of the damage
could not have been evaluated. However, in that case, the facts were developed on
summary judgment. Id. at 6-8, 11-13. Those facts included the following: the
insurer’s pre-repair estimate included specific language regarding additional
damage that might require reinspection of the property by the insurer’s
representative and communication with the insurer, and the insured had not
complied with those requirements; and the insured demanded an appraisal after
obtaining an estimate from a second contractor 15 months after the first contractor
had completed repairs, and the insurer had paid the first contractor in full. Id. at 7-
8, 11-13. See also Coleman, 2023 WL 9052250 at *1, *3 (S.D. Tex. 2023)
(determining on developed factual record that insured waived appraisal when
insurer paid invoice for repair costs beyond its initial estimate and insured
demanded appraisal almost two years after the damage had been repaired, in part
because at that point “appraisal would be useless”). No similar factual record has
been developed here.

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¶40 Federated argues that Federated’s right under the policy to inspection
“as often as may be reasonably required” was prejudiced when Badgerland
completed the repairs without notifying Federated of any disagreement with
Federated’s loss valuation, because, at that point, Federated was unable “to
reinspect” the damaged roof. Therefore, Federated’s argument continues, Maple
Crest waived its right to an appraisal. However, whether Federated received notice
before Badgerland completed the repair work, and whether the completion of the
repair work affected Federated’s ability to “reinspect” the roof, require the
development of a factual record beyond the allegations in the complaint. Moreover,
as Badgerland notes, and as the complaint and the documents properly incorporated
by reference reveal, the roof’s dimensions and the number and cost of shingles that
Badgerland claims were required to cover it is information that is available to
Federated. See State Farm Lloyds, 290 S.W.3d at 890 (Tex. 2009) (stating that the
cost of replacing shingles (or anything else) is a function of both price and number,
and that “[s]ometimes it may be unreasonable or even impossible to repair one part
of a roof without replacing the whole”). In addition, there is no allegation by
Badgerland and no argument by Federated that the damage to the roof required less
than replacement or was due to something other than the hail, or that Federated was
denied the opportunity to inspect the roof promptly after Maple Crest notified
Federated of the loss. See Pottenburgh, 48 N.Y.S.3d at 888 (stating that “there is
no apparent prejudice to [insurer] from compelling an appraisal, even if the property
has been partially or completely repaired,” when the insurer had timely notice of the
claim and the opportunity to inspect and photograph soon after the loss).

¶41 Finally, Federated does not explain how Maple Crest’s conduct
alleged in the complaint, demanding an appraisal after the repair work was
completed, was inconsistent with the policy’s provisions that Federated will not pay

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the cost of repair until the repair is completed, or that Federated will pay the amount
actually spent on the repair or the replacement cost, whichever is less. Cf.
Creekview, 386 F.Supp.3d at 1066 (D. Minn. 2019). In Creekview, the policy,
similar to the policy here, capped the insurer’s payment obligation at either the
replacement cost of the property or the amount the insured “actually spen[t] that is
necessary to repair or replace the … damaged property,” whichever was less. The
court stated that, in light of that language, the insurer could not dispute that it was
required to pay the balance of the appraisal’s replacement cost award that remained
unpaid after the insurer’s initial payments to the insured, because the award was
equal to or less than the amount the insured actually spent on repairs. Id.

¶42 Turning to the equitable estoppel claim, Federated largely repeats its
waiver arguments—the alleged absence of any dispute, Maple Crest’s alleged
failure to timely dispute the ProStar valuation and demand appraisal, and
Federated’s alleged loss of the opportunity to inspect the damaged property. At this
stage of the proceedings, those arguments fail for the reasons stated above.

¶43 In sum, Federated’s waiver and equitable estoppel arguments are
either unsupported by legal authority or premised on facts outside the allegations in
the complaint and the documents properly incorporated by reference.

CONCLUSION

¶44 For all these reasons, we reverse the circuit court order dismissing the
complaint and remand for further proceedings.

By the Court.—Order reversed and cause remanded for further
proceedings.

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