Insurer Required To Replace All Siding On Building When Matching Siding For Damaged Sides Not Available

A condo association held an insurance policy on its condo buildings. In 2014, a hail and wind storm damaged the siding on several of the buildings. The storm, however, damaged only the south and west-facing sides of the buildings. The association’s insurer initially paid the association several million to repair the damage, which covered the replacement cost of siding for the south and west sides of the buildings. The association found, however, that matching siding was no longer produced. The insurer refused to pay the cost of replacing the siding on all sides of the building, so the association sued. The district court ruled in favor of the association, and the insurer appealed. The appellate panel affirmed. The panel found that requiring the insurer to replace all sides of the building was a sensible construction of the contract, given that replacing the siding such that two sides of the building did not match the other two would reduce the value of the properties and keep the insured from being made whole.

Windridge of Naperville Condominium Association held an insurance policy via Philadelphia Indemnity Insurance Company. In May 2014, a hail and wind storm-damaged buildings owned by Windridge. These buildings were insured by Philadelphia Indemnity. The storm directly damaged the siding only on the buildings’ south and west sides. Philadelphia Indemnity paid Windridge $2.1 million for the damage, which covered the replacement of the siding on the south and west sides.

Windridge, however, sought replacement of the siding on all four sides of the building, as matching siding for the south and west sides was no longer available. Philadelphia Indemnity refused to pay those costs, arguing that it was only responsible for replacing the siding that was directly damaged by the storm. The district court granted summary judgment for Windridge, and Philadelphia Indemnity appealed.

The appellate panel began by finding that the district court’s conclusion that Windridge’s buildings as a whole were damaged, and that all of the sidings must be replaced to ensure matching, was a sensible construction of the policy language as applied to the facts. The panel then stated that the unit of covered property to consider under the policy, whether individual panels of siding, entire sides of siding, or the siding as a whole, was ambiguous as applied to the facts. Therefore, the panel reasoned, under Illinois law, the court favored the interpretation that led to coverage.

Reviewing cases from around the country, the panel noted that other circuit courts had interpreted matching issues differently. The panel stated that while Philadelphia Indemnity’s position that only the siding directly hit by the storm was covered was not indefensible and had some support in case law, the language of the policy was not clear enough to support such an interpretation. The court then rejected Philadelphia Indemnity’s reliance on other, distinguishing cases, noting that its focus in the instant case was on the specific contract language used, and therefore cases that used different contract language in different jurisdictions were not that helpful. The panel then stated that the decrease in value would be significant if a building were left with zebra-striped siding due to replacement of only the panels that were damaged, and it could not be said that the building owner was made whole by such compensation. The panel, therefore, affirmed the decision of the district court.

You can review the full opinion here.

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