In a courtroom clash that could’ve started on a legal drama called Law & Roofing Order, Bigfoot Co-op took on giant Nationwide in a hailstorm roofing dispute that had to do less with weather and more about plywood sheathing and the fine print of insurance policies. This roofing dispute was over the valuation of storm damage, code upgrades, the finality of appraisal awards, and the meaning of “increased cost of construction” sub-limits of coverage. The case provides lessons on how appraisal awards are viewed in Iowa, code compliance, and the need to pay attention to the fine print regarding coverage amounts.
The Iowa federal court granted summary judgment in favor of Nationwide in a dispute that tested the limits of “Increased Cost of Construction” (ICC) coverage under a commercial property policy. 1 The heart of the dispute centered on how to interpret and apply the ICC provision within the insurance policy.
After the hailstorm struck the insured property in Burlington, Iowa, the City adopted the 2021 International Building Code (IBC), which imposed new standards for roof sheathing. The parties went to appraisal, and the final award itemized damages into two components: approximately $455,137.49 for the buildings and $189,380.02 for code-related upgrades. Nationwide paid the full “building” amount and $50,000 for code compliance. Nationwide paid code compliance coverage of $10,000 per building, citing the policy’s cap under the ICC provision.
The policy’s ICC clause stated:
In the event of damage by a Covered Cause of Loss to a building that is Covered Property, we will pay the increased costs incurred to comply with the minimum standards of an ordinance or law in the course of repair, rebuilding or replacement of damaged parts of that property, subject to the limitations stated in e.(3) through e.(9) of this Additional Coverage.
Under section e.(6), it further limited recovery:
If a damaged building is covered under a blanket Limit of Insurance which applies to more than one building or item of property, then the most we will pay under this Additional Coverage, for that damaged building, is the lesser of $10,000 or 5% times the value of the damaged building as of the time of loss times the applicable Coinsurance percentage.
Bigfoot argued that a portion of the code-related estimate did not represent “increased” costs of construction but merely reflected the replacement value of sheathing that was already installed and compliant with previous codes. 2 In other words, they contended that only the incremental difference between the old and new code-compliant sheathing, approximately $80,593.48, should be subject to the ICC cap. The rest, they claimed, fell under standard replacement cost coverage and should have been fully reimbursed outside the ICC limitation.
However, the court was unpersuaded. It held that the policy language was unambiguous and that Nationwide correctly applied the ICC limit. The court emphasized that the “Code” line item in the appraisal awards was distinct from the “Buildings” portion and clearly represented expenses tied to compliance with the 2021 IBC.
The policyholder’s failure to produce specific evidence showing that the pre-existing sheathing was directly damaged by the storm proved fatal to their argument. An affidavit from their contractor merely confirmed that the sheathing was replaced to meet the new code, not because of identifiable storm damage. Moreover, the appraisal award itself made no effort to differentiate between the two categories of sheathing work. Thus, the court concluded that the entire $189,380.02 for code compliance fell squarely under the ICC clause and was therefore limited to $10,000 per building.
The policyholders also claimed that the appraisers had exceeded their authority by creating a separate “Code” category in the appraisal award, arguing that this improperly created new coverage not outlined in the policy. The court disagreed, reiterating a core principle under Iowa law: appraisers determine the amount of loss, not questions of coverage. The appraisers’ separation of code and building costs was a facilitation device, allowing the insurer and court to determine later which parts of the loss were covered and under what provisions. The appraisal award even included a disclaimer noting it did not interpret or apply policy provisions, further undermining the argument that the appraisers overstepped.
For what it is worth, my understanding from numerous appraisal seminars is that the appraisal panel did precisely what is commonly taught. They listed a separate item for the building replacement and a separate amount for the code issue. Nationwide then applied the sub-limit since the panel’s valuation for the Code items was greater than the coverage limits.
The court’s ruling also dispatched the policyholder’s bad faith claim. Under Iowa law, bad faith requires showing that the insurer lacked a reasonable basis for denying the claim and knew or recklessly disregarded that fact. Since Nationwide’s interpretation of the ICC provision was not only reasonable but correct, the bad faith argument collapsed. The court found that even if the policy were somehow ambiguous, the dispute would still have been “fairly debatable,” which shields an insurer from bad faith liability.
Several critical lessons emerge from this case. First, policyholders and public adjusters must have a firm grasp of ICC provisions. These clauses often contain strict sublimits, particularly under blanket policies covering multiple buildings. Here, the policy’s language was crystal clear—$10,000 per building—and this cap was enforceable even if the code-compliance work seemed related to storm damage. Knowing exactly what the ICC clause covers and what it does not is vital when estimating recovery potential.
Second, evidence is everything. If the policyholder intended to argue that part of the code-compliance work was actually storm damage subject to full replacement cost, it needed clear, credible evidence. My suggestion is to win that argument in the appraisal panel valuation. Vague affidavits or post-hoc interpretations will not carry the day in court. Detailed documentation of storm-related damage to specific components, especially when dealing with areas that also fall under building code upgrades, is essential.
Third, the structure and terminology used in appraisal awards matter. Even if the policyholder believes that appraisers should not distinguish between code and non-code items, courts will treat clearly itemized awards as valid tools for applying policy limits. The Bigfoot court made it clear that separating damages into categories does not create new coverage; it simply clarifies the loss valuation for later legal determinations.
Finally, this decision is a cautionary tale for pursuing bad faith claims without a solid foundation. Courts will not penalize insurers that follow unambiguous policy language. In this case, Nationwide not only followed the terms of the policy but went further by paying exactly what the contract required. When the facts don’t support improper conduct, courts won’t manufacture it.
For property insurance professionals and adjusters navigating post-storm claims, the message is clear: precision, documentation, and a careful reading of policy terms are the surest path to proper conduct and recovery.
Thought For The Day
“In theory, there is no difference between theory and practice. In practice, there is.”
—Yogi Berra
1 Bigfoot Co-Op A v. Nationwide Mut. Ins. Co., No 3:24-cv-00022 (S.D. Iowa Apr. 21, 2025).
2 Bigfoot Co-Op A v. Nationwide Mut. Ins. Co., No 3:24-cv-00022 [Doc. #30 Policyholders’ Brief in Support of Response In Opposition to Defendant’s Motion for Summary Judgment] (S.D. Iowa).
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