In a decision with far-reaching implications for the appraisal process in property insurance disputes, the Seventh Circuit Court of Appeals affirmed last week that appraisers may determine the cause of loss when establishing the amount of loss. The case, Mesco Manufacturing, LLC v. Motorists Mutual Insurance Company, 1 involved a commercial hail damage claim in Indiana, where the insurer sought to deny a portion of a binding appraisal award by arguing that certain roofing components were not hail-damaged and therefore outside the scope of coverage. The appellate court rejected this approach and upheld the district court’s ruling in favor of the policyholder.
The dispute was a familiar and longstanding tension about whether appraisers and umpires are permitted to assess causation when determining the amount of loss, or whether causation lies solely within the domain of legal coverage decisions made by courts. Motorists Mutual took the position that causation is a coverage issue and that only courts may decide whether hail, a covered peril, actually caused the damage in question. Based on this position, the insurer attempted to withdraw certain roofs from the appraisal after the panel had been formed and before the umpire issued his decision.
Mesco, the policyholder, contended that the parties had submitted the entire scope of hail-related damages to the appraisal panel and that the appraisal process, by necessity, includes an assessment of causation. After thorough inspections and evaluation, the appraisal panel issued a binding award that attributed damage to hail and valued the loss at more than one million dollars. The insurer paid only a fraction of that amount, citing its disagreement with the panel’s findings as to what was actually damaged by hail.
The Seventh Circuit was unpersuaded by the insurer’s arguments. It held that the appraisal panel acted within its authority in determining that certain portions of the property were damaged by hail. The court drew a clear distinction between questions of legal liability and factual determinations. The judges recognized that while appraisers may not resolve legal questions about the existence or interpretation of coverage provisions, they are well within their role to determine the factual cause of damage. In this case, whether hail, rather than wear and tear, caused a roof to deteriorate. The court emphasized that deciding the amount of loss necessarily involves distinguishing between covered and uncovered damage, a process that inherently requires consideration of causation.
The court also rejected the insurer’s reliance on the policy’s “right to deny” clause. The policy stated that the insurer retained the right to deny the claim even after appraisal. Motorists Mutual interpreted this to mean that it could simply disregard portions of the appraisal award with which it disagreed. The court clarified that while an insurer may retain the right to deny a claim for reasons such as failure to comply with post-loss obligations or other contractual defenses, it may not unilaterally reject the factual determinations of a valid appraisal panel once it has agreed to the appraisal process and the panel has rendered a binding decision.
This decision reaffirms longstanding principles supporting the enforceability of appraisal awards. As the court noted, the utility of appraisal lies in its ability to serve as a fast and inexpensive means of resolving valuation disputes. If parties could routinely disregard appraisal outcomes on the basis of mere disagreement with the result, the process would be stripped of any practical value. The court’s ruling reinforces that appraisers and umpires are not mere estimators. Instead, they are fact-finders tasked with resolving the core dispute over what damage was caused by a covered peril and determining its value.
This is not the first time a federal appellate court has addressed this issue. Still, it is a welcome reaffirmation of logic that many in the policyholder community have long advocated. Courts in Florida, Colorado, Minnesota, Iowa and elsewhere have similarly held that appraisal panels can and should consider causation where it is inextricably intertwined with determining the amount of loss. As this body of precedent grows, it will become harder for insurers to argue that appraisers must blindly accept the insurer’s scope of damage without regard to the facts on the ground.
For policyholders in disagreement with their insurance companies, public adjusters, appraisers, umpires, and policyholder advocates, this decision strengthens the foundation of appraisal as a trusted forum for factual dispute resolution. It also serves as a reminder to insurers: When you agree to appraisal, you are agreeing to be bound by the appraisal panel’s findings, even if those findings do not go your way. And once the panel reaches a decision based on the facts presented, courts will not allow a disappointed party to relitigate causation or valuation under the guise of preserving a right to deny.
As with all developments in this area of the law, I will continue to monitor how courts interpret the scope of appraisal. But for now, the message from the Seventh Circuit is clear: Causation can be determined in appraisal, and insurers must respect the process they agreed to use.
I would suggest that those interested in this topic of causation in appraisal read the law review article written by Merlin Law Group attorney Ashley Harris, noted in Ashley Harris Cited by Iowa Supreme Court Regarding Causation Issues in Appraisal Proceedings.
Thought For The Day
“The measure of who we are is what we do with what we have.”
—Vince Lombardi
1 Mesco Manufacturing, LLC v. Motorists Mutual Ins. Co., No. 24-1307 (7th Cir. July 25, 2025).
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