A July 25, 2025, Seventh Circuit decision just made it clear: when insurers agree to an appraisal, they can’t dodge the final bill.
Mesco Manufacturing, LLC, an Indiana-based manufacturer, found itself in a dispute with Motorists Mutual Insurance Company after a hailstorm hit its Greensburg facilities on August 25, 2018. Mesco’s business insurance policy with Motorists Mutual covered “direct physical loss of or damage to” property caused by “any Covered Cause of Loss,” with hail explicitly included and wear and tear excluded. The policy was in effect from September 13, 2017, to September 13, 2018.
After the storm, Mesco submitted a claim for hail damage to its sheet metal, modified bitumen, and EPDM (a synthetic rubber) roofs. Motorists Mutual’s initial adjustment came in at $7,806.75, a figure Mesco disputed. The company then invoked the policy’s appraisal provision, which allows either party to demand an appraisal if they disagree on the value of the property or the amount of loss. Each party picks an appraiser, and if they can’t agree, an umpire is brought in. The policy also stated, “If there is an appraisal, we will still retain our right to deny the claim.”
Mesco and Motorists Mutual selected Nick Banks and Geoff Young as their respective appraisers. The appraisers agreed the metal roofing was hail damaged but disagreed about the modified bitumen and EPDM roofs. Bart Myers was chosen as umpire. Before Myers could weigh in, Motorists Mutual hired an engineer who concluded the modified bitumen and EPDM roofs were not hail damaged. Motorists Mutual then told Mesco those roofs “cannot be included in the appraisal process as the disagreement is not of the value of the roof coverings; rather if the roof coverings are damaged.”
Despite that, Myers inspected the property and determined the modified bitumen roofs were hail damaged, while the EPDM roofs were not. Myers and Banks signed an appraisal award for $1,020,490.32 in replacement cost value, or $894,733.82 in actual cash value. Motorists Mutual paid only $265,296.21, covering what it considered “the covered damages that were awarded by appraisal,” and excluded the modified bitumen and EPDM roofs. On November 5, 2019, Mesco submitted a sworn proof of loss for the entire appraisal award, but Motorists Mutual did not respond.
On December 10, 2019, Mesco sued in the US District Court for the Southern District of Indiana, alleging breach of contract and seeking a declaratory judgment. The district court sided with Mesco, holding that the appraisal award was binding and Motorists Mutual could not deny the claim absent exceptional circumstances like fraud or manifest injustice. The court cited Villas at Winding Ridge v. State Farm Fire & Casualty Co., which found a similar appraisal provision binding and unambiguous.
Motorists Mutual appealed, but the Seventh Circuit affirmed the lower court’s decision. The appellate panel explained that under Indiana law, when parties submit to an appraisal, they are bound by the result unless there are exceptional circumstances such as fraud, collusion, or manifest injustice. The court found that determining the existence and extent of hail damage is a factual question for the umpire and that the insurer’s “right to deny” clause does not allow Motorists Mutual to ignore a binding appraisal award without those exceptional circumstances.
For insurance professionals, this case is a wake-up call: once you agree to the appraisal process, you’re expected to honor the outcome. The decision underscores the importance of clear policy language and following through on commitments. It’s a straightforward message from the Seventh Circuit - insurers can’t cherry-pick which parts of an appraisal award to pay. If you’re in the business of commercial property insurance, this ruling is one you can’t afford to ignore.
