In Nashville Communications, Inc. v. Auto-Owners Insurance Company, the Middle District of Tennessee addressed a dispute many commercial policyholders face after wind or hail losses: when an insurer concedes limited damage and an appraisal later determines the repairs require a much larger scope, is the resulting award binding? The court said yes.

The loss involved a March 2023 wind event that damaged a commercial building in Nashville. Auto-Owners acknowledged damage to only about twelve feet of parapet membrane and valued the loss at $2,204.75. The insured disagreed, invoked appraisal under the policy, and an appraisal panel was formed. After inspection, the umpire — joined by the insured’s appraiser — concluded that patching the parapet membrane was not a feasible or appropriate method of repair. Because manipulating the aged membrane would likely compromise surrounding material and allow moisture migration, the panel determined that returning the building to pre-loss condition required replacing the roof in its entirety. The final appraisal award was $187,469.10 — roughly eighty-five times the insurer’s figure.

Auto-Owners refused to pay the award, arguing that the panel had improperly considered causation and exceeded its authority by evaluating more than the small area of damage the insurer had agreed was wind-related. The court rejected that argument and enforced the award. Under Tennessee law, determining the amount of loss necessarily includes deciding the scope and method of repair for the conceded damage. The court found no evidence that the panel went beyond that role. It did not decide coverage, assign cause for unrelated conditions, or expand the claim beyond what Auto-Owners had accepted; it simply reached a different conclusion about what it would take to properly repair the storm-damaged portion of the roof. Even if that conclusion was debatable, it remained a determination well within the authority of the appraisal panel. Writing for the Middle District of Tennessee, Judge Trauger held:

As already stated, the law is clear that it is well within an appraisal panel’s job description to assess the appropriate manner and means of repair in appraising the cost to repair a loss. Here, the panel appears to have done just that: it was tasked with determining the appropriate means of repairing the admitted damage to the parapet wall, and it determined that replacement of the roof as a whole is required in order to correctly remediate the damage admittedly caused by the storm. . . . Here, the parties agree . . . that the parapet wall was damaged and disagree as to the appropriate manner and means of repairing that damage. [The umpire] attests that his “determination of the amount of the loss” was based “only the scope of damage that Owners agreed had sustained damage, and [he] determined the necessary means and methods of repairing the same.” [] Moreover, even if [the umpire] is wrong as a factual matter about whether repairing the parapet requires replacement of the entire roof to return the property to its pre-loss condition, this is a risk the parties accepted when they agreed to an appraisal procedure in the Policy. Accord Westchester Surplus Lines Ins. Co., 2025 U.S. Dist. LEXIS 185234, 2025 WL 2697481, at *5 (“So, when parties run to the courts following an appraisal and complain that an award is supernaturally high or riddled with duplicative costs, judges generally react with a shoulder shrug—after all, this is the process the parties knowingly bargained for, and appraisers are often better equipped to measure these sorts of damages.”).

Finally, regarding Auto-Owners’ protests about the condition of the roof, wear and tear is simply part of the consideration an appraisal panel takes into account in appraising a loss. See Johnson, 290 S.W.3d at 892-93 (“If State Farm is correct that appraisers can never allocate damages between covered and excluded perils, then appraisals can never assess hail damage unless a roof is brand new. That would render appraisal clauses largely inoperative, a construction we must avoid.” (footnoted citations omitted)). Indeed, the depreciation assessed as part of the Appraisal Award likely took into account the age and state of the roof at the time of the wind event.

The decision is notable because it reinforces the notion that localized damage does not always mean localized repair, especially with adhered membrane roofing where moisture, age, and construction design can make sectional replacement ineffective or impossible. The case reflects a practical recognition that when a small area of loss cannot be repaired without compromising the larger roof system, the appraisal panel is well within its authority to determine full replacement is necessary.

A special shout-out to my partner, Jonathan Bobbitt, who spear-headed this litigation on behalf of our client.