Insurers will go to great lengths – some valid, others less so – to avoid expensive payouts. Their attempts to twist facts and law, however, often crumble in the face of common-sense legal challenges.

In a recent federal court case from the Seventh Circuit, Mesco Manufacturing, LLC v. Motorists Mutual Insurance Company, the Court rejected a particularly egregious attempt at such subterfuge. 7th Cir. Court of Appeals, No. 24-1307 (July 25, 2025). Following a hailstorm in summer 2018, Mesco Manufacturing submitted a claim to its insurer, Motorists Mutual, for roof damage. At first, Motorists offered Mesco less than $8,000, but Mesco disputed the amount. Pursuant to Mesco’s policy, the insurer and policyholder each hired an appraiser, whose independent estimates would be adjudicated by an umpire.

Both appraisers found that multiple Mesco’s roofs, which were made of sheet metal, had suffered hail damage. The remaining roofs, composed of either modified bitumen or EPDM, were harder to diagnose. While Mesco’s appraiser saw signs of hail damage, Motorists’ appraiser claimed that the roofs only displayed wear and tear, which were not covered under Mesco’s policy.

Motorists saw its opportunity to strike. Before an umpire could weigh in on the appraisers’ disagreement, Motorists instructed an engineer to inspect the roofs in question. Unsurprisingly, Motorists’ engineer found that wear and tear, not hail, had damaged Mesco’s modified bitumen and EPDM roofs. Motorists therefore informed Mesco that the umpire could not appraise those roofs by claiming whether there was damage was an issue of coverage and not a factual issue of damages. The umpire’s sole job, the insurer claimed, was to assess the value of the hail damage covered under Mesco’s policy, not which parts of the roof displayed hail damage. In other words, since the damage to the bitumen and EPDM roofs was (allegedly) caused by wear and tear, the umpire had no authority to consider these roofs in his hail damage estimate.

Disregarding Motorists’ arguments, the umpire performed a full inspection. He observed hail damage on the modified bitumen roofs but not the EPDM roofs. Ultimately, he awarded Mesco over $1,000,000 in replacement cost value.

Motorists, however, would not be so easily defeated. Rather than adhering to the appraisal, the insurer paid Mesco only $265,296.21, which excluded the replacement cost of the modified bitumen and EPDM roofs. When Mesco sued for breach of contract, Motorists argued the umpire had exceeded his authority by evaluating the cause of damage to the modified bitumen and EPDM roofs. Therefore, according to Motorists, his estimate was invalid, and Motorists had a “right to deny” Mesco the full value of his appraisal.

Neither the trial court nor the appeals court was convinced. On July 25, 2025, the Seventh Circuit, following the trial court, awarded Mesco summary judgment. The appellate court held that the umpire was fully justified in assessing whether the modified bitumen and EPDM roofs were hail-damaged: how else could he determine the monetary cost of the hail damage? The insurer’s attempts to turn a factual issue (the value of the hail damage) into a legal coverage issue (coverage of hail vs. wear and tear under Mesco’s policy) were all for naught.

The court likewise rejected Motorists’ second argument, that the insurer had the “right to deny” Mesco’s claim after receiving an appraisal: following the policy’s plain language, appraisals to which both parties voluntarily submit, are binding. The court held an insurer can only reject such an appraisal on grounds of fraud, collusion, or clear injustice – not mere disagreement.

Mesco should serve as a warning, as well as an encouragement, to policyholders. On one hand, many times insurers will use extreme arguments to avoid proper payouts. On the other hand, these strategies are hardly bulletproof.

Disclaimer: This case summary is provided for informational purposes only and does not constitute legal advice. Polales Horton & Leonardi LLP is experienced in handling complex insurance coverage matters on behalf of policyholders across the United States. To discuss your specific insurance coverage issue, please contact Jacob M. Mihm.