Multi Star Hotels, LLC v. West Bend Mutual Insurance Company
- Paul Magnuson
- 0:24-cv-01692
- U.S. District Court · District of Minnesota
- 5
In Multi Star Hotels, LLC v. West Bend Mutual Insurance Company, Judge Magnuson granted the insurer's request to compel a formal appraisal process to resolve a dispute over hotel hail damage but denied the insurer's request to pause the lawsuit, ordering the appraisal completed by October 1, 2025, with a Minnesota-based umpire.
Commercial property owners who have filed insurance claims for storm damage and whose insurers have denied coverage based on preexisting conditions, and insurers seeking to invoke contractual or statutory appraisal processes in Minnesota.
What happened
Multi Star Hotels, LLC v. West Bend Mutual Insurance Company is an insurance coverage dispute in the U.S. District Court for the District of Minnesota. Multi Star Hotels owns a hotel in Shakopee, Minnesota, that it says was damaged by wind and hail on May 11, 2022. Its insurer, West Bend Mutual Insurance Company, denied the claim, saying the damage resulted from ordinary wear and tear rather than the storm. Multi Star Hotels then sued for breach of contract.
West Bend Mutual asked the court to order the parties into an appraisal process — a procedure required by Minnesota law and spelled out in the insurance policy, in which each side picks an independent appraiser and those two appraisers choose a neutral umpire whose decision is binding. Multi Star Hotels argued that because West Bend Mutual had denied coverage entirely, there was no dollar amount in dispute and no basis for appraisal. The court disagreed, relying on a 2021 ruling from the Eighth Circuit Court of Appeals that held that separating storm damage from a property's preexisting condition is exactly the kind of question appraisers — not courts — are meant to resolve.
Judge Magnuson granted the motion to compel appraisal but denied the companion request to pause the lawsuit while appraisal proceeds. The court noted the case must be ready for trial by November 1, 2025, and found that ordering a stay would create unnecessary delay. To keep both tracks moving, the court ordered the appraisal completed on or around October 1, 2025, and specified that any umpire chosen must be from Minnesota — addressing an earlier dispute between the parties over an out-of-state umpire.
The detailed version
- Multi Star Hotels, LLC v. West Bend Mutual Insurance Company, Civ. No. 24-1692 (PAM/EMB)
- Paul A. Magnuson, United States District Court Judge
- August 11, 2025
Background
Plaintiff Multi Star Hotels, LLC, owns a hotel in Shakopee, Minnesota. It alleged the hotel suffered damage from heavy wind and hail on May 11, 2022, and filed a claim with its insurer, Defendant West Bend Mutual Insurance Company. On September 12, 2023, West Bend Mutual denied the claim in writing, attributing the damage to wear and tear — an excluded cause under the policy — rather than storm damage. Multi Star Hotels filed this lawsuit, asserting a single cause of action for breach of contract.
The Appraisal Clause
Minnesota Statute § 65A.26 requires every insurance policy covering hail damage to include an appraisal provision. The West Bend Mutual policy tracked this statutory language: if the parties disagree on property value or the amount of loss, either may demand appraisal; each side selects a competent and impartial appraiser; those two appraisers select a neutral umpire (or a court appoints one if they cannot agree); appraisers state their valuations separately; and a decision agreed to by any two of the three participants is binding. West Bend Mutual notified Multi Star Hotels of its intent to invoke appraisal in March 2025, but no appraisal occurred — West Bend Mutual asserted this was because Multi Star Hotels objected to using an out-of-state umpire. West Bend Mutual then filed a motion to stay the case and compel appraisal.
Legal Issue — Coverage Denial vs. Amount of Loss
The parties agreed that appraisal is triggered only by disputes over actual cash value or the amount of loss, per Minn. Stat. § 65A.01. Multi Star Hotels argued that because West Bend Mutual denied coverage entirely, there was no "amount of loss" in dispute and appraisal was therefore inapplicable — the question was a legal one for the court. West Bend Mutual countered that the parties disagreed about the amount of covered loss and the statute mandated appraisal.
The court applied the Eighth Circuit's framework from Axis Surplus Insurance v. Condor Corp., 19 F.4th 1062 (8th Cir. 2021), which distinguished between purely legal questions (e.g., whether a particular peril is covered at all) and mixed factual questions suitable for appraisal (e.g., separating damage caused by a covered storm from damage attributable to a property's preexisting condition). In Axis, as here, the insurer claimed preexisting conditions caused the damage while the insured attributed it to hail. The Eighth Circuit held that disentangling storm damage from preexisting conditions is a question for appraisers. Applying Axis, Judge Magnuson found this dispute fell into the appraisal category and ordered the parties to proceed accordingly.
Timeliness of the Appraisal Demand
Multi Star Hotels argued the demand was untimely under the two-year limitations period in Minn. Stat. § 65A.01, subd. 3. The court relied on Ariel, Inc. v. State Farm Fire & Casualty Co., 15 N.W.3d 673 (Minn. Ct. App. 2024), which held that the two-year limit does not apply to an appraisal demand as long as the insured commenced a timely lawsuit against the insurer. Because Multi Star Hotels filed suit within the limitations period, the court found West Bend Mutual's subsequent appraisal demand was not untimely.
Request to Stay
Multi Star Hotels also argued that West Bend Mutual's motion was procedurally untimely because it was filed more than one month after the close of discovery and that a stay would prejudice Multi Star Hotels by delaying a case already scheduled to be trial-ready by November 1, 2025. West Bend Mutual's counsel submitted a declaration representing that appraisals were being scheduled for August and September 2025, which would not conflict with the November 1 date, and noted that no trial date had yet been formally set. The court agreed that a stay was unnecessary and potentially harmful to the trial schedule, and denied that portion of the motion. The court found that Multi Star Hotels would not be prejudiced by proceeding with appraisal alongside the ongoing litigation, since no delay would result.
Order
The court (1) granted the motion to compel appraisal; (2) denied the motion to stay; (3) ordered the appraisal completed on or around October 1, 2025, in anticipation of the November 1 trial-ready date; and (4) required any umpire selected to be from Minnesota.
Reviewer note from the AI+
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