In a July 2017 decision, Poehler v. Cincinnati Insurance Company, the Minnesota Supreme Court held that an insured could—absent specific policy language precluding it—recover interest on an appraisal award. Below is an explanation of how the court came to that decision.
The defendant insurance company in Poehler issued a homeowner’s insurance policy to the plaintiff. The policy provided for replacement cost coverage for the plaintiff’s home and property. As required by statute, the policy included an appraisal clause that permitted either plaintiff or defendant to demand an appraisal if they failed to agree on the value of the loss. It also contained a statutorily mandated loss payment provision, which provided that a loss was payable within 5 working days after the plaintiff filed an appraisal award with the defendant.
After fire damaged his property, the plaintiff notified his insurance carrier of the damage. The insurance carrier made an initial payment shortly after the fire. The plaintiff then properly demanded an appraisal under the policy’s appraisal clause. The insurance carrier made additional payments to plaintiff after the initial demand, but before the appraisal hearing. After the appraisal hearing, the appraisers issued an award that exceeded the total amount that the insurance carrier had already paid the plaintiff. The insurance carrier paid plaintiff for the full appraisal award sixteen days later.
After receiving payment, the plaintiff brought a motion in state district court seeking, among other things, a confirmation of the appraisal award and preaward interest under Minn. Stat. § 549.09, subd, 1(b). The district court confirmed the award and granted plaintiff preaward interest. In granting the preaward interest, the district court calculated the interest starting from the date of plaintiff’s demand for appraisal and did not reduce the award for payments made prior to the demand.
On appeal, the Minnesota Court of Appeals reversed, reasoning that the interest statute, § 549.09, subd. 1(b), does not apply to appraisal awards in the absence of an underlying breach of contract or wrongdoing on the part of the insurance carrier. The plaintiff then sought review of that decision. The Minnesota Supreme Court reversed the court of appeals, holding that absent specific policy language precluding such an award, Minn. Stat. § 549.09 permits recovery of preaward interest on damages, including those awarded in an insurance appraisal.
The Supreme Court’s Decision
The Minnesota Supreme Court began its analysis by determining whether the interest statute, Minn. Stat. § 549.09, subd. 1(b), requires an underlying breach of contract or wrongdoing for the recovery of preaward interest. It concluded that it did not. In its analysis, the court determined that under the plain reading of the statute, § 549.09 unambiguously provides for interest on “pecuniary damages” not otherwise excluded by statute. The court interpreted “damages” using the plain and ordinary meaning and concluded that damages “extends to compensation for any injury suffered, whether wrongful or not.”
The court also reasoned that because § 549.09, subd. 1(b)(3) specifically excludes preaward interest on noncompensatory damages, the statute provides preaward interest on all awards of compensatory damages not otherwise excluded. The court then went on to say that, in the absence of a contrary statutory definition, compensatory damages are actual damages. That is an amount awarded to compensate for a proven injury or loss.  The court further reasoned that under its earlier decisions, the definition of “compensatory damages” cannot be reasonably interpreted to condition recovery on a finding of wrongdoing.
Having determined that Minn. Stat. § 549.09 does not require wrongdoing, the court then held that absent explicit contractual language precluding it, an insured may recover preaward interest on an appraisal award for a fire insurance loss.
The court went on analyze the loss payment provision contained within plaintiff’s policy to determine if the language of that provision precluded the plaintiff from recovering preaward interest. The court examined two then recent Minnesota federal district court cases that had differing conclusions.
The Minnesota Supreme Court first looked at Housing & Redevelopment Authority of Redwood Falls v. Housing Authority Property Insurance, No. 14-CV-4741 (PAM/HB), 2015 WL 4255858 (D. Minn. July 14, 2015). In that case, the district court determined that the insured was not entitled to preaward interest because the insurance provider was not obligated to pay the insured until after the appraisal award was filed . The district court rejected the insured’s public policy arguments, concluding that they were not compelling enough to override clear statutory and contractual language.
The Minnesota Supreme Court then looked at Eden Homeowners Ass’n, Inc. v. American Family Mutual Insurance Co., No. 15-CV-3527 (RHK/HB) (D. Minn. Dec. 22, 2015). In that case, the policy required payment of a covered loss within 5 days after receiving the proof of loss and an appraisal award has been made. The district court reasoned that the policy’s loss payment provision governed only when the insurer must pay a covered loss, but that it did not speak to when interest must be paid. The district court concluded that the parties were free to contract regarding when interest began to accrue, but they did not. Therefore, the “except as otherwise provided by contract” was never triggered.
The Minnesota Supreme Court Eden court’s reasoning persuasive and held that the Poehler policy’s loss payment provision governed only when a loss became payable, but that it was silent on when interest begins to accrue. Given the fact that the policy did not explicitly prohibit preaward interest on an appraisal award, the policy did not trigger the “except as otherwise provided by contract” portion of the statute. Consequently, the policy did not preclude plaintiff from recovering preaward interest.
Finally, the court rejected the defendant’s argument that the plaintiff was precluded from recovering preaward interest by Minn. Stat. § 65A.01. Section 65A.01 contains mandatory loss payment provision language which states that a loss is payable 60 days after the filing of an appraisal award and that an insurer does not owe any interest until the loss is payable. The court held that the statutory loss payment provision was not applicable because the defendant insurance carrier had provided different language and that language provided the insured more coverage than the statute. The policy language at issue included a shorter payment schedule and did not include language regarding when the interest became payable. The court concluded that the insurance carrier had the opportunity to include the statutory language in the policy, but it did not do so. Consequently, the court held that the policy, not the statute, determined the extent of the plaintiff’s coverage.
Under the Poehler holding, an insured may recover preaward interest under Minn. Stat. § 549.09 unless the policy expressly precludes it. Although the Poehler case involved a homeowner’s insurance policy, recent Minnesota Court of appeals decisions make it clear that this holding applies to commercial policies as well.
If you received an appraisal award for an insurance dispute in Minnesota you may be entitled to interest on that award. For more information on pursuing interest on your appraisal award, please contact Sauro & Bergstrom, PLLC today!
 899 N.W.2d 135 (Minn. 2017).
 Id. at 138.
 Id. at 139.
 See Id. at 138–139.
 Id. at 139.
 Id. at 142.
 Id. at 139.
 Id. at 140.
 Id. at 140–141.
 Id. at 141.
 Id. at 142.
 Id. at 142–143.
 Id. at 142.
 Id. at 142.
 Id. at 142–143.
 Id. at 143.
 Id. 144–145.
 Id. 144.
 Id. The policy language deviated from the mandatory requirements. However, because the policy language provided greater benefits and broader coverage to the than was required by the statute, the court upheld the policy language. Id. at 144-145.
 Id. at 145
 See K & R Landholdings, LLC v. Auto-Owners Ins., 907 N.W.2d 658, 663 (Minn. Ct. App. 2018); Andersen v. Owners Ins. Co., No. A16-0115, 2018 WL 1569837, at *3 (Minn. Ct. App. Apr. 2, 2018) (unpublished opinion). The insurers in both K & R Landholdings and Andersen argued that the Poehler decision did not apply to commercial policies because other statutes governed interest on commercial policies. K & R Landholdings, 907 N.W.2d at 661–64; Andersen, 2018 WL 1569837, at *1–2. The court of appeals rejected those arguments. Id.