Minnesota Court of Appeals Rules on Electing to Waive Appraisal

Last month, the Minnesota court of appeals released its opinion in Bjorklund Companies, LLC v. Auto-Owners Insurance, a decision that clarifies when an insurance policyholder has elected to waive the insurance company’s right to appraisal.

Typically if there is a dispute between a policyholder and the insurance company over the amount owed following a storm, the dispute is decided in an appraisal process during which each side picks their own appraiser. Those two appraisers select and umpire and the three individuals inspect the site, hear and review evidence and make a binding decision on how much, if any, the insurance company owes on the loss.

In this case, Mr. Bjorklund owned two commercial buildings and contracted with the insurance company for a policy that covered any “direct physical loss of or damage to” the buildings. After two windstorms blew through the area, Mr. Bjorklund filed a claim with Auto-Owners, his insurance company. The insurance company and Mr. Bjorklund disagreed about the amount and extent of damage that was caused by the storms. As a result, Mr. Bjorklund sent a letter requesting an appraisal to resolve the discrepancy in damages in December 2011; however, neither party moved forward with selecting an appraiser.

Four months later, Mr. Bjorklund filed a complaint in court against the insurance company, claiming that the insurance company improperly refused to enter into the appraisal process and asking the court to compel the insurance company to participate in the appraisal process. The insurance company also asked the court to compel participation in the appraisal process. The court ordered that the parties participate in an appraisal, which was held in October 2013. Instead of awarding Mr. Bjorklund his claimed damages of $636,289.92, the panel awarded him $25,345.28. The appraisal panel agreed with the insurance company and awarded Mr. Bjorklund the money to replace the roof on one of his buildings but did not believe that the storm caused the remaining damage on his buildings. The insurance company moved the district court to confirm the appraisal award.

At issue in Bjorklund was Minn. Stat. § 65A.12, subd. 1, which provides that “[a]ny person who shall not, within 20 days after written request, appoint a qualified appraiser, as provided in the policy, shall at the election of the other party be deemed to have waived the right to appraisal, and, if it be the insurer, shall be liable to suit.” Mr. Bjorklund argued that the insurance company waived its right to appraisal by failing to appoint a qualified appraiser. The insurance company, on the other hand, was trying to convince the court that Mr. Bjorklund never submitted a written request to appraisal. The court determined that Mr. Bjorklund’s letter stating that “I want to take this to appraisal” was sufficient to qualify as a “written request” under Minn. Stat. § 65A.12, subd. 1. The court further held that “nothing in the statute requires the party making the written [appraisal] request to include the name of a qualified appraiser.”

The court went on to find that the language about appointing an appraiser was ambiguous, but sidestepped this question altogether and instead addressed the question of whether Mr. Bjorklund elected to waive the insurance company’s right to an appraisal. Looking to the plain meaning of the word, the court found that “election” implies an affirmative act and is defined as “the exercise of a choice.” Because Mr. Bjorklund continued to pursue appraisal long after submitting his written request, and including the fact that his court complaint also asked for appraisal, the court found that Mr. Bjorklund’s actions did not constitute an election to waive the insurance company’s right to an appraisal under its plain language interpretation of Minn. Stat. § 65A.12, subd. 1.

Finally, even though he recovered some money at appraisal, Mr. Bjorklund was not entirely happy with the panel’s award and attempted to persuade the court to overturn it claiming the panel intentionally excluded his testimony and the testimony of his contractor. The court however, upheld the finding of the panel because the record showed that appraisal panel faithfully executed its obligation to hear Mr. Bjorklund’s testimony and accept evidence showing the amount of Mr. Bjorklund’s loss. As such, Mr. Bjorklund’s rights in the appraisal process were not substantially prejudiced, and award upheld.

To read the full decision, click here:  Bjorklund Companies, LLC v. Auto-Owners Insurance Decision