386 F. Supp. 3d 1059
D. Me.2019Background
- Creekview of Hugo Association insured a multi-building townhome complex; storm on June 11, 2017 caused wind/hail damage and Creekview filed a claim June 19, 2017.
- Owners Insurance paid an actual cash value (ACV) partial payment of $832,684.96; dispute arose over total replacement cost and recoverable depreciation.
- Parties invoked the policy appraisal clause; an appraisal panel awarded ACV $1,124,515.89 and replacement cost $1,499,354.52 on October 30, 2018.
- Owners issued a supplemental ACV payment but withheld $354,564.68 in recoverable depreciation pending verification of certain alleged incomplete repairs; later paid $20,273.95 toward depreciation.
- Creekview sought confirmation of the appraisal award, interest, costs, and fees; Owners removed to federal court. The court confirmed the appraisal award and ordered payment of the unpaid recoverable depreciation and interest, but denied attorneys’ fees without prejudice pending a proper fee application.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Minnesota's Uniform Arbitration Act govern judicial review of insurance appraisal awards? | Appraisal awards are subject to the Minnesota Uniform Arbitration Act. | Appraisals are common-law arbitration not governed by the statute. | The Uniform Arbitration Act applies; court follows Minnesota Court of Appeals and Eighth Circuit precedent. |
| Is Owners required to pay the unpaid recoverable depreciation (replacement cost) despite Owners' claim some repairs remained incomplete? | Replacement cost awarded by appraisal is payable because Creekview had spent at least the appraisal amount repairing the property; appraisal award is non‑itemized so Owners cannot withhold portions. | Owners may withhold depreciation for specific items not yet repaired and verify completion before paying. | Owners must pay the unpaid balance of the replacement cost awarded at appraisal; cannot cherry-pick items when award is an aggregated replacement-cost figure. |
| When does pre-award interest begin to run and on what amount? | Interest should run from written notice of claim (Creekview: June 19, 2017) and apply to the full appraisal award (less prior payments). | Interest should begin later (e.g., when proof of loss or demand was timely received) and should not run on depreciation holdback or amounts already paid. | Pre-award interest accrues from June 19, 2017 (the claim-opening email). Interest is calculated on the award but reduced by prior payments (e.g., the $832,684.96 initial payment is excluded). |
| Are attorneys’ fees, costs, and expenses awardable now? | Creekview seeks fees and costs under Minnesota statutes governing arbitration and interest. | Owners opposed; procedural/formal fee substantiation lacking. | Prevailing party is entitled to fees under Minnesota law, but Creekview’s fee motion denied without prejudice for failure to state amount or provide a fair estimate per Rule 54(d)(2)(B). |
Key Cases Cited
- Hanna v. Plumer, 380 U.S. 460 (1965) (federal court in diversity applies state substantive law)
- Poehler v. Cincinnati Ins. Co., 899 N.W.2d 135 (Minn. 2017) (pre-award interest may accrue despite contract loss-payment timing rules)
- Herll v. Auto-Owners Ins. Co., 879 F.3d 293 (8th Cir. 2018) (Minnesota Uniform Arbitration Act applies to appraisal awards)
- Continental Cas. Co. v. Advance Terrazzo & Tile Co., 462 F.3d 1002 (8th Cir. 2006) (federal court predicts state law where state supreme court has not decided an issue)
- Minn. Supply Co. v. Raymond Corp., 472 F.3d 524 (8th Cir. 2006) (federal court bound by state supreme court decisions on state law)
- Burniece v. Illinois Farmers Ins. Co., 398 N.W.2d 542 (Minn. 1987) (purposes of pre-award interest: compensate for loss of use and promote settlement)