Turnberry Townhome Association v. State Farm Fire and Casualty Company

Background

A storm caused hail damage to Turnberry’s property on May 19, 2022. Turnberry sought coverage under its policy with State Farm. On July 22, 2022, Gavnat and Associates, a public insurance adjuster, sent State Farm an email and letter of representation identifying Turnberry, State Farm, the policy and claim numbers, the date and type of loss, and Gavnat’s role in handling the claim.

State Farm initially paid $688,571.98. Turnberry later demanded an appraisal. On May 8, 2023, the appraiser issued an award of $1,259,887.84 in actual cash value and $1,574,859.80 in replacement cash value. State Farm paid additional amounts, including $551,315.86 in actual cash value, the difference between replacement and actual cash value, building permit fees, and interest.

Turnberry sued over the amount of interest State Farm owed. Under Minnesota Statutes § 549.09, interest runs at 10 percent per year from the earliest of the action’s commencement, a demand for arbitration, or written notice of the claim. Turnberry argued that the July 2022 letter started the interest period. State Farm argued that interest began with Turnberry’s January 2023 appraisal demand.

Summary Judgment Standard

The court applied the summary-judgment standard under Federal Rule of Civil Procedure 56. Summary judgment is appropriate when there is no genuine dispute over a material fact and the moving party is entitled to judgment under the law. Because the case was in federal court based on diversity jurisdiction, the court applied Minnesota law and predicted how the Minnesota Supreme Court would resolve issues that court had not decided.

Written Notice of Claim

The court held that Gavnat’s July 22, 2022 email and letter were sufficient written notice of claim under Minnesota law. The notice identified the insured, insurer, claim number, policy number, date of loss, and wind and hail damage. The court explained that Minnesota law does not require a specific dollar demand or enough detail for an insurer to calculate its exact potential obligation solely from the notice itself.

The court concluded that the notice gave State Farm enough information to investigate the claim and assess its potential liability. Although the letter listed an incorrect address, it also included the policy and claim numbers, and State Farm did not argue that the error caused confusion or delayed its investigation. The court therefore held that the notice triggered interest on July 22, 2022, and granted Turnberry partial summary judgment on that issue.

Calculation of Interest

The court agreed with State Farm that a payment should be excluded from the pre-award interest calculation once the payment was made, because Turnberry then had the use of that money. The court rejected State Farm’s additional argument that all amounts paid before the appraisal award should be deducted as a single lump sum, regardless of when those payments occurred.

The court reasoned that State Farm’s proposed approach could encourage an insurer to delay payments until shortly before an appraisal, because a late payment would receive the same credit as an early payment. The court predicted that the Minnesota Supreme Court would hold that a partial payment reduces an insurer’s pre-award interest obligation only when the payment is made. The parties were directed to calculate interest using that approach.

Order and Disposition

Judge Susan Richard Nelson denied State Farm’s Motion for Summary Judgment. She granted in part Turnberry’s Motion for Summary Judgment. The order did not determine the final interest amount because the parties had minor factual disputes about the payment dates. The parties were ordered to meet and confer within 30 days and report back. If they do not settle the date issue, the court will conduct an evidentiary hearing.