Creekview of Hugo Association, Inc. v. Owners Insurance Company

Background

A wind and hail storm damaged the Creekview of Hugo Townhomes complex on June 11, 2017. Creekview was insured under a policy issued by Owners Insurance Company. The policy generally required repairs or replacement before Owners had to pay the withheld depreciation under replacement-cost coverage.

The parties disagreed about the amount of the covered loss. After their competing estimates differed, Creekview invoked the policy’s appraisal process. The appraisal panel determined that the actual cash value of the loss was $1,124,515.89 and the replacement cost was $1,499,354.52. Owners paid the actual cash value, less the deductible, and later made a partial depreciation payment. Creekview then sought confirmation of the appraisal award, the remaining $354,564.68 in depreciation, interest, fees, and costs.

Appraisal-award review

The court held that the Minnesota Uniform Arbitration Act governs the review and confirmation of insurance appraisal awards. The court relied on decisions from the Minnesota Court of Appeals and the United States Court of Appeals for the Eighth Circuit and declined to treat the appraisal as a separate form of common-law arbitration.

The court concluded that Creekview had completed enough of the repairs to trigger payment of the full replacement-cost amount. The appraisal award provided aggregated amounts for each building and did not identify which specific repairs were included or assign separate amounts to items such as doors, roofing, or gutters. Because Creekview had spent at least the entire replacement-cost amount awarded by the panel, the policy and appraisal award did not allow Owners or the court to speculate about which particular repairs the award covered.

Interest

The court ruled that pre-award interest began on June 19, 2017, when Creekview emailed Owners to open a claim for the hail damage. The court determined that this communication was a sufficiently specific written notice of claim because it informed Owners of the loss, the insurance claim, and the cause of damage, allowing Owners to determine its potential liability through claim adjustment. The court rejected Owners’ argument that interest began only when Creekview submitted its proof of loss or demanded appraisal.

The court held that the depreciation holdback had to be included in the pre-award-interest calculation. However, Owners’ initial payment of $832,684.96 had to be excluded from the amount on which interest accrued after that payment was made, because Creekview had received and could use that money. The court ordered Creekview to file a revised pre-award-interest calculation.

The court also ruled that post-award interest applied to the unpaid balance of the entire appraisal award, not only the actual cash value. Owners conceded that the post-award interest rate was 10 percent. The order awarded $16,395.20 through March 20, 2019, plus $97.14 per day from March 21, 2019, until judgment was entered.

Fees and costs

The court determined that Creekview was the prevailing party and was entitled under Minnesota law to attorneys’ fees, costs, and reasonable litigation expenses. But Federal Rule of Civil Procedure 54 required Creekview’s fee motion to state the amount sought or provide a fair estimate. Because Creekview had not yet done so, the court denied that request without prejudice to refiling.

Disposition

The court granted in part and denied in part Creekview’s motion. It confirmed the appraisal’s actual-cash-value and replacement-cost determinations, awarded Creekview $354,564.68 in recoverable depreciation, awarded interest as described in the order, and denied the request for attorneys’ fees, costs, and expenses without prejudice.