Savanna Grove Coach Homeowners' Association v. Auto-Owners Insurance Company

Background

Savanna Grove Coach Homeowners’ Association, described in the opinion as the corporate representative of a townhome community in Blaine, Minnesota, sued its insurer, Auto-Owners Insurance Company, over property damage from a June 2017 storm. Before the lawsuit, the parties used an appraisal process authorized by Minnesota law and the insurance policy to determine the replacement-cost value of the damage. The appraisal award was $2,614,624.35, of which $916,809.83 was unpaid when Savanna Grove filed suit.

The court had previously granted partial summary judgment to Savanna Grove for the unpaid appraisal amount and for pre-award, post-award, and post-judgment interest. The summary judgment was partial because Savanna Grove had also been allowed to amend its complaint to assert a claim under Minnesota Statutes section 604.18, and that claim remained pending.

Fee and Cost Requests

Savanna Grove sought $47,912.50 in attorney fees under section 572B.25 of the Minnesota Uniform Arbitration Act. That provision allows a court, on application by a prevailing party in a contested judicial proceeding to confirm an arbitration award, to add attorney fees and other reasonable litigation expenses incurred after the award. Savanna Grove also sought $2,194.11 in costs and disbursements under Minnesota Statutes sections 549.02 and 549.04.

After the motion and response were filed, the Minnesota Supreme Court decided Oliver v. State Farm Fire & Casualty Insurance Company. The parties submitted supplemental briefing about Oliver’s effect on the motion. Savanna Grove argued that Oliver applied only to fire-insurance appraisals under Minnesota Statutes section 65A.01 and not to the hail-insurance appraisal under section 65A.26. Auto-Owners argued that Oliver established that the Minnesota Uniform Arbitration Act does not apply to appraisal awards generally.

Court’s Analysis

Because this was a diversity case and no conflicting federal law or court rule applied, the court used Minnesota law to determine whether attorney fees were available. The court explained that it was bound by Minnesota Supreme Court decisions and, where necessary, had to predict how that court would resolve an unsettled issue.

In Oliver, the Minnesota Supreme Court held that the appraisal process under Minnesota’s Standard Fire Insurance Policy was not an “agreement to arbitrate” under the Minnesota Uniform Arbitration Act. The court here interpreted Oliver as applying not only to fire-loss appraisals but also to similar non-fire appraisal procedures that determine the amount of an insurance loss.

The court relied on several points. Oliver discussed the general differences between arbitration and appraisal, including the different authority of arbitration panels and appraisal panels. The Minnesota Supreme Court also cited decisions involving non-fire losses, including hurricane and hail damage. In addition, Oliver was best understood as rejecting earlier Minnesota appellate decisions that had treated appraisal awards as governed by the Uniform Arbitration Act without distinguishing between fire and non-fire appraisals.

The court found no material difference between the appraisal procedures in sections 65A.01 and 65A.26. Both address a disagreement between the insured and insurer about the amount of a loss, allow either party to demand an appraisal, provide for appraisers and an umpire, and establish that a written award determines the amount of the loss. The court concluded that section 65A.26 does not establish a process resembling arbitration. It therefore held that Oliver prevented Savanna Grove from obtaining attorney fees under section 572B.25.

The court also rejected Savanna Grove’s argument that Oliver should not apply retroactively, stating that applying Oliver would not produce substantially inequitable results.

Disposition

The court denied Savanna Grove’s renewed motion for attorney fees, costs, and expenses. The denial of attorney fees was without prejudice to Savanna Grove’s right to seek fees under legal authority other than section 572B.25 at the conclusion of the case. Although Savanna Grove provided enough documentation to support its requested costs and Auto-Owners raised no additional objection, the court denied the request for costs and disbursements without prejudice to renewal at the conclusion of the case. Judge Eric C. Tostrud signed the order on June 19, 2020.