In 2017, SJJ won an important case before the Minnesota Supreme Court that allows property owners to collect pre-award interest on insurance appraisal awards in Poehler v. Cincinnati. While the Court found that interest was due on appraisal awards, it did not answer another important question: how much interest is due?
Pre-award interest on appraisal awards comes from a Minnesota Statute (549.09 to be exact). It states that interest is due on the appraisal award from the first written notice of claim until the date of the appraisal award. If the appraisal award is over $50,000, then the interest rate is 10%. That seems pretty straightforward, but there are a lot of issues still in dispute between us and the insurance companies about how to calculate the interest. This specific issue cannot be decided by an appraisal panel and must be calculated by the court.
The first question is the start date for calculating interest. The statute says it begins from the first “written notice of claim,” which should mean anything in writing about the claim at all. Courts are split on what constitutes the “written notice of claim,” but many have decided it is the date the property owner submits an opposing estimate to the insurance company. For this reason, it is important that when there is a dispute, there is a written communication (even by email) describing what is in dispute as soon as possible. Ideally, it will include a written estimate or bid as well.
The second is what part of the award that interest accrues on. Most appraisal awards contain ACV and RCV awards. The statute says that interest accrues “on the award” which means the whole RCV award, but insurance companies claim it is only due on the ACV amount. The majority of courts agree with us that interest accrues on the entire RCV amount of the award.
The third is whether the insurance company gets “credit” for prior payments. The statute does not allow an insurance company to get credit or offsets for prior payments, though a single federal district court has held otherwise.
We expect this issue will continue to develop in the legal system, and we have several cases moving through it as we speak. For now, the best practice is to identify the dispute in writing as soon as it’s known. Until the law is fully developed, pre-award interest will need to be decided in court. In order to assess if you are entitled to interest on an appraisal award, and how much, you should contact Tim Johnson or Alex Jadin today!