Last month, the Supreme Court of Minnesota issued its long-awaited opinion in Oliver v. State Farm Fire and Cas. Ins. Co., 939 N.W.2d 749 (Minn. 2020). In Oliver, the Minnesota Supreme Court finally established that the Minnesota Uniform Arbitration Act, and its provisions under Minn. Stat. § 572B, do not apply to appraisal proceedings under the standard fire policy, Minn. Stat. § 65A.01. See id. In doing so, the Minnesota Supreme Court in Oliver made it ultimately clear that arbitration and appraisals are not the same. Id. at 753 (citing as persuasive authority to Brownson PLLC Senior Litigation Attorney, Joseph Lulic’s, case Minot Town & Country v. Fireman’s Fund Ins. Co., 587 N.W.2d 189, 191 (N.D. 1998)).
Although on its face, the distinction between arbitration and appraisal seems obvious, it has not always been so under Minnesota law. Oliver completely upended the longstanding, albeit incorrect, Minnesota Court of Appeals precedent established in David A. Brooks Enterprises, Inc. v. First Systems Agencies which applied the Minnesota Uniform Arbitration Act, Minn. Stat. § 572B, to appraisal proceedings. See Oliver, 939 N.W.2d at 752; see also David A. Brooks Enterprises, Inc. v. First Systems Agencies, 370 N.W.2d 434, 435 (Minn. Ct. App. 1985). David A. Brooks, resulted in a series of cases by the Minnesota Court of Appeals which incorrectly applied the Minnesota Arbitration Act to appraisal proceedings and established an interchangeable use of the terms “arbitration” and “appraisal” by both courts and counsel when referencing the two. See Oliver, 939 N.W.2d at 752.
Now that the Minnesota Supreme Court has righted the ship on the distinction of arbitration and appraisal, the Minnesota Bar is left to wonder how this might ultimately affect the 2017 decision of the Minnesota Supreme Court in Poehler v. Cincinnati Ins. Co., 899 N.W.2d 135 (Minn. 2017).
Poehler v. Cincinnati Ins. Co. held that preaward interest under Minn. Stat. § 549.09, subd. 1(b) applied to appraisal awards as a pecuniary damage, although the term “appraisal” appears nowhere in the statute. See id.; see also Minn. Stat. § 549.09. Although Poehler held that appraisal awards were a pecuniary damage under Minn. Stat. § 549.09, it did not address the issue of when preaward interest on appraisal awards begins to accrue. See Poehler, 899 N.W.2d at 140-41, n.2. Indeed, Poehler specifically stated that it would not address the calculation of interest on appraisal awards as “the triggering-event issue…is not properly before us.” See id.
Since the issuance of Poehler, courts have struggled with how to calculate preaward interest on appraisal awards. This issue was the focus of an appeal argued by Brownson PLLC before the Minnesota Court of Appeals last summer in Dewey Hill III Townhomes Ass’n, Inc. v. Auto-Owners Ins. Co., Case No. A18-1562, 2019 WL 3000691 (Minn. Ct. App. July 1, 2019).
The statutory language of Minn. Stat. § 549.09, subd. l(b) articulates three events that cause interest to begin to accrue: (1) a demand for arbitration; (2) a commencement of an action; or (3) a written notice of claim (which only applies if a qualifying commencement of action is filed within two years). See Minn. Stat.§ 549.09, subd.l(b). With the term “appraisal” nowhere in the statute, the Minnesota Court of Appeals, in Dewey Hill held that “Poehler can only be read to hold that a demand for arbitration is the equivalent of a demand for appraisal for purposes of preaward interest.” Dewey Hill, 2019 WL 3000691at *3. The argument crafted by Brownson PLLC, which was adopted by the dissenting Judge, was that the statute could not be read to include the term “appraisal” and that Poehler could not be extended to equate arbitration and appraisal as the same. See Dewey Hill, 2019 WL 3000691 at *4-5 (J. Reyes, dissenting). In Oliver, the Minnesota Supreme Court made it clear: arbitration and appraisal are not the same.
Consequently, with Oliver, how does Poehler hold up? It may be able to stand alone for the simple proposition that appraisal awards are a pecuniary damage under Minn. Stat. § 549.09. However, how is preaward interest supposed to be calculated on such an award? Though the question has existed since the enumeration of Poehler in 2017, in the wake of Oliver, the answer is more elusive, if not completely impossible. Could Oliver be the beginning of the end of Poehler? The Minnesota Supreme Court’s reasoning in Oliver might be an indication that it is. See Oliver, 939 N.W.2d at 752-753, n.4. In the Supreme Court’s distinction of arbitration and appraisal, the Court in part relied on the canon of the legislature’s intent of using one term instead of the other. See id; see also Dewey Hill, 2019 WL 3000691 at *4-5 (J. Reyes, dissenting). The same tenet could be applied in overturning Poehler. Only time, and additional case law, will tell.
Brownson PLLC is proud to be on the forefront of this unique issue in Minnesota law through its attorneys Kristi Brownson, Joe Lulic, and Olivia Cooper.