The Minnesota appellate courts have issued several decisions in the last few years regarding prejudgment interest in insurance cases. Because prejudgment interest can greatly increase the amount of damages, it is important to understand how it will be calculated. Lommen abdo helps you to understand the decision regarding prejudgment interest.
The starting point is Minn. Stat. § 549.09, which, unfortunately, is not a very clear statute. It states in relevant part, “Except as otherwise provided by contract or allowed by law, preverdict, preaward, or prereport interest on pecuniary damages shall be computed as provided in paragraph (c) from the time of the commencement of the action or a demand for arbitration, or the time of a written notice of claim, whichever occurs first, except as provided herein.” The text leaves a number of questions unanswered:
- What information must “a written notice of claim” provide?
- Who must send the “written notice of claim”?
- To whom must it be sent?
- To what extent can an insurance policy alter the effect of Minn. Stat. § 549.09 by “otherwise provid[ing] by contract”?
A slew of recent appellate decisions have tried to answer some of these questions.
What information must a written notice of claim provide?
First, in Blehr v. Anderson, 955 N.W.2d 613 (Minn. Ct. App. 2021), the Court of Appeals addressed what information a “written notice of claim” must provide. The court concluded that it did not require a demand for a specific amount of money, but it did need to provide enough information to enable the noticed party to “determine its liability from a generally recognized objective standard of measurement.” In that case, a letter to the insurer asking to confirm the existence and amount of coverage and requesting documents from the insurer’s investigation of the accident was sufficient because such a request indicated the insurer was already well-aware of the seriousness of the accident, which had killed its own insured.
It is also worth noting that the Eighth Circuit in Nat’l Union Fire Ins. Co. of Pittsburgh v. Cargill, Inc., 61 F.4th 615 (8th Cir. 2023) reached a similar conclusion interpreting Minn. Stat. § 60A.0811. That statute provides that interest on a claim by an insured against its own insurer for failure to make payments begins to run “from the date the request for payment of those benefits was made to the insurer.” Although it did not discuss Minn. Stat. § 549.09 or Blehr, the Eighth Circuit concluded this statute likewise did not require the “request for payment” to include a specific dollar amount.
Who can send a written notice of claim?
The next question that arose under Minn. Stat. § 549.09 is who must send the “written notice of claim”?
In Elm Creek Courthome Ass’n, Inc. v. State Farm Fire & Cas. Co., 971 N.W.2d 731 (Minn. Ct. App. 2022), review denied (May 17, 2022), the Minnesota Court of Appeals held that the insured could not rely on a “notice-of-loss” report generated by the insurer. The court reached this conclusion because the plain meaning of “notice” is notification or warning and the plain meaning of “claim” is a demand for payment. An insurer could not warn itself about a demand being made by someone else. Therefore, the court stated, “only the claimant may demand payment from the noticed party.”
But a year later the Court of Appeals narrowed Elm Creek. In Shardlow Townhomes Ass’n v. Midwest Fam. Mut. Ins. Co., 988 N.W.2d 502 (Minn. Ct. App. 2023), the claimant relied on a “property loss notice” generated by an independent agency that sells insurance for various companies and sent by the agency to the insured’s insurer. The court held that this loss notice was sufficient to trigger prejudgment interest because it was sent to the insurer at the direction of the insured and was not self-generated by the insurer.
Who must a written notice of claim be sent to?
In light of these cases addressing by whom the “written notice of claim” can be sent, one might wonder who the “written notice of claim” must be sent to. Minn. Stat. § 549.09 uses passive language that does not answer this question. Nor have the Minnesota appellate courts directly answered the question.
The most natural interpretation of the statute is that the notice must be sent to the defendant. The statute as a whole refers to “party” several times and because Minnesota is not a direct action state, the defendant party in a third party liability case would be the insured tortfeasor.
However, Blehr involved a notice sent to the tortfeasor’s insurer and, as described above, the Court of Appeals held the notice was sufficient. It does not appear that anybody in the Blehr case argued about to whom the notice must be sent. As a practical matter, the insured in that case had died and it is unclear whether a personal representative of the estate had been appointed at the time the notice was sent. A future court could use those as distinguishing characteristics, but of course it is unknown whether they will do so. The question of to whom notice must be sent therefore appears to be an open question that the appellate courts have not yet resolved.
Can an insurance policy limit prejudgment interest?
Finally, the Minnesota Supreme Court addressed the phrase “except as otherwise provided by contract” in Wesser v. State Farm Fire & Cas. Co., 989 N.W.2d 294 (Minn. 2023). There, the policy stated “No interest accrues on the loss until after the loss becomes payable.” It also stated, “loss will be payable five business days after we receive your proof of loss and . . . there is a filing of an appraisal award with us.” The court held that under the plain terms of the policy, preaward interest was not allowed and Minn. Stat. § 549.09 allows parties to so agree in an insurance policy.
But in Else v. Auto-Owners Ins. Co., 980 N.W.2d 319, 322 (Minn. 2022), the Supreme Court held that a policy limit alone did not necessarily preclude an award of prejudgment interest that exceeded policy limits. Else involved a fire insurance policy and relied on an interpretation of the standard fire policy. The court held that the language providing that the insurer “will not in any case be liable for more than the sum insured, with interest thereon, from the time when the loss shall become payable” plainly anticipated that interest could exceed policy limits.
In short, prejudgment interest is an issue that has been rapidly developing in the Minnesota appellate courts. It is crucial to stay informed of these developments so that claims can be appropriately evaluated with an accurate estimation of what prejudgment interest may apply.
For more information about appellate decisions on insurance law, please contact Michelle Kuhl.