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Housing and Redevelopment, Authority of Redwood Falls v. Housing Authority Property Insurance

United States District Court, D. Minnesota

November 7, 2017

Housing and Redevelopment, Authority of Redwood Falls, Plaintiff,
v.
Housing Authority Property Insurance, Defendant.

          MEMORANDUM AND ORDER

          Paul A. Magnuson United States District Court Judge.

         This matter is before the Court on Plaintiff Housing and Redevelopment Authority of Redwood Falls's (“HRA”) Motion for Pre-Award Interest, following a limited remand from the Eighth Circuit Court of Appeals. For the following reasons, the Motion is granted in part.

         BACKGROUND

         In January 24, 2013, a fire damaged a building owned by HRA and insured by Defendant Housing Authority Property Insurance (“HAPI”). (July 14, 2015, Order (Docket No. 30) at 1-2.) HRA notified HAPI of the fire damage the following day, and HAPI accepted coverage of the loss. (Id. at 2.) HAPI paid HRA $124, 942.79 in disbursements by April 9, 2013, but the parties disputed a substantial portion of the total value of the loss. (Id.; Compl. (Docket No. 1-1) ¶ 12.)

         On September 4, 2013, HAPI offered to pay an additional $2, 262, 296.21 if HRA signed a partial proof of loss form, and HAPI demanded an appraisal to settle the remaining disputed portion of the loss. (Order at 2.) HAPI paid HRA the additional $2, 262, 296.21 on October 18, 2013, for a total of $2, 387, 239.00 in disbursements to HRA. (Id.; Bloomquist Decl. (Docket No. 16) Exs. 4, 7.)

         The parties brought their estimates to the appraisal panel for review. HAPI estimated that the total value of the loss was $2, 834, 433.90; HRA's estimate was $6, 026, 015.00. (Order at 2.) The appraisal panel issued its award on June 4, 2014, finding that the replacement cost value of the loss was $3, 871, 891.00 and the actual cash value of the loss was $3, 097, 512.80. (Order at 2.) On June 23, 2014, HAPI paid HRA the difference between the actual cash value of the loss and the amount of disbursements to date, or $707, 773.80. (Id.)

         HRA then sued HAPI, seeking confirmation of the appraisal award and recovery of preaward interest under Minn. Stat. § 549.09. (Id. at 3.) At summary judgment, this Court confirmed that the replacement cost value of the loss was $3, 871, 891.00, concluded that confirmation of the actual cash value was moot because HAPI had already paid the entire actual cash value of the loss to HRA, and denied HRA's demand for preaward interest. (Id. at 5, 8.)

         HRA took an appeal, and the Court of Appeals reversed this Court's denial of HRA's request for preaward interest, citing a recent Minnesota Supreme Court decision. Hous. & Redev. Auth. of Redwood Falls v. Hous. Auth. Prop. Ins., 864 F.3d 986, 988 (8th Cir. 2017) (citing Poehler v. Cincinnati Ins. Co., 899 N.W.2d 135 (Minn. 2017)). The Court of Appeals concluded that HRA was entitled to preaward interest and remanded to this Court to calculate that interest. Id. at 989. The mandate on that decision issued on August 24, 2017. (Docket No. 45.)

         HRA now moves the Court for recovery of $525, 092.07 in preaward interest pursuant to Minn. Stat. § 549.09. (Docket No. 46.)[1] HAPI does not dispute HRA's entitlement to preaward interest, but contends that HRA's recovery of preaward interest should not be greater than $52, 937.60. (Def.'s Opp'n Mem. (Docket No. 50).)

         DISCUSSION

         Under Minn. Stat. § 549.09, “an insured may recover preaward interest on an appraisal award for a fire insurance loss, notwithstanding a contractual loss payment provision stating that the loss is payable after the filing of an appraisal award.” Hous. & Redev. Auth., 864 F.3d at 988 (quoting Poehler, 899 N.W.2d at 142). Thus, HRA may recover preaward interest here. Id.

         Calculation of the preaward interest on the appraisal award requires the Court to identify the applicable interest rate, the length of time over which the interest rate applies, and the principal amount to which the interest rate applies. Here, the annual interest rate is ten percent because the appraisal award is greater than $50, 000. Minn. Stat. § 549.09, subd. 1(c)(2). The parties disagree about when that preaward interest began to accrue and about the applicable principal amount.

         A. Time Period

         Minn. Stat. § 549.09 unambiguously identifies three events, the earliest of which triggers when preaward interest starts to accrue: (1) the commencement of an action, (2) the time of a demand for arbitration, and (3) the time of a written notice of claim. See, e.g., In re Estate of Rutt, 824 N.W.2d 641, 646 (Minn.Ct.App. 2012). Despite the statute's clarity, ...


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