United States District Court, D. Minnesota
R. Bergstrom, Kayla M. Cottier, and Brenda M. Sauro, Sauro
& Bergstrom, PLLC, Oakdale, MN, for Plaintiff Creekview
of Hugo Association, Inc.
P. Alton, Gislason & Hunter LLP, Minneapolis, MN, for
Defendant Owners Insurance Company.
OPINION AND ORDER
C. Tostrud United States District Court Judge
multi-building Creekview of Hugo Townhomes complex (the
“Property”) was damaged by a large wind and hail
storm on June 11, 2017. At the time of the storm, the
Property was insured under a policy issued by Defendant
Owners Insurance Company. Owners and the Property's
homeowners association, Plaintiff Creekview of Hugo
Association, Inc. (“Creekview”), dispute the
amount currently owed under the policy, even following an
appraisal conducted pursuant to the policy and Minnesota
statute. Creekview filed a motion in Washington County
District Court seeking confirmation of the appraisal award
and an order requiring Owners to pay the $374, 838.63
Creekview contends was still owed under the appraisal,
plus pre-award and post-award interest, costs, and fees.
Owners removed to federal court on the basis of diversity
jurisdiction, which exists here because the Parties are of
diverse citizenship and the amount in controversy well
exceeds the $75, 000 threshold. See ECF No. 1 at 3-4; 28
U.S.C. § 1332(a). Creekview's motion will be granted
in part and denied in part.
Parties seem to agree on the broad outline of the facts: The
Property was damaged by wind and hail on June 11, 2017. Mem.
in Supp. at 3 [ECF No. 4]; Mem. in Opp'n at 3-4 [ECF No.
9]. At the time, Creekview was covered under an insurance
policy issued by Owners that covered the replacement cost of
just such a covered loss. Mem. in Supp. at 3; Mem. in
Opp'n at 3-4; see also Cottier Aff. Ex. A at
¶ 00 02 01 87 (“Policy”) at 12 [ECF No. 5-1
policy provides that, in general, Owners “will not pay
on a replacement cost basis for any loss or damage . . .
[u]ntil the lost or damaged property is actually repaired or
replaced; and . . . [u]nless the repairs or replacement are
made as soon as reasonably possible after the loss or
damage.” Policy at 12-13. But even if the insured
initially “make[s] a claim for loss or damage . . . on
an actual cash value basis instead of on a replacement cost
basis, ” it may-and here, Creekview did-subsequently
“make a claim on a replacement cost basis” if it
does so timely. Id. at 12. When a claim proceeds in
that manner, Owners follows a two-step claims-payment
process: first, it issues payment for the actual cash value
of the loss-that is, the replacement cost minus
depreciation-and then, after repairs are complete, it issues
the amount withheld for depreciation, called the
“recoverable depreciation” or “depreciation
holdback.” Mem. in Supp. at 3 (citing Policy at 12);
see also Mem. in Opp'n at 4. The policy caps
Owners' obligation on replacement cost at either the
amount actually spent to repair or replace the damaged
property or the cost to repair or replace the damaged
property with other property of comparable quality and used
for the same purpose, whichever is less. Policy at 13.
opened a claim with Owners on June 19, 2017. Cottier Aff. Ex.
B [ECF No. 5-1 at 69]. Owners retained an independent
adjusting firm, Moe & Nevins, which determined that the
replacement cost value of the damage was $1, 196, 299.26.
See Cottier Aff. Ex. C [ECF No. 5-1 at 71]. On
August 29, 2017, Owners issued Creekview a check for $832,
684.96-to cover the actual cash value of the loss, as
determined by its own adjuster, minus Creekview's $25,
000 deductible-and confirmed that an additional payment for
recoverable depreciation could be paid after Creekview
completed its repairs. Cottier Aff. Ex. D [ECF No. 5-1 at
73-76]. But Creekview's repair contractor, Lincoln
Hancock Restoration, estimated that the replacement cost
value of the damage was $1, 654, 913.44, which was around
$450, 000 more than the replacement cost value assigned by
Moe & Nevins. When the Parties failed to agree on the
amount of loss, Creekview invoked the policy's appraisal
clause, which provides:
If we and you disagree on the amount of loss, either may make
written demand for an appraisal of the loss. In this event,
each party will select a competent and impartial appraiser.
The two appraisers will select an umpire. If they cannot
agree, either may request that selection be made by a judge
of a court having jurisdiction. The appraisers will state
separately the amount of loss. If they fail to agree, they
will submit their differences to the umpire. A decision
agreed to by any two will be binding.
Policy at 11; Alton Decl. Ex. 2 [ECF No. 10-1 at 2].
Creekview's request was dated May 25, 2018, but was not
received by Owners until July 3, 2018. Compare Alton
Decl. Ex. 2 with Alton Decl. Ex. 3 [ECF No. 10-1 at
3]. No evidence in the record suggests the reason for this
lag, although at oral argument Owners' counsel stated
that it was the result of a delay between when he received
the request and when he transmitted it to Creekview.
13, 2018, Owners requested that Creekview provide proof of
loss, and reiterated that request several more times before
Creekview provided an itemized and sworn proof-of-loss
statement on October 11, 2018. See Alton Decl. Exs.
3-7 [ECF No. 10-1 at 3-93]. On October 30, 2018, the
appraisal panel-the appraiser each Party selected, along with
the umpire selected by those two appraisers-conducted the
appraisal and awarded Creekview a total replacement cost of
$1, 499, 354.52, with an actual cash value of $1, 124,
515.89. Cottier Aff. Ex. F [ECF No. 5-1 at 80-81]. The panel
transmitted the appraisal award to the Parties that same day.
Cottier Aff. Ex. G [ECF No. 5-1 at 83]. The award listed an
actual cash value and a replacement cost value for each of
the eighteen buildings at issue, as well as for
“general conditions” at the Property, but did not
otherwise itemize values for particular types of damage
(e.g., it did not identify specific values for
elements of roofing, gutters, siding, etc., either at
specific buildings or for the Property as a whole). Cottier
Aff. Ex. F.
understood the policy to require Owners to make full payment
within five days after the appraisal award was issued,
see Mem. in Supp. at 5 (citing Minn. Stat. §
72A.201, subd. 5(5) and policy endorsements specific to
Minnesota); when Creekview had received no further payment
within that time, it sent a letter dated November 9, 2018,
requesting that Owners pay the total replacement cost plus
pre-award and post-award interest, see Cottier Aff.
Ex. H [ECF No. 5-1 at 85-86]. Creekview's position was
that it was entitled to the total replacement cost because
all repairs had been completed-or “substantially
complete[d]”-at the time of the appraisal. Mem. in
Supp. at 5-6; Elert Decl. ¶ 3 [ECF No. 17]. Owners
evidently disputed that point. See Mem. in Opp'n
at 5. At the appraisal, Owners' adjuster had determined
that, contrary to Creekview's assertions, some repairs
had not yet been completed. Alton Decl. ¶ 10 [ECF No.
10]. On November 16, 2018, it mailed Creekview a check for
$266, 830.93, representing the difference between the actual
cash value awarded by the appraisal panel and the payment
previously issued by Owners. See Cottier Aff. Ex. I
[ECF No. 5-1 at 88-89]. In the letter enclosing the check,
Owners requested that Creekview not deposit the check
“pending the potential modification by the appraisal
panel.” Id. Ultimately, the award was not
modified, and on November 29, 2018, Owners advised that
Creekview could deposit the check. See Cottier Aff.
Ex. J [ECF No. 5-1 at 91-95]. That still left Creekview
without the $374, 838.63 portion of the appraisal award
representing recoverable depreciation.
furtherance of its position that all repairs at the Property
had been completed, Creekview provided Owners with a copy of
a December 19, 2018 invoice from Lincoln Hancock describing a
total of $1, 499, 354.52 in “[s]torm damage repairs
completed per the appraisal award, ” and seeking
payment for the unpaid balance of those repairs. Cottier Aff.
Ex. E [ECF No. 5-1 at 78]; Mem. in Supp. at 6; Mem. in
Opp'n at 5. Moe & Nevins undertook reinspection in
early January 2019. Alton Decl. Ex. 9 [ECF No. 10-1 at 103-
04]. Following the reinspection, it exchanged several emails
with Creekview's contractor about a number of repairs it
did not believe had been completed, although Moe &
Nevins's specific concerns were unclear and it was, in
several respects, unresponsive to Creekview's
contractor's requests for clarification. See
Alton Decl. Ex. 8 at 1-6 [ECF No. 10-1 at 94].
on February 5, 2019, Creekview filed a motion in Washington
County District Court to confirm the appraisal award and for
entry of a judgment awarding interest, costs, and fees. ECF
No. 3. Two days later, on February 7, 2019, Moe & Nevins
issued a supplemental report to Owners documenting that, in
its opinion, several repairs remained incomplete. Alton Decl.
Ex. 9. It had been unable to reinspect the roofing repairs at
the Property due to weather conditions. Alton Decl. Ex. 10
[ECF No. 10-2]. On February 27, 2019, with communications
continuing among the Parties, Owners' adjuster, and
Creekview's contractor, Owners removed this case to
federal court. ECF No. 1.
Parties continued briefing Creekview's motion in federal
court, Owners issued a partial depreciation payment of $20,
273.95 on March 20, 2019, bringing the amount of unpaid
recoverable depreciation to $354, 564.68. Bergstrom Aff. Ex.
R [ECF No. 16-1 at 159-68]. That payment was based on Moe
& Nevins's reinspection and its itemized
calculations, and it did not include any depreciation
holdback relating to repairs that Owners did not believe had
been completed or that, due to weather delays, it had not yet
been able to verify to its satisfaction. Id.;
see also Alton Decl. Ex. 10; Mem. in Opp'n at 6;
Elert Decl. Ex. B [ECF No. 17-1 at 18-128]. For example, the
supplemental payment did not include payment for any
depreciation holdback for roofing or roofing components,
satellite-dish recalibration, two overhead doors, two
windows, some number of aluminum gutters and downspouts,
siding on one building, or chimney caps. Elert Decl. Ex. A at
4- 5 [ECF No. 17-1 at 2-16]. Creekview's contractor
maintains that many of these repairs have indeed been
completed, but the record is at least ambiguous as to whether
some items have been repaired or replaced to Owners'
satisfaction. Id. Creekview now seeks an order
awarding it the unpaid balance of the entire appraisal award,
plus interest, costs, and fees. ECF No. 18.
initial matter, the Parties disagree about which response
brief the Court should consider with respect to Owners'
opposition to the motion. When Owners removed, it filed
Creekview's motion papers in federal court, but not its
own opposition to Creekview's motion, which it had filed
in state court the day before it removed. See
generally ECF No. 1; Bergstrom Aff. Ex. P at 28 [ECF No.
16-1 at 2-28]. Accordingly, on March 11, 2019, the Court
ordered Owners to file “any opposition to
Creekview's motion on or before . . . March 13,
2019.” ECF No. 8 at 2. Owners filed its opposition by
that date, but it was not the same opposition it had filed in
state court. Compare Mem. in Opp'n [ECF No. 9]
(federal-court brief) with Bergstrom Aff. Ex. P [ECF
No. 16-1 at 2-28] (state-court brief). The differences,
however, are minimal, and consist primarily of one new
exhibit and one new sentence describing Moe &
Nevins's assessment, based on its reinspection, that only
a small portion of the depreciation holdback could be paid as
of late March 2019-after Owners' state-court opposition
brief had been filed. See Mem. in Opp'n at 3, 6;
Alton Decl. Ex. 10. Creekview suggests that these minimal
updates were improper and requests that the Court strike
Owners' federal-court brief, deciding the motion based
only on the arguments and evidence contained in its
state-court filings. Reply Mem. at 6-7 [ECF No. 15].
Court declines Creekview's request and will consider
Owners' federal-court filings made in connection with
this motion. Owners may have created some procedural
confusion when it did not file its original brief in federal
court at the same time it removed the case, but the Court did
not explicitly order Owners to file the exact same brief it
had filed in state court, and Owners therefore is not in
violation of the Court's briefing order. See ECF
No. 8 at 2 (ordering that “Owners must file
any opposition to Creekview's motion” by
the deadline (emphasis added)). Furthermore, this motion
presents a fairly unusual situation in which highly pertinent
facts-how much Owners has paid Creekview, and when, and
why-have continued to develop in the months since Creekview
first filed its motion to confirm the appraisal award in
state court. Creekview acknowledges as much-it filed the
March 20 check constituting a partial depreciation payment
and recent email correspondence as exhibits to its reply.
See Bergstrom Aff. Ex. R; Bergstrom Aff. Ex. S [ECF
No. 16-1 at 170-72]; Bergstrom Aff. Ex. V [ECF No. 16-1 at
182-91]. To the extent that Owners' opposition brief
includes changes based on developments that occurred after it
filed its state-court brief, it is more consistent with
“the just, speedy, and inexpensive determination”
of this matter to consider that information at this time.
matter is before the Court on the basis of diversity
jurisdiction. Minnesota's substantive law therefore
applies. Hanna v. Plumer, 380 U.S. 460, 465 (1965).
Because the Court's role in this diversity action is to
interpret the state law of Minnesota, it is bound by the
decisions of the Minnesota Supreme Court. Minn. Supply
Co. v. Raymond Corp., 472 F.3d 524, 534 (8th Cir. 2006).
“When a state's highest court has not decided an
issue, it is up to this court to predict how the state's
highest court would resolve that issue.”
Continental Cas. Co. v. Advance Terrazzo & Tile
Co., 462 F.3d 1002, 1007 (8th Cir. 2006). When the
decisions of a ...