Written Notice of Claim by a Third-Party is Sufficient to Start Accrual of Pre-Award Interest Under Minn.Stat. §549.09

In Shardlow Townhomes Ass’n v. Midwest Family Mut. Ins. Co., 567 N.W.2d 767 (Minn. Ct. App. 2023), the Minnesota Court of Appeals ruled that a property loss notice submitted by a third-party insurance agent at the insured’s direction and on the insured’s behalf constitutes “written notice of claim” sufficient to start the accrual of pre-award interest under Minn.Stat. § 549.09, subd. 1(b).

In the underlying case, Shardlow obtained an insurance policy from Midwest Family. Shardlow purchased the policy through WA Group, its independent insurance agent. In 2019, a storm damaged Shardlow’s properties. Shardlow reported the damage to WA Group. On July 26, 2019, WA Group submitted a “property loss notice” to Midwest. Three days later, Midwest sent Shardlow a letter acknowledging receipt of the notice and provided a claim number. Based on Midwest’s engineer’s evaluation, it paid Shardlow $108,498.70. However, Shardlow disputed the damage amount and hired its own adjuster. On October 7, 2020, Shardlow sent Midwest a “sworn statement in proof of loss” claiming $820,901.18. As allowed under the Policy, Shardlow demanded an appraisal. Per the appraisal award, Midwest paid Shardlow $620,128. However, the two parties disagreed on the amount of pre-award interest owed. The parties’ disagreement stemmed from their differing interpretations of Minn.Stat. § 549.09, subd. 1(b), which provides that pre-award interest “shall be computed […] 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.”

Shardlow sued Midwest, claiming it was entitled to pre-award interest beginning July 26, 2019, when WA Group submitted the property loss notice. Midwest argued interest accrued beginning October 7, 2020, when Shardlow sent its proof of loss. Midwest based its arguments on Elm Creek Courthome Ass’n v. State Farm Fire & Cas. Co., 971 N.W.2d 731, 734 (Minn. Ct. App. 2022). In Elm Creek, the insurer internally generated a “notice-of-loss report” and sent it to the insured upon learning of the insured’s loss. The Court of Appeals ruled that the internally generated report did not constitute written notice of claim because an insurer, the party responsible for issuing payment, cannot notify itself of a claim. The District Court disagreed with Midwest and granted summary judgment in favor of Shardlow. This appeal followed.

The Court of Appeals affirmed the District Court based on three reasons. First, the Court held Elm Creek is limited to cases concerning a self-generated statement of loss by the insurer. It does not encompass Shardlow’s situation where a third-party insurance agency generates the notice. Second, the Court noted that WA group acted on behalf of Shardlow. WA Group submitted the notice after Shardlow reported it and offered to follow up with the insurer on Shardlow’s behalf. Finally, the Court found that after receiving the property loss notice, Midwest communicated directly with Shardlow when acknowledging receipt of the notice and providing a claim number. Based on these reasons, the Court of Appeals held WA Group’s notice was sufficient to start accrual of pre-award interest.

Please reach out to Bob Kuderer, Matt Johnson, or Tom Brock with any first-party property insurance coverage questions.