Smith Jadin Johnson attorneys Tim Johnson and Anthony Remick won a Court of Appeals decision holding that State Farm’s Policy does not exclude preaward interest on an appraisal award. You can read the order here.

The policyholder in this matter experienced a fire loss that caused substantial damage to his home.  Following the loss, State Farm undervalued the cost to make repairs.  SJJ assisted the property owner with proceeding to an appraisal to determine the correct amount of loss.  Appraisal is an alternative dispute resolution mechanism required in every Minnesota property insurance policy.  For appraisal, a panel of three construction experts inspect the loss and determine what is damaged, what caused the damage, what the proper repairs are, and how much repairs will cost (the amount of Loss).  In this case, the appraisal panel awarded a much higher repair cost than State Farm’s original estimate.

Following the appraisal award, SJJ demanded State Farm pay the homeowner preaward interest on the appraisal award.  State Farm contended that its policy excluded any preaward interest based on a clause that stated: “[n]o interest accrues on the loss until after the loss becomes payable.”  The District Court agreed with State Farm and denied the claim for interest.  SJJ believed this determination was contrary to Minnesota law, which SJJ helped establish in the earlier Poehler decision it won at the Minnesota Supreme Court.  Accordingly, SJJ appealed the matter to the Minnesota Court of Appeals.  The Court of Appeals overturned the District Court, agreed with Smith Jadin Johnson, and held that State Farm’s policy does not explicitly preclude preaward interest.  Accordingly, the policyholder was entitled to additional interest on the appraisal award.

If an insurance company undervalues your loss and you prevail at appraisal, you may be entitled to interest in addition to the appraisal award.  Contact us today to determine whether you may be entitled to additional compensation.


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