SJJ attorneys Bradley Hammond and Alexandra Anderson recently secured a complete defense verdict on behalf of Twin Cities Dance and Entertainment, LLC (“TCDE”) and its owner, Marcy McHenry, following a multi-day jury trial. After hearing extensive evidence regarding Great American Insurance Company’s allegations of fraud and material misrepresentation, the federal jury rejected the insurer’s claims and found in favor of TCDE. The verdict vindicated Ms. McHenry after years of accusations arising from her efforts to recover under an insurance policy following the destruction of her business during the civil unrest that followed the death of George Floyd.
The Background
For more than three decades, Marcy McHenry built Twin Cities Dance and Entertainment into a successful Twin Cities business. What began as a dance studio evolved into Midpointe Event Center, a premier event venue that hosted weddings, corporate events, community gatherings, and celebrations of all kinds. By 2020, the business was growing and benefiting from increased activity surrounding neighboring Allianz Field.
That growth came to an abrupt halt in May 2020 when civil unrest caused significant damage to Midpointe Event Center. The loss left the property unusable and ultimately resulted in TCDE losing its leasehold interest in the venue. Like any prudent business owner, Ms. McHenry had purchased commercial insurance that included coverage for business income losses and expenses associated with relocating and rebuilding the business. She promptly submitted a claim to Great American Insurance Company seeking the benefits she had paid for.
Although all parties agreed that TCDE sustained a covered loss, they disagreed about its value. That disagreement was hardly unusual. Business income claims are among the most complex losses to quantify because they necessarily require estimating what a business would have earned in a future that never occurred. Recognizing that reality, Minnesota law and most commercial insurance policies provide a specific mechanism for resolving valuation disputes: appraisal. The parties availed themselves of that process, and the appraisal panel ultimately determined the amount of TCDE’s loss. Rather than paying that amount, Great American filed suit, contending that the very positions and information presented during the adjustment and appraisal process were evidence of fraud. Those allegations would ultimately be put before a jury.
The Jury’s Findings
After hearing days of testimony from insurance adjusters, accountants, consultants, and fact witnesses, the jury rejected Great American Insurance Company’s allegations that Twin Cities Dance and Entertainment, LLC and its owner, Marcy McHenry, engaged in fraud during the insurance claims process.
Throughout the litigation, Great American contended that various aspects of TCDE’s claim, including business income calculations, real estate consulting expenses, temporary meeting space claims, and information contained within the company’s event management software, demonstrated an intent to deceive the insurer. TCDE maintained that the claim arose from a legitimate catastrophic loss, that it cooperated fully with the insurer’s investigation for years, and that any disagreements concerned claim valuation and coverage issues, not fraud.
After considering the evidence, the jury found in favor of TCDE and rejected Great American’s fraud-based claims. In doing so, the jury declined to accept Great American’s theory that disputes over business income projections, claim documentation, or the presentation of information during a lengthy adjustment process amounted to intentional deception.
Rather than finding fraud, the jury accepted that this case involved a legitimate insurance claim arising from a catastrophic loss and rejected the insurer’s efforts to characterize years of claim-related disagreements as intentional misconduct.
Why This Case Matters
Disagreements over the amount of loss are common in insurance claims. They are even more common in business income claims, where the calculation necessarily involves projections about what a business would have earned had the loss never occurred. By their very nature, business income losses require insurers, accountants, consultants, and business owners to make assumptions about an uncertain future. That is why disputes over valuation are not only expected, they are routinely contemplated by insurance policies and Minnesota law
Minnesota provides a well-established mechanism for resolving those disputes: appraisal. Here, the parties utilized that process. The appraisal panel was presented with the same allegations, criticisms, and arguments that Great American Insurance Company now characterizes as evidence of fraud. Despite those allegations, the panel determined the amount of TCDE’s loss and issued an appraisal award resolving the parties’ valuation dispute.
Rather than paying the amount of loss determined through that contractual and statutory process, Great American filed suit and asked a jury to find that the very disagreements presented during appraisal were actually fraud. Here, the jury declined to do so.
This case underscores an important distinction between valuation disputes and fraud. Insurers may believe a claim is overstated. Policyholders may believe it is understated. Those disagreements do not automatically become fraud simply because the parties cannot agree on a number. Here, both the appraisal process and the jury system reached the same fundamental conclusion: Great American’s allegations did not transform an ordinary dispute over the amount of loss into intentional misconduct.
The verdict reinforces the importance of appraisal as the mechanism for resolving complex valuation disputes and serves as a reminder that accusations of fraud require proof, not merely disagreement with the outcome of the appraisal process.
Bottom Line
Twin Cities Dance and Entertainment, LLC’s claim began as what many insurance disputes become: a disagreement over the value of a loss. Because the parties could not agree on the amount owed, they followed the process contemplated by both the policy and Minnesota law and submitted the dispute to appraisal. The appraisal panel considered the parties’ competing positions and determined the amount of TCDE’s loss.
But rather than accepting that result, Great American Insurance Company asked a jury to conclude that the same disagreements over valuation, documentation, and claim presentation were actually evidence of fraud. After hearing all of the evidence, the jury rejected that argument.
The verdict is significant because it reinforces a principle at the heart of insurance law: valuation disputes belong in appraisal; fraud allegations belong in court. Here, both processes pointed in the same direction. The appraisal panel determined an amount of loss, and the jury rejected the insurer’s attempt to transform a dispute over that amount into a claim of intentional misconduct.
For Marcy McHenry, the verdict brought an end to a six-year battle that began after the destruction of the business she spent more than three decades building. For policyholders more broadly, it serves as an important reminder that an insurer’s disagreement with the value of a claim does not make the claim fraudulent.
At SJJ, we understand the difference between a legitimate dispute over value and an unsupported accusation of fraud. When insurers attempt to blur that line, we are prepared to defend our clients through appraisal, litigation, and trial, all the way to a verdict. Contact the team at SJJ Law today.