K & R Landholdings, LLC, d/b/a High Banks Resort, Appellant,

STATE OF MINNESOTA
IN COURT OF APPEALS
A16-0660

K & R Landholdings, LLC,
d/b/a High Banks Resort,
Appellant,

vs.

Auto-Owners Insurance,
Respondent.

Filed February 12, 2018
Reversed and remanded
Schellhas, Judge

Itasca County District Court
File No. 31-CV-15-2426

Alexander M. Jadin, Timoth y D. Johnson, Roeder Smith Jadin, PLLC, Bloomington,
Minnesota (for appellant)

Timothy P. Tobin, Brock P. Alton, Gislason & Hunter LLP, Minneapolis, Minnesota (for
respondent)

Considered and decided by Kirk, Presiding Judge; Halbrooks, Judge; and Schellhas,
Judge.
S Y L L A B U S
I. Commercial policy insureds are entitle d to preaward interest on appraisal
awards, “except as otherwise provided by contract or allo wed by law” under Minn. Stat.
§ 549.09, subd. 1(b) (2016).
II. Preaward interest on appraisal aw ards involving commercial insurance
policies is not “otherwise . . . allowed by law” under Minn. Stat . §§ 60A.0811, 334.01
(2016), within the meaning of Minn. Stat. § 549.09, subd. 1(b).

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O P I N I O N
SCHELLHAS, Judge
Appellant challenges the district court’s order denying preaward interest on its
insurance appraisal award, arguing that it is entitled to preaward interest under Minn. Stat.
§ 549.09, subd. 1(b), and Poehler v. Cincinnati Ins. Co., 899 N.W.2d 135 (Minn. 2017). We
agree and therefore reverse and remand for calculation of preaward interest.
FACTS
Appellant K & R La ndholdings, LLC d/b/a High Banks Resort (High Banks) is a
family-operated resort located in Deer River that sustaine d significant storm damage on
July 2, 2012. On the day of the storm, High Banks notifie d its insurer, respondent Auto-
Owners Insurance, of the loss. In September 2012, Auto-Owners made an initial payment of
$53,239.89 to High Banks for its loss and later made additional payments. By November 17,
2014, Auto-Owners had paid High Banks a total of $82,142.45, representing Auto-Owners’
estimated actual cash value (ACV) of High Banks’ loss. But High Banks disputed the amount
of its loss and, on December 12, 2014, demanded appraisal under the terms of its policy.
After an appraisal hearing on April 2, 2015, the appraisal panel determined both the
replacement cost value (RCV) and the ACV of High Banks’ loss, and Auto-Owners made
additional payments to High Banks for an approximate total of $195,000. High Banks then
sued Auto-Owners, alleging that Auto-Owners breached the terms of the parties’ insurance
contract by “fail[ing] to tim ely and fully compensate [H igh Banks] for its damages,”
requesting confirmation of the parties’ appraisal award under Minn. Stat. § 572B.22 (2016),
and seeking preaward interest under Minn. Stat. § 549.09 (2016).

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Both parties moved for summary judgment, and the district court granted summary
judgment to Auto-Owners, denied summar y judgment to High Ba nks, and denied High
Banks’ request for preaward interest under Minn. Stat. § 549.09. The court concluded that
High Banks’ action was time-barred under the plain language of the policy, requiring that
“any legal action against Auto-Owners to be brought within two years of the date on which
the covered loss or damage occurred.”1 The court also concluded that “[e]ven if [High Banks’]
action were not time-barred, High Banks would not be entitled to an award of pre-judgment
interest” under this court’s opinion in Poehler v. Cincinnati Ins. Co., 874 N.W.2d 806 (Minn.
App. 2016), rev’d, 899 N.W.2d 135 (Minn. 2017).
High Banks appealed the dist rict court’s order, and this court stayed the appeal
“pending resolution of Poehler.” On July 19, 2017, the supreme court released Poehler,
reversing this court’s decision. 899 N.W.2d 135 (Minn. 2017). This court then dissolved the
stay of High Banks’ appeal.
ISSUE
Is High Banks entitled to preaward interest under Minn. Stat. § 549.09?
ANALYSIS
High Banks argues that the supreme court’s decision in Poehler dictates its
entitlement to preaward interest under Minn. Stat. § 549.09. In Poehler, the supreme court
interpreted Minn. Stat. § 549.09 and concluded that it “plainly and unambiguously provides
preaward interest on ‘pecuniary damages’— including those awarded in insurance

1 On appeal, High Banks does not challenge the district cour t’s ruling that its breach-of-
contract claim is time-barred under the policy.

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appraisals—that are not otherwise excluded by the statute.” Id. at 140 (emphasis added)
(footnote omitted). The supreme court held th at “absent contractual language explicitly
precluding preaward interest, an insured may recover preaward interest on an appraisal
award for a fire insurance lo ss, notwithstanding a contra ctual loss payment provision
stating that the loss is payable afte r the filing of an appraisal award.” Id. at 142. We
therefore need not engage in statutory inte rpretation to determine whether the statute
provides preaward interest on appraisal awards. It does. See id.
Auto-Owners contends that Poehler does not control the availability of preaward
interest in this case for two reasons. First, unlike in Poehler, the district court here decided
that High Banks’ claim is “time-barred” under the “Policy’s two-year limitation on
bringing any action against Auto-Owners.” Second, Auto-Owners argues that other statutes
govern preaward interest involving commercial insurance policies.
I. Is High Banks’ claim for pr eaward interest time-barred?
“General principles of contract inte rpretation apply to insurance policies.” Lobeck
v. State Farm Mut. Auto Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998). “When the language
of a contract is clear and unambiguous, we enforce the agreement of the parties as
expressed in the contract.” Caldas v. Affordable Granite & Stone, Inc., 820 N.W.2d 826,
832 (Minn. 2012). Ambiguities regarding coverage are resolved in favor of the insured, but
the reviewing court cannot read an ambiguity into the plain language of the policy. Hubred
v. Control Data Corp. , 442 N.W.2d 308, 310 (Minn. 1989). The i nterpretation of an
insurance policy is a questi on of law that appellate courts review de novo. Stand Up

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Multipositional Advantage MRI, P.A. v. Am. Family Ins. Co., 889 N.W.2d 543, 547 (Minn.
2017).
Auto-Owners’ policy provides:
No one may bring a legal ac tion against us under this
Coverage Part unless . . .
1. [t]here has been full compliance with all of the terms of
this Coverage Part; and
2. [t]he action is brought with in 2 years after the date on
which the direct physical loss or damage occurred.

Auto-Owners argues that notwithstanding the Poehler decision, High Banks’ claim
for preaward interest is time-b arred under the plain language of its policy. High Banks
argues that because its entitleme nt to preaward interest aris es from section 549.09, the
policy’s time limitation for bringing an action is inapplicable. We agree with High Banks.
The Auto-Owners insurance policy provides that “[t]his Coverage Part is subject to
the following conditions.” (Emphasis added.) One of the conditions is that “[n]o one may
bring a legal action against us under this Coverage Part unless” the action is brought within
two years after the date of loss. (Emphasis added.) In the sectio n of the policy entitled
“Coverage,” the policy provides that Auto-Owners “will pay for direct physical loss of or
damage to Covered Property at the premises described in the Declarations caused by or
resulting from any Covered Cause or Loss.” The policy does not address preaward interest.
Instead, High Banks’ right to recover interest arises from Minn. Stat. § 549.09, subd.
1(b). See Poehler , 899 N.W.2d at 141 (holding that “M inn. Stat. § 549.09, subd. 1(b),
unambiguously provides for preaward interest on all awards of pecuniary damages that are
not specifically excluded by the statute, and do es not restrict the re covery of preaward

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interest to cases or matters involving wrongdoing or breach of contract”). We note, by way
of analogy, that the Minnesota Supreme Court ha s specifically stated that “[t]he right to
recovery of prejudgment interest . . . is statutory, not contractual,” and that “[p]rejudgment
interest is governed by Minn. Stat. § 549.09, subd. 1.” Schwickert, Inc. v. Winnebago
Seniors, Ltd. , 680 N.W.2d 79, 88 (Min n. 2004). Like prejudgment interest, preaward
interest is governed by Minn. Stat. § 549.09, subd. 1.
Auto-Owners contends that Johnson v. Mut. Se rv. Cas. Ins. Co. , 732 N.W.2d 340
(Minn. App. 2007), review denied (Minn. Aug. 21, 2007), su pports its position that High
Banks’ claim for preaward interest is time-barred. In Johnson, the insured sued her insurer
after it declined to participat e in an appraisal that the in sured demanded more than two
years after the date of loss. 732 N.W.2d at 342. The district court granted the insurer
summary judgment, concluding that the in sured’s action was barred by the policy’s
statutorily mandated two-year limitation period on suits or actions, which began to run
from the date of the loss. Id. at 343.
This court held that the appraisal clause is not an agreement to arbitrate the insurer’s
liability under the policy, and that the insurer’s liability can be determined only by a court
action, which the two-year limitati ons on suits or actions barred. Id. at 346. This court
therefore affirmed the district court’s dismissal of the insured’s action for recovery under
the policy. Id. But Johnson is distinguishable from this case and therefore inapplicable.
Johnson involved liability for a covered loss under the policy, not a request for preaward
interest under section 549.09. Id. at 342.

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Because section 549.09 unambiguously provides for preaward interest on all awards
of pecuniary damages that are not specifically excluded by the statute, and because nothing
in the plain language of the policy addresses High Banks’ right to receive preaward interest,
we conclude that the two-year limitations pe riod in the policy does not bar High Banks’
preaward-interest claim.
II. Is High Banks entitled to preaward interest under Minn. Stat. § 549.09?
Auto-Owners argues that even if High Ba nks’ claim for preaward interest is not
time-barred under the policy, because the policy at issue in this case is a commercial policy,
not a homeowner policy as in Poehler, recovery of preaward-interest is not controlled by
Poehler. Auto-Owners also argues that section 549.09 does not apply because it states that
preaward interest is “otherwise . . . allowed by law.” Minn. Stat. § 549.09, subd. 1(b).
A. “Otherwise provided by contract or allowed by law”
Minnesota Statutes section 549.09, subdi vision 1(b), specifically provides for
preaward interest “[e]xcept as otherwise provided by contra ct or allowed by law.” In
Seaway Port Auth. v. Midland Ins. Co. , this court stated that section 549.09, “was not
intended to disturb existing la w of prejudgment interest, but to provide for prejudgment
interest in situations where prejudgment interest was not already allowed by law.” 430
N.W.2d 242, 252 (Mi nn. App. 1988) (concluding that district court had not erred by
calculating prejudgment interest according to common-law prin ciples rather than under
section 549.09). And recently, in Hogenson v. Hogenson , this court stated that section
549.09 “was meant to supplement, not replace, the existing law on preverdict interest.” 852
N.W.2d 266, 273 (Minn. App. 2014).

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Auto-Owners argues that section 549.09 is inapplicable because this case involves
a commercial policy, and two statutes, Minn. Stat. §§ 334.01, 60A.0 811, “otherwise . . .
allow[] by law” interest involving commercial policies.
1. Minn. Stat. § 334.01
Relying heavily upon Hogenson, Auto-Owners argues that Minnesota Statutes
section 334.01 “otherwise” provides for preawa rd interest. That statute states that the
interest rate “for any legal indebtedness” is six percent, “unless a different rate is contracted
for in writing.” Minn. Stat. § 334.01, subd. 1. Auto-Owners contends that section 334.01,
rather than section 549.09, is applicable because the “question” here involves “the amount
owed by [Auto-]Owners under its contract of insurance,” a claim in which damages are
established by common law. Accordingly, Auto -Owners argues that “assuming” all of its
“other arguments are rejected, and this court re verses the holding of the District Court, it
should . . . direct that [High Banks’] claim of pre[award] interest is limited to the amount
owed by [Auto-]Owners, at six percent,” under Minn. Stat. § 334.01.
In Hogenson, in determining whether the distri ct court correctly awarded and
calculated preverdict interest under section 549.09 on the plaintiff’s conversion claims, this
court discussed the “History of the Conflict Between Section 549.09 and Section 334.01.”
Hogenson, 852 N.W.2d at 272–74. This court conc luded that section 549.09 “was meant
to supplement, not replace, the existing law on pr everdict interest,” and that “the phrase
‘except as otherwise allowed by law’ require[d] that preverdict interest be calculated under
existing common-law principles whenever possible.” Id. at 273–74. This court held that
“[b]ecause preverdict interest was allowe d for conversion claims under common law,

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preverdict interest should be calculated from the date of conversion at 6% under section
334.01.” Id. at 274.
This case, unlike Hogenson, involves preaward interest on an appraisal award, and
Auto-Owners cites no authority to show that preaward interest was allowed for appraisal
awards under common law. Conversely, Poehler specifically allows for preaward interest
on insurance-appraisal awards under Minn. Stat. § 549.09, subd. 1(b), “except as otherwise
provided by contract or allowed by law.” 899 N.W.2d at 141. The supreme court could
have acknowledged that section 334.01 may, in some circumstances, “otherwise” provide
for preaward interest. But the supreme court in Poehler did not mention section 334.01.
Although unlike in Poehler, this case appears to invo lve a commercial policy, a
circumstance not disputed by the parties, Poehler includes no hint that such a distinction is
dispositive. 899 N.W.2d at 142 (noting that “Minnesota pr ecedent require[es] strict
construction of insurance policies against the insurer”).
Indeed, in explaining its reasoning, Poehler includes discussion about two federal
district court cases, one of whic h involved a co mmercial policy. Id. at 142 −43; see also
Hous. and Redevelopment Auth. of Redwood Falls v. Hous. Auth. Prop. Ins., 864 F.3d 986,
988–89 (8th Cir. 2017) (relying on Poehler to hold that insured under commercial policy
was entitled to preaward interest from insurer following appr aisal award). We therefore
conclude that, under Poehler, High Banks is entitled to preaward interest pursuant to Minn.
Stat. § 549.09.

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2. Minn. Stat. § 60A.0811
Minnesota Statutes section 60A .0811, subdivision 2, provides:
(a) An insured who prevails in any claim against an
insurer based on the insurer’s breach or repudiation of, or
failure to fulfill, a duty to provi de services or make payments
is entitled to recover ten percent per annum interest on
monetary amounts due under the insurance policy, calculated
from the date the request for payment of those benefits was
made to the insurer.

(b) Punitive damages or damages for nonmonetary
losses are not recoverable under this section.

Minn. Stat. § 60A.0811, subd. 2. Subdivis ion 3 provides that “[t]his section applies to a
court action or arbitration proceeding, including an action seeking declaratory judgment.”
Id., subd. 3 (emphasis added).
Auto-Owners argues that because the policy involved in this case is a commercial
policy, and because section 60A. 0811 “otherwise” allows for preaward interest in regard
to commercial policies, section 549.09 is in applicable. But the case before us does not
involve an arbitration proceed ing. And because appraisal pr oceedings do not determine
liability, High Banks’ action is not a “court action.” See Johnson, 732 N.W.2d at 346 (“It
is well settled that appraisal does not determine liability under a policy. Liability depends
on a judicial determination.”); see also Vaubel Farms, In c. v. Shelby Farmers Mut. , 679
N.W.2d 407, 411–12 (Minn. App. 2004) (noti ng that “action” is “confined to judicial
proceedings” (quotation omitted)). Auto-Owner s’ argument that section 549.09 is
inapplicable because section 60A.0811 “otherwise” provides for preaward interest is
unpersuasive.

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B. Applicability of the Arbitr ation Act to appraisal hearings
Auto-Owners argues that because apprai sals are not “Arbitrations” under the
Arbitration Act, section 549.09 is inapplicab le to appraisal hearin gs. Auto-Owners relies
on the dissent in Poehler to support its argument that sec tion 549.09 is not applicable to
appraisal actions because “the parties’ appr aisal proceeding does not trigger a right to
preaward interest.” 899 N.W.2d at 147 (Anderson, J., disse nting) (footnote omitted).
Describing “a demand for arbitration” as a “predicate event,” the dissent stated that section
549.09, subdivision 1(b), “sets out a specific list of predicate events—one of which must
occur—before preaward interest accrues on pecuniary damages.” Id. (Anderson, J.,
dissenting) (footnote omitted). Th e dissent noted that Poehle r did not demand arbitration
and that his demand for an appraisal did not commence an action. Id. at 147–48 (Anderson,
J., dissenting). The dissent concluded that because none of the triggering events established
in section 549.09 occurred, the statute did not apply. Id. at 148–49 (Anderson, J.,
dissenting). Although Auto-Owners’ argument to the district court may have been precisely
consistent with the dissent, it conflicts with the majority’s holding in Poehler and therefore
is unpersuasive.
As in Poehler, High Banks moved for preaward interest after issuance of an
appraisal award in its favor. Based on Poehler, we conclude that Minnesota Statutes section
549.09 “unambiguously provides for preaward interest” on the appraisal award. Id. at 140.
Accordingly, we reverse the district court’s denial of preaward interest and remand for a
calculation of preaward interest.

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D E C I S I O N
A claim for preaward interest under Minn. Stat. § 549.09 on an appraisal award is
not time-barred under insurance-policy limitation terms when the policy does not address
preaward interest. Commercial policy insure ds are entitled to preaward interest on
appraisal awards under Minn. Stat. § 549.09 , subd. 1(b), unless ot herwise provided by
contract or allowed by law. Preaward interest on appraisal awards is not “otherwise . . .
allowed by law” under Minn. Stat. §§ 60A.0811, 334.01, within the meaning of Minn. Stat.
§ 549.09, subd. 1(b).
Reversed and remanded.