Elm Creek Courthome Association, Inc., Appellant,

STATE OF MINNESOTA
IN COURT OF APPEALS
A21-0964

Elm Creek Courthome Association, Inc.,
Appellant,

vs.

State Farm Fire and Casualty Company,
Respondent.

Filed February 14, 2022
Affirmed in part, reversed in part, and remanded
Connolly, Judge

Hennepin County District Court
File No. 27-CV-19-21441

Alexander M. Jadin, Timothy D. Johnson, Ross M. Hussey, Karly A. Kauf, Smith Jadin
Johnson, PLLC, Bloomington, Minnesota (for appellant/cross-respondent)

Scott G. Williams, Kathleen K. Curtis, Lehoan T. Pham, Haws -KM, P.A., St. Paul,
Minnesota (for respondent/cross-appellant)

Considered and decided by Cochran, Presiding Judge; Connolly, Judge; and Smith,
John, Judge.
SYLLABUS
A “written notice of claim” sufficient to trigger the accrual of preaward interest
according to Minn. Stat. § 549.09, subd. 1(b) (2020), must be sent from the claimant to the
opposing party.

 Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
OPINION
CONNOLLY, Judge
Appellant and cross -respondent Elm Creek Courthome Association, Inc. (Elm
Creek) seeks to reverse a grant of summary judgment relating to an insurance appraisal
award providing for the use of existing undamaged siding to repair damaged siding on the
same property. Respondent and cross -appellant State Farm Fire and Casualty Company
(State Farm) in turn appeals the district court’s decision granting preaward interest to Elm
Creek. Because the insurance policy does not preclude the use of undamaged siding for
repairs, we affirm in part , and because the amount of preaward interest was incorrectly
calculated we reverse in part, and remand.
FACTS
Elm Creek is a residential common -interest com munity of 21 buildings in
Champlin, Minnesota . A hailstorm damaged the buildings in June 2017. Elm Creek
reported the loss to State Farm, its insurer. The record is silent as to how Elm Creek
reported its loss. There is no written document in the record from Elm Creek to State Farm
reporting the loss. However, State Farm generated a notice-of-loss report on September
20, 2017, and sent the notice to Elm Creek. 1 State Farm inspected the buildings a month
later, estimated the covered damages amounted t o $187,978.99, and issued a net payment
for $75,530.08.

1 The notice-of-loss report generated by State Farm stated: “We received a report of a loss
occurring on June 11, 2017. A member of our team, ISAAC BREWER, will review the
claim and contact you if we need additional information.”
Elm Creek requested a second inspection in 2018. In June 2019, Elm Creek hired
its own public adjustor to provide an independent estimate. This adjustor estimated Elm
Creek suffered a loss of $2,869,634.10 due to the June 2017 hailstorm. After receiving this
estimate, Elm Creek served State Farm with a complaint alleging breach of the insurance
contract and seeking declaratory judgment as to the extent of the policy’s coverage.
Elm Creek also demanded an appraisal at that time. The appraisal panel issued its
decision on October 11 , 2019. It awarded Elm Creek $622,839.72 in replacement cost
value (RCV) of the losses, or $582,519.72 in actual cash value (ACV) of the losses. The
panel specifically stated that “[s]iding was covered on 4 buildings due to match.” It also
provided for “harvesting from the other 4 buildings” for damages to the siding on 10
additional buildings. State Farm issued a check to Elm Creek for $486,989.64 2 the next
month.
Elm Creek filed a motion to vacate the appraisal award and a motion seeking
declaratory relief in January 2020. Elm Creek argued that the policy does not allow for
“harvesting,”3 that the appraisal panel reached matters outside the scope of its authority,
and that Elm Creek is entitled to full siding replacement for all 21 buildings. State Farm
opposed this motion. In June, the district court determined that Elm Cree k’s motions and

2 This figure equals the $582,519.72 ACV appraisal award minus the $75,530.08 payment
from October 2017 and the $20,000 policy deductible.

3 Elm Creek’s adjustor defined “harvesting” as “a term of art in the construction and
insurance industry used to describe the process of reusing materials fr om one location or
structure to repair portions of a separate location or structure.”

State Farm’s opposition to them were to proceed as “cross motions for summary judgment
as to the procedural validity of the appraisal award and whether the award is in violation
of the terms of the insurance contract.”4
The district court issued its summary judgment decision in July 2020. It denied Elm
Creek relief, concluding that “harvesting” is a method of repair that did not violate the
terms of the insurance contract. Accordingly, it granted summary judgment in State Farm’s
favor. But it also instructed the parties to identify any remaining issues before it directed
entry of final judgment.
Elm Creek identified the amount of preaward interest that may be due as an
outstanding issue. The district court issued its order on preaward interest in June 2021. It
determined Elm Creek was the prevailing party in the appraisal and concluded that the
September 20, 2017, notice -of-loss report generated by State Farm constituted a written
notice of claim by Elm Creek to trigger the accrual of preaward interest. It awarded Elm
Creek $109,510.42 in interest calculated based on the RCV appraisal award amount. The
district court also directed entry of final judgment on both the July 2020 summary judgment
order and the June 2021 order for preaward interest.
Elm Creek appeals the denial of its claims for declaratory relief. State Farm cross-
appeals the award of preaward interest to Elm Creek.

4 The district court had previously dismissed Elm Creek’s motion to vacate the appraisal
award because it determined that i nsurance appraisals are not arbitration proceedings
subject to the Minnesota Uniform Arbitration Act pursuant to Oliver v. State Farm Fire &
Cas. Co., 939 N.W.2d 749 (Minn. 2020).
ISSUES
I. Is State Farm entitled to summary judgment that the appraisal award was consistent
with the terms of the insurance policy?

II. Is Elm Creek entitled to $109,510.42 in preaward interest?

ANALYSIS
I. The appraisal award was consistent with the terms of the insurance policy and
State Farm is entitled to summary judgment.

Elm Creek challenges the district court’s award of summary judgment to State Farm.
A district court “shall grant summary judgment” if “there is no genuine issue as to any
material fact and the movant is entitled to judgment as a matter of law.” Minn. R. Civ. P.
56.01. We review a grant of summary judgment de novo to determine if the district court
properly applied the law and if genuine issues of material fact preclude summary judgment.
Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn. 2010).
And the “interpretation of an insurance policy and the application of the policy to the
undisputed facts” is a question of law reviewed de novo. Com. Bank v. W. Bend Mut. Ins.
Co., 870 N.W.2d 770, 773 (Minn. 2015). Upon review, we conclude that the district court
did not err by granting summary judgment to State Farm.
A. The insurance policy does not plainly prohibit “harvesting.”
Elm Creek’s primary c hallenge to the district court’s decision is that the policy’s
plain language prohibits using “harvesting” to determine the amount of loss. We review
the interpretation of an insurance policy de novo and according to general contract
principles. Thommes v. Milwaukee Ins. Co. , 641 N.W.2d 877, 879 (Minn. 2002). A
contract is to be interpreted as a whole “with meaning give n to all of its provisions.” Am.
Nat’l Bank of Minn. v. Hous. & Redevelopment Auth. , 773 N.W.2d 333, 337 (Minn. App.
2009). We interpret an insurance policy to “ascertain and give effect to the intentions of
the parties.” King’s Cove Marina, LLC v. Lamb ert Com. Constr. LLC , 958 N.W.2d 310,
316 (Minn. 2021) (quotation omitted). We determine the parties’ intent from “the plain
language of the instrument itself.” Storms, Inc. v. Mathy Constr. Co. , 883 N.W.2d 772,
776 (Minn. 2016) (quotation omitted). If the language is “clear and unambiguous,” we
“enforce the agreement of the parties as expressed” in the contract. Id. In other words, we
do not “rewrite, modify, or limit” the effect of an unambiguous provision “by a strained
construction.” Id. (quotation omitted).
The relevant policy provisions are those concerning the conditions for “Loss
Payment:”
e. Loss Payment
In the event of loss covered by this policy:
(1) At our option, we will either:
(a) Pay the value of lost or damaged property;

. . . .

We will determine e.(1)(a) in accordance with the
applicable terms of Paragraph e.(4) . . . .

(4) . . . we will determine the value of Covered Property
as follows:
(a) At replacement cost without deduction for
depreciation, as of the time of loss, subject to the following:
i. We will pay the cost to repair or replace,
after application of the deductible and without deduction for
depreciation but not more than the least of the following
amounts:

. . . .

2) The cost to replace, on the described premises,
the lost or damaged property with other property of comparable
material, quality and used for the same purpose

. . . .

Elm Creek first focuses on “depreciation.” The plain meaning of “depreciation” is “[a]
decrease or loss in value, as because of age, wear, or market conditions,” or “[a]n allowance
made for a loss in value of property.” The American Heritage Dictionary of the English
Language 488 (5th ed. 2018). Because “harvesting” is the “ process of reusing materials
from one location or structure to repair portions of a separate location or structure ,” Elm
Creek contends that the policy prohibits “harvesting” because it necessarily uses aged
materials to make repairs. This interpretation is a strained construction that does n ot give
effect to all the policy’s provisions.
Whenever “depreciation” is used in the policy, it is used in the context of the phrase
“without deduction for depreciation.” The plain meaning of “deduction” is “[t]he act of
deducting; subtraction,” or “[a] n amount that is or may be deducted.” Id. at 473. These
“Loss Payment” provisions thus merely provide a method of accounting that disclaims
subtracting the property’s inherent loss of value over time from the amount to be paid as
the RCV of the property. As the plain meaning of “without deduction for depreciation”
does not relate to any method of making repairs, it does not operate to prohibit
“harvesting.”
Elm Creek also argues that because the “Loss Payment” provisions require the use
of “other property” to replace “lost or damaged property,” re-using existing materials from
the same property to make repairs is contrary to the policy’s plain language. But construing
these provisions as a whole reveals that “other property” in its proper context does n ot
mandate the use of brand -new materials in all repairs. The plain meaning of “other”
includes “[d]ifferent from that or those implied or specified.” Id. at 1249. In context of
the “Loss Payment” provision, “other property” merely designates the materi als used for
repairs as different from “the lost or damaged property.” Because “harvesting”
contemplates using existing but undamaged materials to repair the “lost or damaged
property,” it does not fall afoul of the “other property” provision.
Construing the “Loss Payment” provisions to prohibit “harvesting” would unduly
restrict acceptable methods to repair or replace lost or damaged property based on a strained
construction of “without deduction for depreciation” and “other property.” We therefore
decline the invitation to “rewrite, modify, or limit” the policy as Elm Creek proposes and
we conclude that the policy’s plain language does not prohibit “harvesting” as a method of
repair. See Storms, Inc., 883 N.W.2d at 776.5

5 Elm Creek also argues that “the doctrine of reasonable expectations” applies to prohibit
“harvesting,” because “harvesting” was not within its reasonable expectations at the time
it entered into the policy. But the doctrine is applied “to provide coverage where the actual
language interpreted as the insurance company intended would have proscribed coverage.”
Atwater Creamery Co. v. W. Nat’l Mut. Ins. Co., 366 N.W.2d 271, 278 (Minn. App. 1985);
see also Reinsurance Ass’n of Minn. v. Johannessen, 516 N.W.2d 562, 565-66 (Minn. App.
1994) (“The doctrine is generally applied . . . where legal technicalities would defeat
coverage which the insured reasonably believed was in place.”). Application of the
doctrine thus depends upon a dispute over coverage. See Atwater Creamery, 366 N.W.2d
at 278 (“Properly used, the doctrine will result in coverage in some cases and in no
coverage in others.”). There is no dispute that the losses Elm Creek suffered in the June
2017 hailstorm are covered losses under the policy. Moreover, the doctrine does not apply
in the absence of evidence “that the insured was actually misled.” Reinsurance Ass’n, 516
N.W.2d at 566. Elm Creek provided no evidence that it sought and was misled into
believing it purchased a policy that excluded “harvesting” as a means of repair.
Accordingly, the doctrine of reasonable expectations does not apply.
B. The appraisal panel did not exceed the scope of its authority.
Elm Creek next contends that the appraisal panel exceeded its authority by re -
evaluating matters that were not in dispute, and because it made a coverage determination
relating to “harvesting.” “The scope of apprais al is limited to damage questions while
liability questions are reserved for the courts.” Quade v. Secura Ins., 814 N.W.2d 703, 706
(Minn. 2012). The policy provides for appraisal where there is disagreement “on the value
of the property or the amount of loss.” According to Elm Creek, there was an agreement
between the competing estimates that State Farm would cover overhead and profit and
sales tax, as well as full replacement of siding for one of the buildings. Elm Creek argues
that because both estim ates included amounts for these issues, there was no dispute on
these issues for the appraisal panel to decide. And b ecause the appraisal panel included
amounts for these items in its award, Elm Creek contends it exceeded the scope of its
authority. But there is no evidence of any alleged agreement in the record. The purported
agreements are that both State Farm and Elm Creek included coverage for contractor
overhead and profit in their estimates, and that both estimates provided coverage for losses
to the building at issue. However, there was significant disagreement between the parties
as to the amount of overhead and profit that would be covered and the amount of covered
loss for the building at issue. Because there remained disagreement as to the am ount of
loss, the appraisal panel acted within its authority. See id. (stating appraisers generally
“have authority to decide the amount of loss” (quotation omitted)).
Nor did the panel exceed its authority by making a decision relating to harvesting.
Appraisers generally “may not construe the policy or decide whether the insurer should
pay.” Id. (quotation omitted). The permissibility of “harvesting” is not a coverage
determination. It is undisputed that the siding was covered under the policy ; the o nly
dispute is over the cost to repair or replace it. The cost to do so necessarily depends on the
means of repair or replacement. And as Elm Creek’s adjustor explained, “harvesting” is a
means of repair. The appraisal panel was thus within its authority to consider “harvesting”
in the context of determining “[t]he cost to replace, on the damaged premises, the lost or
damaged property with other property of comparable material, quality and used for the
same purpose.”
C. Elm Creek has not demonstrated it was deprived of due process.
Elm Creek contends the appraisal panel deprived Elm Creek of due process by
making determinations on the use of “harvesting,” an issue on which Elm Creek did not
have an opportunity to present evidence or argum ent. Both Elm Creek and State Farm
were entitled “to be heard and to an opportunity to present evidence” at the appraisal.
Dufresne v. Marine Ins. Co. , 196 N.W. 560, 561 (Minn. 1923) . The Dufresne court
determined due process was not provided to the insured where he “did not waive notice of
the hearing, and . . . he expected and intended to be present and give evidence, but was
prevented from attending and presenting his evidence because of lack of notice and
knowledge of the meeting of the appraisers.” Id. at 562. That was not the case here. Elm
Creek had notice of the appraisal, knew that State Farm would argue for a lower cost to
repair or replace than Elm Creek believed was necessary, submitted relevant evidence on
replacement cost, and attended th e appraisal. This satisfies the due process requirements
of “notice and an opportunity to be heard.” Id. at 561.
Moreover, the appraisal panel did not violate Elm Creek’s due process rights by
exceeding the scope of the appraisal. The scope of the appraisal was limited to questions
of damage and the amount of loss. Quade, 814 N.W.2d at 706. And the appraisers were
entitled to “make a personal examination of the premises and of the property,” but could
not “base the award upon their personal knowledge to the exclusion of pertinent evidence
offered by the parties.” Am. Cent. Ins. Co. v. Ramsey County , 147 N.W. 242, 243 (Minn.
1914). Both Elm Creek and State Farm were provided the opportunity to present evidence
as to the amount of the loss. Both parti es availed themselves of this opportunity and
provided their respective estimates of loss, photos, and other evidence. Given that the
panel was provided this evidence, its award cannot be said to have been made “upon . . .
personal knowledge to the exclusion of pertinent evidence offered by the parties.” Id.
Because the district court did not err by concluding the policy did not prohibit
“harvesting,” the appraisal panel did not exceed the scope of its authority, and Elm Creek
was afforded due process, i t was not error to award summary judgment to State Farm on
Elm Creek’s claims related to the insurance policy.
II. The September 2017 notice-of-loss report generated by State Farm was not a
written notice of claim by Elm Creek sufficient to trigger the accrual of
preaward interest and the amount of preaward interest must be recalculated.

The district court awarded Elm Creek preaward interest under Minn. Stat. § 549.09,
subd. 1(b) (providing for “preaward . . . interest on pecuniary damages” from the ea rliest
of the “commencement of the action or a demand for arbitration, or the time of a written
notice of claim.”). Preaward interest decisions “are reviewed de novo.” Blehr v. Anderson,
955 N.W.2d 613, 618 (Minn. App. 2021).
A. The September 2017 notice-of-loss report generated by State Farm does
not constitute a written notice of claim by Elm Creek.

The district court determined the September 2017 notice-of-loss report generated by
State Farm was a written notice of claim sufficient to “commence[] the accrual of preaward
interest.” We recently addressed what constitutes “written notice of claim” as an issue of
first impression in Blehr. 955 N.W.2d at 619. The document at issue in Blehr was a letter
from an injured party’s attorney sent to an insurer. Id. at 617. We determined a written
notice “must be sufficient, in light of the circumstances known to the noticed party, to allow
the noticed party to determine its potential liability fr om a generally recognized objective
standard of measuremen t” and that the letter satisfied these requirements. Id. at 622
(quotations omitted). We are now tasked with determining whether a notice-of-loss report
generated solely by an insurer constitutes a “written notice of claim” by the insured under
Minn. Stat. § 549.09, subd. 1(b). We conclude that it does not.
State Farm contends the plain language of Minn. Stat. § 549.09 prevents the
notice-of-loss report from operating as a written notice of claim because it is not a demand
for payment from Elm Creek to State Farm. We agree. “Statutory interpretation . . . is a
question of law which we review de novo.” Jepsen ex rel. Dean v. County of Pope , 966
N.W.2d 472, 482 (Minn. 2021). Because the parties do not contend the statute is
ambiguous, we look to the statute’s plain language to determine its meaning. Alerus Fin.,
N.A. v. Aaron Carlson Corp. , 966 N.W.2d 253, 256 (Minn. App. 2021). At issue here is
whether the plain meaning of “written notice of c laim” requires that a document be sent
from the claimant to the noticed party. The plain meaning of “notice” includes “[a] formal
announcement, notification, or warning.” American Heritage, supra, at 1206. And the
plain meaning of “claim” includes “[a] demand for something as rightful or due” and “[a]
demand for payment in accordance with an insurance policy or other formal arrangement.”
Id. at 340. A written notice of claim, therefore, is a formal announcement or warning of a
demand for payment and mu st be in writing . A party responsible for issuing payment
cannot announce a demand for payment to the party making the claim. In other words,
only the claimant may demand payment from the noticed party under the plain meaning of
“written notice of claim.” Accordingly, a “written notice of claim” necessarily requires a
written notice be sent from the claimant to the party from whom the claimant is demanding
payment. In this case there is no record of a written notice of claim from Elm Creek to
State Farm.6
Such a construction appears implicit from our conclusions in Blehr. We determined
the letter in Blehr satisfied the requirement to allow the noticed party to determine its
potential liability because it contained “evidence of [the injured party’s] intent to make a
claim against [the] estate, and ultimately against [the] automobile liability insurer.” Blehr,
955 N.W.2d at 621. The effect of the letter was the insurer was reasonably on notice that
the injured party “was making a claim for damages as a result of the accident and that the
insurer, based upon the information in the letter and in its claim file, was sufficiently
notified of its potential liability to [the injured party].” Id. The insurer in Blehr would not

6 We acknowledge that the notice-of-loss report generated by State Farm states: “ We
received a report” but that may merely have been a phone call from Elm Creek to State
Farm. The statute requires a “written” notice of claim,” and as we previously have stated,
there is no such document from Elm Creek to State Farm in the record.
reasonably have been on notice of a claim if the potential claimant had not sent the letter
demanding such information.
Unlike the letter at issue in Blehr, the notice -of-loss report here is a document
generated entirely by the insurer. The notice was sent from an insurer to its insured simply
acknowledging the initiation of a claim under its own insurance policy. Such a document
is not a demand for payment from Elm Creek to State Farm. Were we to conclude
otherwise, it would discourage insurers from communicating with their insureds by making
routine communications regarding the initiation and status of claims a source of potential
liability in preaward interest should a future dispute arise. 7 Accordingly, the September
2017 notice -of-loss report does not constitute a “written notice of claim” sufficient to
trigger the accrual of preaward interest under Minn. Stat. § 549.09, subd. 1(b).
B. Elm Creek is entitled to preaward interest that began accruing on June
5, 2019.

State Farm contends that Elm Creek is not entitled to preaward interest because the
appraisal award was closer to its October 2017 estimate of the losses, which it argues is a
written offer of settlement under the statute. The preaward interest statute p rovides that
“[I]f either party serves a written offer of settlement . . . [t]he prevailing party shall receive
interest on any judgment or award from the time of commencement of the action or a

7 We are also reluctant to in effect absolve Elm Creek from its burden as the moving party
to prove it is entitled to preaward interest. A moving party may do so either by producing
its “written notice of claim” or demonstrating that it filed a complaint or made a demand
for arbitration. Minn. Stat. § 549.09, subd. 1(b). The moving party must thus affirmatively
demonstrate that it made a demand for payment or initiated a legal proceeding. An internal
document generated by an insurer is not a demand for payment made by the insured.

demand for arbitration . . . until the time of . . . award . . . only if the amount of its offer is
closer to the judgment or award than the amount of the opposing party’s offer.” Minn.
Stat. § 549.09, subd. 1(b). The district court determined State Farm’s October 2017
estimate was not a written offer of settlement, and it did not err in that determination.
A valid offer of settlement “must be in writing and must offer, in sufficiently clear
and definite terms, to dispose completely the claims between the negotiating parties.”
Hogenson v. Hogenson, 852 N.W.2d 266, 275 (Minn. App. 2014). The payment made on
October 31, 2017, was for the ACV of the loss because it deducted the value of
depreciation. The summary of loss included with the payment states: “Your policy may
provide for additional payments on a replacement cost basis for the Recoverable
Depreciation listed above . . . . Please refer to your policy for specific time limits and
additional settlement provisions.” The various summaries for each specific building also
include the provision “ALL AMOU NTS PAYABLE ARE SUBJECT TO THE TERMS,
CONDITIONS AND LIMITS OF YOUR POLICY.” And the policy provides that “[i]n
the event you elect to have loss settled on an actual cash value basis, you may still make a
claim on a replacement cost basis if you notify us of your intent to do so within 180 days
after the loss.” Because the policy and the documents included in the estimate make plain
that even if Elm Creek accepted the ACV payment, it could later make claims for additional
money on an RCV basis, the October 2017 estimate did not purport to “dispose completely
the claims between the negotiating parties.” Id. Elm Creek is thus not barred from
receiving preaward interest because State Farm did not make a valid offer of settlement.
But because the September 2017 notice-of-loss report generated by State Farm does
not constitute a written notice of claim to State Farm, the amount of interest as calculated
by the district court is incorrect. In the absence of a written notice of claim by Elm Creek,
the next dat e on which interest may begin to accrue is either “the time of the
commencement of the action or a demand for arbitration.” Minn. Stat. § 549.09, subd.
1(b). Insurance appraisals are not arbitration proceedings subject to the Minnesota
Uniform Arbitration Act. See Oliver, 939 N.W.2d at 754 (“We hold that the Minnesota
Uniform Arbitration Act . . . does not apply to the appraisal process . . . .”). Thus, the date
upon which preaward interest began to accrue is the “time of the commencement of the
action.” Minn. Stat. § 549.09, subd. 1(b). Elm Creek served its complaint on State Farm
on June 5, 2019. Elm Creek is entitled to preaward interest that began accruing on June 5,
2019.
C. The district court did not err by awarding preaward interest on the RCV
appraisal award.

State Farm also argues that the district court erred by awarding interest on the higher
RCV amount in the appraisal award. The preaward interest statute “unambiguously
provides for preaward interest on all awards of pecuniary damages that are not specifically
excluded by the statute.” Poehler v. Cincinnati Ins. Co. , 899 N.W.2d 135, 141 (Minn.
2017). One category of specifically excluded damages is “judgments or awards for future
damages.” Minn. Stat. § 549.09, subd. 1(b)(2). State Farm argues that the RCV appraisal
award is equivalent to “future damages” because State Farm is not obligated to pay
replacement cost for losses until the insured makes the repairs. We disagree.
Several courts have recently touched on the iss ue of whether preaward interest is
available for an award of replacement cost benefits. The Poehler court noted that interest
may begin to accrue “months or even years before the payment is due” on an insurance
claim. 899 N.W.2d at 143. Local federal courts have interpreted this language to “require[]
that the depreciation holdback be included in the interest computation” —in other words,
that interest is to be calculated on an amount that does not deduct for depreciation, such as
RCV—because “a contract provision governing when payment on a claim is due does not
limit the availability of pre-award interest.” Creekview of Hugo Ass’n v. Owners Ins. Co.,
386 F. Supp. 3d 1059, 1071 (D. Minn. 2019). Another federal court addressed the specific
question of wh ether an RCV award constitute s future damages, and it determined that
“[t]he RCV award does not compensate [the insured] for a loss that he will suffer in the
future; the RCV award compensates [the insured] for a loss” that the insured suffered in
the past. Selective Ins. Co. of S.C. v. Sela, 455 F. Supp. 3d 841, 870 (D. Minn. 2020). The
Sela court also cited Poehler when stating that “[t]he fact that the terms of [the] insurance
policy do not provide for payment of the full RCV award until [the insured] completes
repairs is not relevant to when interest began to accrue on the RCV award.” Id.
Although we are not bound by these federal decisions, we find them persuasive.
That the insurance policy dictates when State Farm must issue payment on replaceme nt
cost benefits does not dictate when preaward interest begins to accrue on an RCV award,
which may be “months or even years before the payment is due.” Poehler, 899 N.W.2d at
143. Moreover, “[f]uture damages” identifies an award made for damages which, as
proven “to a reasonable certainty,” will occur in the future. Pietrzak v. Eggen, 295 N.W.2d
504, 507 (Minn. 1980). In contrast, RCV identifies an amount of money equivalent to the
cost to replace a loss that has already occurred. Because the loss oc curred on June 11,
2017, and RCV is meant to compensate for expenses incurred to repair the damages
suffered in that loss, the RCV award does not constitute the “future damages” excluded by
the statute. The district court did not err in awarding preaward interest based on RCV.
D. State Farm is entitled to an offset for its October 2017 payment.
Lastly, Elm Creek contends that offsetting the total amount of preaward interest by
prior payments State Farm made is erroneous. But the purpose of preaward interest is to
“compensate prevailing parties for the true cost of money damages incurred.” Blehr, 955
N.W.2d at 618. Elm Creek was deprived of the full value of the RCV appraisal award until
it was paid, but it was not deprived of all money damages until that time. State Farm paid
Elm Creek $75,530.08 on October 31, 2017. Elm Creek was entitled to accept this payment
without sacrificing its rights to replacement cost benefits under the policy. Accordingly,
Elm Creek was not deprived of the use of this $75,530.08 during the time preaward interest
was accruing, and State Farm is entitled to an offse t in that amount. See Creekview, 386
F. Supp. 3d at 1072 (stating that the purpose of interest is to “compensat[e] the plaintiff for
the loss of use of the money,” and that “[o]nce [the insurer] made its initial payment . . .
[the insured] . . . needs no compensation for the loss of [that payment’s] use.”).
DECISION
Because the insurance policy does not prohibit “harvesting” as a means of repair,
the appraisal panel did not exceed the scope of its authority, and Elm Creek was provided
the requisite due process, we affirm the grant of summary judgment to State Farm. And
because Elm Creek is entitled to preaward interest with an offset for State Farm’s prior
payments, we affirm in part the district court’s decision on preaward interest. But because
the notice-of-loss report generated by State Farm does not constitute a “written notice of
claim,” we reverse in part and remand to recalculate the amount of preaward interest with
June 5, 2019, as the date interest began to accrue.
Affirmed in part, reversed in part, and remanded.