Housing & Redevelopment Authority of Redwood Falls v. Housing Authority Property Insurance , 864 F.3d 986 ( 2017 )

United States Court of Appeals
For the Eighth Circuit
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No. 15-3499
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Housing and Redevelopment Authority of Redwood Falls
lllllllllllllllllllll Plaintiff - Appellant
v.
Housing Authority Property Insurance
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: October 18, 2016
Filed: July 28, 2017
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Before GRUENDER, BEAM, and SHEPHERD, Circuit Judges.
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GRUENDER, Circuit Judge.
Housing and Redevelopment Authority of Redwood Falls (“HRA”) appeals the
district court’s order declining to grant pre-award interest on an insurance appraisal
award. Because the Minnesota Supreme Court subsequently ruled that Minnesota
Statute section 549.09 provides for pre-award interest on such awards, we reverse the
district court’s order and remand for further proceedings.
HRA owns a public-housing apartment building insured by Housing Authority
Property Insurance (“HAPI”). The building caught fire on January 24, 2013, and
HRA submitted an insurance claim to HAPI. HAPI accepted coverage of the loss and
paid $2,387,239 to HRA. However, the parties disagreed on the total value of the
loss, and HAPI demanded an appraisal pursuant to the terms of the insurance policy.
Before the appraisal panel, HAPI estimated the total repair cost at
$2,834,433.90, while HRA requested $6,109,069.35. On June 4, 2014, the appraisal
panel issued its award and determined that the actual cash value of the loss was
$3,097,512.80. On June 23, 2014, HAPI paid HRA $707,773.80, which represented
the difference between the actual cash value of the loss and the payments already
made, less a $2,500 deductible.
HRA then sued HAPI in a Minnesota state court, seeking confirmation of the
appraisal award under Minnesota’s Uniform Arbitration Act and recovery of pre-
award interest under Minnesota Statute section 549.09. HAPI removed the case to
federal court based on diversity jurisdiction, and both parties filed motions for
summary judgment. HRA argued that, under section 549.09, it was entitled to interest
of 10 percent per year on the actual cash value of the loss, starting from the time of
the written notice of the claim. The district court confirmed the appraisal award, but
it denied HRA’s request for pre-award interest under section 549.09.
Section 549.09 is Minnesota’s general prejudgment interest statute. As is
relevant here, it states:
Except as otherwise provided by contract or allowed by law, preverdict,
preaward, or prereport interest on pecuniary damages shall be computed
as provided in paragraph (c) 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, except as provided herein.
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Minn. Stat. § 549.09, subd. 1(b). The district court reasoned that “[t]he first six
words of the statute, ‘[e]xcept as otherwise provided by contract,’ resolve the issue.”
Hous. and Redev. Auth. of Redwood Falls v. Hous. Auth. Prop. Ins., No. 14-cv-4741,
2015 WL 4255858, at *3 (D. Minn. July 14, 2015) (quoting id.). The court noted
that, “[t]hough the insurance policy does not expressly prohibit pre-award interest,
it implicitly addresses when the interest would start accruing based on when HAPI
must pay the loss.” Id. Specifically, a portion of the insurance policy states that “[a]n
insured loss will be payable 30 days after . . . the filing of an appraisal award.” Id.
The court also reasoned that granting pre-award interest would not further the
purpose of the statute, which is “to compensate the plaintiff for the loss of use of his
money,” unless HAPI “wrongfully withheld the money” beyond the payable date set
forth in the insurance policy. Id. at *4 (quotation omitted). Hence, because HAPI
fully compensated HRA less than thirty days after the appraisal panel issued its
award, the court held that HRA “suffered no loss of the use of the money” and thus
was not entitled to pre-award interest. Id. It entered summary judgment in favor of
HAPI, id. at 5, and HRA now appeals.1
“We review de novo a grant of summary judgment, considering the facts in the
light most favorable to the nonmoving party. Summary judgment is proper when no
genuine issues of material fact exist and the moving party is entitled to judgment as
a matter of law.” Nat’l Am. Ins. Co. v. W & G, Inc., 439 F.3d 943, 945 (8th Cir. 2006)
(citation omitted). “In insurance coverage actions involving diversity of citizenship,
state law controls our analysis of the insurance policy.” Id. “Decisions from the state
supreme court as to state law are binding on this court.” Cont’l Cas. Co. v. Advance
Terrazzo & Tile Co., 462 F.3d 1002, 1007 (8th Cir. 2006).
At the time the district court granted summary judgment in favor of HAPI, the
Minnesota Supreme Court had not yet addressed whether section 549.09 permits
1
HAPI does not appeal the confirmation of the appraisal award.
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recovery of pre-award interest on an appraisal award when the insurance policy does
not expressly address pre-award interest. Since then, the Minnesota Supreme Court
has resolved this issue in Poehler v. Cincinnati Insurance Company, --- N.W.2d ---,
2017 WL 3045531 (Minn. July 19, 2017). As in this case, the parties in Poehler
disagreed over whether an insured was entitled to pre-award interest under
section 549.09 after appraisers issued an award determining that the insured’s total
loss was greater than what the insurer had paid by the time of the appraisal hearing.
Id. at *1-2. Moreover, the insurance policy in Poehler was identical in all relevant
respects to the policy here, as it declared that a “[l]oss is payable within 5 working
days . . . [a]fter there is a filing of an appraisal award.” Id. at *4 (emphasis omitted).
In Poehler, the court first explained that section 549.09 “unambiguously
provides for preaward interest on all awards of pecuniary damages that are not
specifically excluded by the statute, and does not restrict the recovery of pre-award
interest to cases or matters involving wrongdoing or a breach of contract.” Id. Next,
the court held that, “absent contractual language explicitly precluding preaward
interest, an insured may recover preaward interest on an appraisal award for a fire
insurance loss, notwithstanding a contractual loss payment provision stating that the
loss is payable after the filing of an appraisal award.” Id. Finally, the court
considered and rejected an argument that the loss-payment provision in another
statute, Minnesota Statute section 65A.01, precluded the insured from recovering pre-
award interest on the appraisal award. Id. at *6-8. Thus, the court held that the
insured may recover pre-award interest under section 549.09. Id. at *8. As such,
HRA likewise is entitled to such interest.
However, the court did not decide whether such interest must be calculated
based on (1) the full amount of the appraisal award, representing the actual cash value
of the loss, or (2) the difference between the actual cash value of the loss and the
payments already made before the appraisal was demanded. In a footnote, the court
observed that the trial court “awarded preaward interest on the full amount of the
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appraisal award,” and it “acknowledge[d] that [the trial court’s order] is anomalous.”
Id. at *8 n.4. Presumably, the court acknowledged that this was “anomalous” in light
of the insurer’s argument that “if ‘loss of use of money’ is the basis for an award of
preaward interest in this case, it must be recognized that [the insured] did not have
a ‘loss of use’ of [the full amount of the appraisal award].” Id. (alterations and
quotation omitted). In any event, the court declined to address the issue because it
concluded that the insurer failed to preserve the issue for appeal. Id.
Similarly, we decline to address this issue, as the district court has had no
opportunity to calculate the pre-award interest owed to HRA, and the parties did not
argue this issue on appeal. See Murphy v. Aurora Loan Servs., LLC, 699 F.3d 1027,
1033-34 (8th Cir. 2012) (“[W]here the parties did not adequately develop an issue,
remanding to allow the district court to address the matter in the first instance is
appropriate.”). Thus, on remand, the district court may decide in the first instance
how to calculate the pre-award interest.
For the reasons stated above, we reverse the district court’s order granting
summary judgment in favor of HAPI and remand for further proceedings not
inconsistent with this opinion.
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