Tag Archives: insurance coverage

Proof of Loss: Eighth Circuit Decision Highlights the Burden Placed on Insureds Seeking Coverage

8 Jan

In a decision filed January 7, 2014 (available here), the United States Court of Appeals for the Eighth Circuit discussed the effect of he insureds’ failure to timely file a proof of loss in connection with their flood insurance claim. in reversing the district court’s decision granting summary judgment in favor of the insureds, the Eighth Circuit held that insureds are barred from recovering any amounts under a flood insurance claims that are not asserted in a timely submitted proof of loss. Although the insureds were granted additional time to file their proof of loss due to the vast scope of the flood in question, this period typically expires just 60 days from the date of the flood. Proper owners should beware of the mandate to file a timely and complete proof of claim, particularly in flood claims, in light of this decision.

Importantly, this was a flood loss claim covered by a federally-administered insurance program, and therefore is subject to regulations that played a factor in the decision. This case almost certainly would have been decided differently if it were decided under Minnesota law. Insurance carriers in typical property-damage claims (and other kinds of claims) in Minnesota often have insurance policies mandating that insureds submit proofs of loss before they may recover under the policy, but frequently that requirement does not arise until and unless the carrier requests the proof of loss. Moreover, if the proof of loss is not timely submitted by the deadline set by the policy, there may be arguments that the insured can still pursue a recovery if there was no harm to the insurance company as a result of waiting a little longer to receive the formal proof of loss. Still, it can be important for insureds in Minnesota, even on non-flood claims, to prepare a complete proof of loss and timely submit it to the insurance company. In a lawsuit to enforce an insurance policy, it is possible for a court to deny a recovery to the insured if the insured has failed to submit the proof of loss when it is required under the policy.

Even though there are different standards applicable to the claims process for federally-managed flood insurance policies, the Eighth Circuit certainly did the insureds in this case no favors. Although the insureds had clearly asserted the intent to claim nearly $50,000 in additional coverage, the proof of loss, which was filled out by the adjuster for the insurance company, didn’t include these amounts. The insureds again reiterated their desire to claim the additional loss, and were told they could “always submit a supplemental claim for additional damages,” even though there was a deadline to do so which was less than a month away. Later, the adjusters told the insureds that their request for the additional coverage was, in fact, denied and that they had one year to commence a lawsuit to pursue the disputed portion of the claim. Again, the imminent deadline that would bar them from commencing such a suit was not mentioned. The Court held that it was the insureds’ job to make sure they prepared a complete proof of loss and to make sure they complied with applicable deadlines.

The Eighth Circuit’s decision today wasn’t incorrect in asserting that the insureds had the final responsibility to timely submit a claim for the full amount of the loss they hoped to recover, but the trial court had held that the insurer had engaged in “affirmative misconduct,” and the Eighth Circuit was dismissive of this finding. The Eighth Circuit held that the communications from the adjusters, who are identified to insureds as “independent adjusters” who will assist insureds with their claims, weren’t “legally inaccurate.” The Court cited extensively to the Code of Federal Regulations concerning these flood insurance claims to establish the extent of the insureds’ responsibility in this matter. However, the representations from these adjusters were incomplete, omitting information about prerequisites to the suit they were told they had one year to commence, under circumstances in which the insureds were clearly seeking information about how to preserve their ability to pursue the disputed portion of their claim and were led to believe they had received complete information about their options.

Despite some concerns about the Eighth Circuit’s dismissal of the insureds’ arguments about the communications surrounding the proof of loss involved in this case, it’s also still possible that the insurance adjusters properly denied the last $50,000 of the claim. The Eighth Circuit didn’t analyze that question as it was not the issue on appeal. The final outcome may have been the right one. But this case serves as an important reminder of two things: 1) While “independent” insurance adjusters are supposed to assist in determining all applicable coverage (as the Minnesota Court of Appeals affirmed in June 2013), insureds should beware that they are retained and paid by the insurance companies who have to pay on any claims that are approved and may have other agendas; and 2) there are technical requirements to the insurance claims process that, unfortunately, the typical property owner or manager may not understand or to which they may not have access.

This article was submitted by Matt Drewes, a Shareholder with Thomsen Nybeck. He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law, and insurance coverage. He has been included in several years of the annual list of Minnesota’s Rising Stars, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, HOALeader.com, and elsewhere on various legal issues involving construction litigation, community associations, real property, and insurance. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.


Do Non-matching Shingles Mean A Property Damage Insurance Carrier Must Pay for Full-roof Replacement?

5 Mar

For years, this question has clouded insurance claims determinations (adjustments) and the appraisals and other claims-resolution procedures available to the parties.  We may now have the Minnesota Court of Appeals’ answer in the form of QBE Insurance Corporation v. Twin Homes of French Ridge Homeowners Association, — N.W.2d —, 2010 WL 607409, *1 (Minn. Ct. App. Feb. 23, 2010).

The case involved a hail storm causing damage to some, but not all, of the shingles on the roofs of a 16-building townhome association.  The Association’s insurance policy stated the method of determining how much coverage applied in the event of a loss:

[W]e will pay no more than the least of the following:

a.  The cost to repair or replace the property at the same site, regardless if repaired or replaced at the same site or another, without deduction for depreciation:

(1) With comparable material;

(2) With property of the same height, floor area and style; and

(3) With property intended for the same purpose;

b. The amount actually and necessarily expended in repairing or replacing the property at the same site; or,

c. The limit of insurance.

QBE Ins. Corp. v. Twin Homes of French Ridge Association, 2010 WL 607409 at *2.  After the loss, the insured and the insurance company could not agree on the amount of the loss, so the community association demanded an appraisal pursuant to the policy.  Each party selected its appraiser and the two appraisers attempted to resolve the dispute.  When they could not they presented their opinions to the umpire so the three-member panel could review the issues and reach its decision.  From that point, as the Court of Appeals itself stated:

The appraisal panel determined that the loss could not be remedied by repair or replacement because the shingles used on the buildings were no longer manufactured and/or the non-damaged shingles were too worn to be suitable to connect to new shingles, so they rejected the first valuation method and applied the second.  Consistent with the policy’s second valuation method, they determined the amount that would need to be expended to repair the roofs by using comparable shingles. . . .  Consistent with the plain language of the insurance contract allowing the panel to value the loss at the amount actually and necessarily expended to repair or replace the shingles, the panel’s decision is a proper determination of the value of loss to respondent.

QBE Ins. Corp. v. Twin Homes of French Ridge Association, 2010 WL 607409 at *4 (emphasis added).  The Court of Appeals clearly acknowledged it was proper for the appraisal panel to conclude that shingles which are no longer manufactured may have to be replaced entirely.  In fact, this basis or the potential that even matching replacement shingles may not suitably connect to the existing shingles appears to warrant a full roof replacement.  It is unclear whether other factors may have motivated the panel’s decision as well, but it appears the Court did not necessarily rely on those other considerations.

Does this case require insurance companies to pay for full roof replacement each time there is demonstrable damage to only a few shingles?  Insurance companies will argue that it does not.  The battles over this issue are not likely to end, but for the time being, insured parties appear to have another weapon in their arsenal.  It remains to be seen whether the insurance company will ask the Minnesota Supreme Court to review (and possibly reverse) the Court of Appeals’ decision.

Entry by Matt Drewes.  Matt is a shareholder at Thomsen & Nybeck, P.A. and head of the firm’s Community Association Representation Group and Co-chairs the firm’s Construction Litigation Group.  He practices primarily in the areas of real estate litigation, townhome and condominium law, construction litigation, debtor/creditor law, insurance litigation and employment law.  Matt can be reached at mdrewes@tn-law.com.

American Family to Pay More than $2,000,000 due to Finding of Bad Faith

18 Aug

On Friday, August 14, 2009 a three-judge panel of the United States Court of Appeals for the Eighth Circuit upheld a decision by a Federal judge of the North Dakota Federal District Court not to overturn a jury’s verdict finding that American Family Mutual Insurance Company committed bad faith adjustment practices and should pay punitive damages.  The case involved a farmer, Thomas Moore, and his wife, who purchased a structure to use as rental property and insured it for $50,000.  The property burned down and American Family accused the Moores of arson, which apparently the jury concluded was so unfounded as to constitute bad faith on the part of American Family.  You can read the case here:  http://www.ca8.uscourts.gov/opndir/09/08/083238P.pdf.


The jury concluded that the Moores should have received their original insurance claim of $48,414.97, as well as $1,150,000 for, among other things: economic losses that Moores suffered from loss of income on their rental property; the potential expenses they might incur as a result of being deemed uninsurable as a result of American Family’s reporting its unfounded conclusion to various agencies; and the related emotional trauma caused by the accusation that they were arsonists.  The jury also added $1,150,000 in punitive damages, which are warranted under North Dakota law where an insurer “guilty by clear and convincing evidence of oppression, fraud, or actual malice.”  The panel of Eighth Circuit judges held that the punitive damage award was not excessive and was supported by the evidence.


This case should be compelling reason for insurers to exercise appropriate discretion before accusing insureds of wrongdoing and/or denying an insurance claim.  Importantly, it should also encourage people who feel their insurance claims have wrongfully been denied to pursue their rights.  Minnesota does have its own version of North Dakota’s bad faith adjustment practices statues and provides a policy holder with the right to seek additional damages and attorneys’ fees if the insurance company acts in bad faith or is knowingly unreasonable.  These rights are affected where the insured proceeds with an arbitration or appraisal proceeding, so it is important to get proper advice before pursuing that option under an insurance policy.  Contact an attorney right away if you believe you are not being offered the insurance benefits you paid for.  Thomsen & Nybeck has insurance coverage litigation attorneys who can help.


Entry by Matt Drewes.  Matt is a shareholder at Thomsen & Nybeck, P.A. and head of the firm’s Community Association Representation Group and Co-chairs the firm’s Construction Defect Litigation Group.  He practices primarily in the areas of real estate litigation, townhome and condominium law, construction litigation, debtor/creditor law, insurance litigation and employment law.

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