Tag Archives: property insurance

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.


Minnesota Supreme Court Holds That The “Cause of Loss” Is To Be Determined By the Insurance Appraisal Process

18 Jun

In a decision issued on June 13, the Minnesota Supreme Court analyzed whether the cause of loss, in addition to the amount of the loss, was a determination to be made by the insurance appraisal process.

In Quade v. Secura Insurance, there was a dispute regarding property damage from a windstorm.  The insurance company took the position that some of the damage claimed by the insured was not caused by the windstorm, but rather continual deterioration over time.  The insurance policy required that the appraisal process be initiated prior to a lawsuit being commenced.  The insured did not initiate the appraisal process, but instead brought an action directly in district court.  The insured contended that the appraisal clause didn’t apply because the dispute was about whether the damage was covered by the policy, not the cost of that repair, and that the question was a coverage question inappropriate for an appraisal panel.  The district court disagreed with the insured and held that the appraisal process had to be used.  The court of appeals reversed.  The Supreme Court then took up the case.

The Supreme Court held that the insurance policy’s language concerning the appraisal process’s determination of the amount of loss includes a determination of the cause of the loss.  As a result, where there is a dispute about what the cause of certain damage was, the question is one to be determined by an appraisal panel.  The Court was careful to clarify that the appraisal process can’t construe the policy or decide whether an insurer can pay, but it does determine the amount of loss, which includes determining what the cause of the loss claimed was.  The Court noted the public policy in favor of appraisals.

A copy of the decision can be found here.

This blog entry is written by Chris Renz, a shareholder at Thomsen Nybeck. Chris practices in the litigation area of the firm with primary focus on real estate litigation, employment litigation, insurance law, townhome and condominium law, and criminal law.  Chris and his colleagues at Thomsen Nybeck have extensive experience representing clients in insurance appraisal hearings.  More regarding the firm’s abilities in that area can be found here.

Court Limits Scope of Insurance Appraisal Process

27 Mar

In a published decision issued yesterday, March 26, 2012, the Minnesota Court of Appeals clarified that whether there was total loss under a fire insurance policy was an issue for a court to decide, not an appraisal panel. 

In Auto-Owners Insurance Company v. Second Chance, Investments, LLC, Court File No. A11-1145, a commercial building suffered severe fire damage.  The insured—Second Chance, Investments, LLC submitted a claim to is insurer—Auto-Owners Insurance Company under its policy, which policy provided for payments of the policy limits (more than $2,000,000) in the event of a total loss.  The insurer admitted there was a covered loss, but denied the loss was total and paid the insurer less than the policy limits.  The insurer demanded appraisal, to which the insured objected on the basis that appraisal was inappropriate where a total loss occurred.  The District Court ultimately determined that the question of whether there was a total loss was to be decided by a jury, not by an appraisal panel.  The insurer appealed.

The Court of Appeals agreed with the District Court’s decision that an appraisal panel was not the appropriate venue to determine whether there was a total loss.  The Court cited the policy and Minnesota Statute 65A.01 (found here), theMinnesota standard fire insurance policy, for the proposition that policies inMinnesota are valued policies, meaning the policy can not provide for less than policy limits in the event of a total loss.  As a result, the Court reasoned, the appraisal panel whose function is to determine the amount of loss is inappropriate in the event of a total loss is not the appropriate body to make the determination of whether there is a total loss.  In addition, the Court cited language in the statute and policy that specifically excluded the question of whether there is total loss from the circumstance in which the appraisal process is appropriate.  That question is determined under a reasonable person standard, which is not limited to the cost of repair (the only question for an appraisal panel).

There are many insurers, and law firms dedicated to insurance defense, that have taken a shine to appraisal hearings for determination of as many issues as possible.  Insurers appear to find that appraisal hearings are more efficient than court, in addition to not being restricted to the rules and strictures that are part of the court process.  However, insurers and their attorneys seem to also make those hearings into a much more complicated and trial-like process than initially anticipated.  Be sure that you have appropriate knowledge and representation as an insured before going into such a hearing.  And in the case of total loss, per the recent published decision of the Minnesota Court of Appeals, the appraisal process is not the appropriate forum to make a decision about whether total loss occurred.

The decision can be found here.

This blog entry is written by Chris Renz, a shareholder at Thomsen Nybeck. Chris practices in the litigation area of the firm with primary focus on real estate litigation, employment litigation, insurance law, townhome and condominium law, and criminal law.  Chris and his colleagues at Thomsen Nybeck have extensive experience representing clients in insurance appraisal hearings.  More regarding the firm’s abilities in that area can be found here.

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