Tag Archives: Thomsen & Nybeck

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.


Is There a “Total Loss”?—Not an Insurance Appraisal Panel Decision

28 Mar

In Auto-Owners Insurance Company v. Second Chance Investments, LLC, a decision released March 20, 2013, the Minnesota Supreme Court held that under the Minnesota standard fire insurance policy, the question of whether there is a total loss is not a question that can be determined by the an appraisal panel.

The Minnesota standard fire insurance policy is really a statute defining the minimum that fire insurance policies can provide and is found at Minn. Stat. 65A.01, subd. 1.  In that statute, there is an appraisal provision for determining what the amount of loss is, which requires that such an issue be determined by an appraisal panel (typically three people: one chosen by the insured, one by the insurer, and one by the two chosen by those respective party), if requested by the insurer or the insured.  See Minn. Stat.  65A.01, subd. 3. Minn. Stat. § 65A.01, subd. 3.  However, that statutory provision contains an important clause that reads “except in case of total loss on buildings.”  The Minnesota Supreme Court recognized that language and held that an appraisal panel can’t determine whether there is a total loss.  The full opinion can be read here.

Obtaining an appropriate insurance settlement is often not an easy task.  As this case exemplifies, there are many details of and aspects to insurance policies, claims, and recovery.  Insureds should contact an attorney to ensure that they are properly submitting a claim and that the processes in relation to that claim are not being abused or improperly foreclosing relief.  Contact a member of the Thomsen Nybeck litigation team  with insurance-specific experience to help advise you.

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.

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.

Finally a break in the real estate industry

30 May

Last week the United States Supreme Court decided a case which refines a commonly debated interpretation of the Real Estate Settlement Procedures Act (“RESPA”) by lower courts.  RESPA is a Federal law that plays a significant role in how real estate brokerage companies (among others) conduct day-to-day business.  It has myriad prohibitions, restrictions and disclosure requirements that are applicable to such “settlement service providers” as title companies, mortgage lenders, real estate brokers and more.  Generally, it prohibits referral fees and unearned fees by settlement service providers in connection with a federally-related mortgage, imposes restrictions and requirements on “affiliated business providers”, mandates certain disclosures to increase transparency of transactions for consumers, and more.

Until this month, the issue of how RESPA impacts “administrative fees” charged by real estate brokers and agents was a controversial and often debated real estate brokerage issue, nationwide.  There was a split in how the decisions in various cases across the country interpreted Section 2607(b) of RESPA.  That section provides:

“[n]o person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service […] other than for services actually performed.” 12 U. S. C. §2607(b)

The various split in decisions and HUD interpretations addressing this issue left some unanswered questions as to whether a real estate brokerage would find itself in hot water when charging an “administrative fee” or similar charge in addition to a commission, if the real estate broker could not readily identify what service was being rendered pursuant to that admin fee.

The United States Supreme Court decided a case last week (May 24, 2012) which clarifies this issue significantly, and simplifies this issue for real estate brokers.  In the case of Freeman v. Quicken Loans, the Supreme Court found that there is no violation of §2607(b) of RESPA without showing that a charge for a settlement service was divided with a third party.

The full decision of the Freeman case can be found here: http://www.supremecourt.gov/opinions/11pdf/10-1042.pdf.  An interpretation of how this decision impacts real estate brokerage companies and brokers/agents was offered by the National Association of Realtors(R) (“NAR”), and their article can be found here: http://speakingofrealestate.blogs.realtor.org/2012/05/24/supreme-court-rules-fee-split-required-for-respa-violation/.

In short, this author suspects that some of the national controversy and confusion surrounding real estate brokerage admin fees will now become an easier topic to  address consistently, and with less controversy. Prior cases, including the controversial 2009 decision in Busby v. JRHBW Realty, Inc. d/b/a Realty South, had suggested that merely charging an “admin fee” in addition to a commission, even if it is disclosed to the consumer paying such fee, is in and of itself a violation of RESPA.  In January 2010, a HUD letter from Helen Kanovsky (Office of the General Counsel at HUD) clarified that there may be some room from brokerages to have commissions composed of a flat fee or commission or both.

Now that the Supreme Court has weighed in, it would seem likely that admin fees charged by real estate brokers should draw less scrutiny.  Additionally, the prior caselaw and unfavorable decisions interpreting RESPA in such a way as to further restrict the real estate industry than was explicitly stated in RESPA are probably of dramatically less impact, or their impact is narrowed significantly by this decision.

Stay tuned to the Thomsen Nybeck Legal Update blog for further discussion of this issue as more information, interpretations, and decisions bring this issue into even sharper focus.  For now, real estate brokerage companies, agents, and brokers who charge (or have ceased charging) administrative fees may wish to discuss these issues once again with their legal counsel to identify how they want their business practices to fit within the fluid and evolutionary laws surrounding these practices.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

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.

Minnesota Court of Appeals Sides with Homeowners Associations Terminating Contracts

2 Feb

In a decision rendered January 30, 2012, the Minnesota Court of Appeals examined Minn. Stat. § 515.B.3-105(a)(iii) of the Minnesota Common Interest Ownership Act (MCIOA).  This statute allows certain contracts to be terminated by the association without penalty, including contracts to which a declarant (the developer) bound the association.  The intent of the statute is to avoid a situation where a unit owner-controlled association becomes subject to unfavorable contracts that were entered into during the time that the declarant controlled the association, but which the unit owners hadn’t agreed to as they weren’t yet in control of the association.  In the case that the court examined, an association was obligated on a service contract that the declarant (the developer) of the association had entered into prior to homeowner control.  The association asserted its right to cancel the service contract under the statute.  The company providing those services objected arguing that the association could not terminate the contract because the declarant wasn’t still a party at the time the association sought termination.  The Court of Appeals, however, sided with the association finding that it was sufficient that the declarant at one point had been a party to the contract during the period of declarant control and then had the association assume that obligation.  The name of the court case is Energy Center, LLC v. The Falls and Pinnacle Owners’ Association, number 27-CV-09-26427 (Minn.Ct. Ap. Jan. 30, 2012); the decision is an unpublished decision from the court.

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, townhome and condominium law, and criminal law, particularly as the prosecutor for the Metropolitan Airports Commission.


10 Jan

Being a trial lawyer for over 20 years I have seen many cases succeed and fail.  In many of these cases, I can point to a single event as the moment when the case’s outcome was foretold.  More often that moment is during a deposition.  A deposition of a client, witness or adversary can be the proverbial “thrill of victory or agony of defeat.”

For those who are blissfully ignorant of what a deposition is, let me share a brief description.  A deposition is the questioning of a witness, under oath, in the presence of a court reporter.  The opposing attorney is normally the one doing the questioning and it is usually the by-product of litigation.  The court reporter records the questions and answers provided by the witness and all other matters that may arise during the time of the deposition.  A written transcript is created which becomes part of the record of the case.

This is a list, by no means comprehensive, of what I believe are the top ten mistakes deponents (the person being deposed) make during their deposition:

10.       Lying.  We all know lying is bad but in a deposition it can be criminal.  Giving  a deposition is testifying under oath, just as in Court and the penalties of  perjury do apply.

9.        Not saying you do not know when you do not know.  A deposition is not like a  high school math test where you have to answer every question.  If you do not know the answer to a question, simply say, “I do not know.”

8.        Not saying you do not recall when you do not recall.  No one is expected to recall every facet of their life.  When asked what the name of your Great Aunt’s cat is, it is perfectly alright to say “I do not recall.”  (However,  it would be helpful to your case if you can recall the facts which are beneficial to your case.)

7.        Dressing for failure.  While a tuxedo is not necessary, dressing as if you are  on your way to the beach or recovering from an all night bender, is probably not presenting the best appearance.  It has been my observation over the years that a neat and well dressed witness is treated with more respect by the questioner.

6.        Not answering the question.  Too many deponents believe that they are    faster or smarter than the attorney asking the questions and answer not the   question posed but the one they think the attorney is getting to.  All that does is slow down the process and unfortunately make the deposition last longer.    Answering the question posed is the quickest way to end the deposition and it      may turn out that the attorney never gets to the follow-up questions that you  anticipate he would get to.  You should not withhold information but you are  not required to volunteer it either. 

5.         Grunting, groaning or nodding your head.  The court reporter is taking down everything stated in the room but they cannot take down non-verbal signals or indecipherable emanations coming from your mouth.  Your answers must be clear and articulate.  This avoids any ambiguity when the transcript is put into written form. 

4.         Fighting with the questioner.  If you are represented by counsel at your deposition and if your counsel does not object to a question and tell you not to answer, you should assume that the question is not objectionable.  As such, unless otherwise told by your attorney, you are required to answer the questions posed by the questioner even if you do not want to answer or would prefer not to. 

3.         Guessing.  The old line from Dragnet is appropriate here “just the facts.”  You are testifying to your knowledge regarding the events of which you are aware.  You are not there to guess about the facts or circumstances.  You should restrict yourself to answering things of which you are personally aware.  If you are asked to guess, your answer should be that you do not want to guess, and that you don’t know.

2.         Don’t treat the attorney as your friend.  Experienced attorneys try to build a rapport with the person they are questioning in an effort to have them put their guard down to elicit answers to questions which may not have otherwise been provided.  The attorney asking you questions, especially in the area of litigation, is usually representing the opponent.  The opposing attorney has a client to represent.  That client’s interests are generally adverse to yours.  Therefore, the attorney is not your friend.

1.         Talking too much.  Having sat through hundreds of depositions over the years, I have wished for the creation of a button which I could push that would send a shock wave to the deponent which would remind them to only answer the question posed and then stop talking.  Many depositions are prolonged and unnecessary information is disclosed when a deponent, for whatever reason, simply cannot answer only the question that is asked.  Experienced attorneys often try to elicit this by pausing between questions and waiting for the deponent to fill in silence with more testimony.  What this does is diminishes the previous answer and potentially opens up additional areas for inquire.  Simply put, the best way to conclude a deposition is to answer the question and then stop talking.  If the questioner wants additional information, they will ask more questions.

The outcome of depositions routinely has an impact on the overall case whether it is the information derived from the deposition or the parties’ evaluation of the deponent as a potential trial witness.  Following these ten simple rules can help deponents give better testimony, or, at least stay out of trouble.

David McGee’s practice is based in the litigation section at Thomsen & Nybeck, P.A.  Dave brings his 20 plus years of experience representing Community Associations in construction defects and insurance disputes.  Dave has recovered millions for Associations in disputes with developers, contractors and insurance companies, and heads up the firm’s “Property Insurance Claims” Group.  Dave has been named a “Top Lawyer” by Minnesota Law & Politics and Minneapolis/St. Paul Magazine for a number of years.  Dave has represented clients in numerous appellate cases including Chapman Place Ass’n, Inc. v. Prokasky, 507 N.W.2d 858 (Minn. Ct. App. 1993); Ly v. Nystrom, 615 N.W.2d 302 (Minn. 2000); and Peggy Rose Revocable Trust v. Eppich, 640 N.W.2d 601 (Minn. 2002).  Dave represents clients in arbitrations, mediations, court actions, trials, and appellate work.  Dave is a frequent lecturer and has written numerous articles in the area of Insurance, Construction, and Real Estate Law.  He is also a qualified neutral under Rule 114 of the Minnesota General Rules of Practice (mediation and arbitration).

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