Arbitration act doesn't apply to fire-damage appraisal.

Byline: Barbara L. Jones

Arbitration and appraisal are not the same thing, even though some existing case law seems to imply that they are, the Supreme Court ruled last week in Oliver v. State Farm Fire and Casualty Insurance Company.

The decision provides a path to the insurer's liability for pre-award interest on a fire insurance appraisal award, because that is not governed by the Minnesota Uniform Arbitration Act, the court said. The unanimous decision was written by Justice G. Barry Anderson.

"We hold that the Minnesota Uniform Arbitration Act, Minn. Stat. 572B.01.31, does not apply to the appraisal process under the Minnesota Standard Fire Insurance Policy, Minn. Stat. 65A.01," Anderson wrote.

Pre-award interest

The plaintiffs' home was "significantly" damaged in a fire in May 2015. The plaintiffs requested an appraisal of the damage under the provisions of the policy. The appraisal panel issued an award, which the defendant paid.

More than a year later, plaintiff asserted a claim for $94,009 in pre-award interest. The defendant declined to pay it. In 2017, the Supreme Court decided Poehler v. Cincinnati Insurance Company, saying that "absent contractual language explicitly precluding pre-award interest, an insured may recover pre-award interest on an appraisal award for a fire insurance loss." Also in 2017 the plaintiffs moved the District Court for confirmation of the award and pre-award interest.

State Farm opposed the motion for pre-award interest because the motion was made outside the 90-day period to modify an arbitration award and thus was untimely. Oliver argued that the statute did not apply because the request for pre-award interest was not a modification of the award of the appraisal panel.

The District Court said that the motion for interest was a motion to modify an arbitration award and therefore it was untimely under the 90-day limitation period in the statute. The Court of Appeals reversed in 2019, holding that although appraisal awards are subject to the arbitration act, the 90-day limitation period for motions to modify an arbitration award does not apply to motions for pre-award interest. The court also said that appraisal panels lack authority to grant pre-award interest and remanded the case to District Court.

The defendant sought review of two questions whether the provision limiting modification of awards to 90 days after receiving notice of an arbitrator's award, applies to pre-award interest; and whether an...