Minnesota has three statutes that provide interest for insured property owners. The statutes are Minn. Stat. § 65A.01, Minn. Stat. § 549.09, and Minn. Stat. § 60A.0811. The first statute does not specify the rate and is rarely argued. The second applies to residential and commercial properties, but the date when interest begins to accrue can be modified by the terms of the insurance policy. The third statute, Minn. Stat. § 60A.0811, is reserved for commercial insurance policies. It is a statute that all commercial property owners and their advocates should know about.
Under Minn. Stat. § 60A.0811, an insured who prevails in any claim against an insurance company for a) a breach or repudiation of the insurance policy, or b) failure to provide services or make payments, is entitled to recover ten percent per annum interest on the amount due. It is calculated from the date of the request for payment to the insurer.
What Triggers Interest
This is a significant statute. Interest of 10% on top of the amount of loss (amount of insurance claim) is significant. A recent Minnesota Court of Appeals case deals with what must occur to trigger the interest. The Court of Appeals affirmed the text of the statute does not require written notice to trigger interest. However, there must be a specific “request for payment”. Under the statute, and the first case to interpret it, Galaxy Wireless v. Western National Insurance, the event to trigger interest is any “demand for payment”, verbal or in writing.
Best practice is to deliver the “demand for payment” in writing. The reason is evidentiary: weeks or months after a verbal demand for payment memories will fade as to what was said. The value of putting the demand for payment in writing is that people can easily re-create the request for payment months later. A demand for payment can certainly be made verbally, and technically, that is just as “legal” (or enforceable) as something in writing under this statute. Yet best practice is to communicate the demand in writing.
Many insurance companies communicate with their customers via email or web portal messaging. Best practice is for insured property owner to take screenshots or otherwise archive their demands for payment to the insurance company so they can easily demonstrate when they made a demand for payment.
Content of Demand
Insurance companies should not insist that the written demand for payment be detailed or in a particular form to trigger interest. As I read the statute, interest begins when the claims process begins, not a statement detailing the specifics of the loss. I am confident that insurance company advocates will disagree, and they will require a proof of loss or another formal document. Yet if that were the law, both the statute and the Galaxy Wireless case would require detail of the claim to trigger interest. That is why my position is that interest is triggered when the claims process begins, not when an insured meets an arbitrary amount of detail or a particular type of form.
All that said, best practice is for property owners and their contractors or public adjusters to provide the most amount of detail as soon as practical.
Another common insurer defense is that it need not pay under this statute until a jury finding of a breach of contract. That would make interest under this statute different from interest under Minn. Stat. § 549.09 which allows interest on appraisals with a finding of breach of contract. Insurers have argued that the difference between its scope of loss, and an insured’s scope of loss, resolved in appraisal is not a breach. The counter to that is that any failure to make payments results in 10% interest.
Another advantage of interest under Minn. Stat. § 60A.0811 is that the insurers are not able to write a policy to circumvent the statute. Minn. Stat. § 549.09 has been interpreted to allow insurers to write policies that only trigger interest after a certain event, not the first written demand. I do not see any authority for that outcome under Minn. Stat. § 60A.0811. As such, this statute is a very good statute for commercial property owners with insurance claims in Minnesota.
Please e-mail me if you have any questions at ed@beckmannlawfirm.com.