IN COURT OF APPEALS
Mutual Service Casualty Insurance Company,
Ramsey County District Court
File No. C205012573
Amanda M. Furth, Scott A. Teplinsky, Katz, Manka, Teplinsky, Due & Sobol, Suite 4150, 225 South Sixth Street, Minneapolis, MN 55402 (for appellant)
Paul C. Peterson, William L. Davidson, Matthew S. Frantzen, Lind, Jensen, Sullivan & Peterson, P.A., Suite 1700, 150 South Fifth Street, Minneapolis, MN 55402 (for respondent)
Considered and decided by Stoneburner, Presiding Judge; Dietzen, Judge; and Worke, Judge.
The appraisal clause mandated by Minn. Stat. § 65A.01, subd. 3 (2006), to be included in every Minnesota fire-insurance policy to resolve disputes over the amount of loss is subject to the statutorily mandated two-year of limitation on suits or actions on the policy.
Appellant, an insured under a fire-insurance policy issued by respondent, challenges summary judgment dismissing her claim for fire-loss damages. Appellant acknowledges that her claim for damages is barred by the two-year limitation contained in the policy, but she argues that (1) she sufficiently pleaded a claim to enforce the appraisal clause in the policy and that (2) the district court erred by dismissing her motion to compel enforcement of the appraisal clause in the policy because appraisal is a non-judicial proceeding not barred by the limitation on suits or actions. We affirm.
Appellant Margaret Johnson insured real and personal property against fire loss under a policy issued by respondent Mutual Service Casualty Insurance Company (MSI). The property was damaged by fire, and a dispute developed between Johnson and MSI over the amount of the loss.
The policy contained an appraisal clause, mandated by Minn. Stat. § 65A.01, subd. 3 (2006). Appraisal is a non-judicial method to resolve disputes over the amount of a loss. The policy also contained a statutorily mandated two-year limitation, which began to run from the date of the loss, barring any “action” for recovery under the
policy. Three months after the limitation period expired, Johnson first demanded appraisal. MSI declined to participate in appraisal and continued to deny Johnson’s claim for additional damages.
Subsequently, Johnson sued MSI for damages and “[f]or such other and further [relief] as the court deems just and equitable.” In its answer, MSI asserted, among other affirmative defenses, that Johnson’s lawsuit was barred by the two-year limitation in the policy mandated by Minn. Stat. § 65A.01, subd. 3.
MSI moved for summary judgment. One day later, Johnson again demanded that MSI choose an appraiser. MSI again refused to participate in appraisal, claiming that Johnson’s first demand for appraisal was made after the limitation period expired and that Johnson had not complied with the policy provisions regarding inspections. MSI “provisionally” appointed an appraiser in case the district court denied its summary-judgment motion. Johnson then moved the district court to stay legal proceedings and compel appraisal. She asserted that although the two-year limitation barred her action for damages, it did not apply to a demand for appraisal, which is not an “action.”
The district court granted MSI’s motion for summary judgment and denied Johnson’s motion to compel appraisal, concluding that Johnson’s action was solely for damages and therefore barred by the statutorily mandated limitation on suits or actions on the policy. The district court did not address Johnson’s argument that appraisal is not governed by the two-year limitation. This appeal followed.
I. Did Johnson’s pleadings assert a claim for appraisal?
II. Is the statutorily mandated appraisal provision in MSI’s fire insurance policy subject to the two-year limitation on “any action” for recovery under the policy?
On appeal from summary judgment, we ask: (1) whether
there are any genuine issues of material fact and (2) whether the district
court erred in its application of law. State by Cooper v. French, 460 N.W.2d 2,
We first address whether Johnson’s failure to explicitly assert
a claim for appraisal in the complaint or to move to amend the complaint to
assert such a claim precludes our consideration of her claim for
appraisal. “A pleading which sets forth a claim
for relief . . . shall contain a short and plain statement
of the claim showing that the pleader is entitled to relief and a demand for
judgment for the relief sought.”
Johnson acknowledges that the complaint is for damages, but she asserts that although her complaint does not mention appraisal or refer to the appraisal provision in the policy, the prayer “for such other and further [relief] as the court deems just and equitable” was sufficient to put MSI on notice of a demand for appraisal. We disagree and conclude that the district court did not err in holding that the complaint asserted only a claim for damages and did not give MSI notice of Johnson’s intent to assert a demand for appraisal. But we further conclude that Johnson’s motion for an order to stay the court proceedings and to compel appraisal was sufficient notice to MSI to permit the issue to be addressed on the merits on appeal. Although generally we will not consider issues that were not decided by the district court, Johnson’s argument that her demand for appraisal was not barred by the two-year limitation on suits or actions was fully briefed and argued to the district court and involves only questions of law. Therefore, in the interest of justice and judicial economy, we elect to address the claim. See Minn. R. Civ. App. P. 103.04 (providing that this court has discretion to address any issue as justice requires).
Next, we address whether Johnson’s demand for appraisal
was barred by the two-year limitation in the policy. Interpretation of an insurance policy and
statutory language are questions of law which we review de novo. Nathe
Bros., Inc. v. Am. Nat. Fire Ins. Co., 615 N.W.2d 341, 344 (
The Minnesota Standard Fire Insurance Policy sets out a number of provisions that must be included in all fire-insurance policies issued for Minnesota property, including the provision that “[n]o suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy have been complied with, and unless commenced within two years after inception of the loss.” Minn. Stat. § 65A.01, subd. 3 (2006). As mandated, the MSI policy provides, in relevant part:
No one may bring a legal action against [MSI] under this Coverage Part unless:
1. There has been full compliance with all of the terms of this Coverage Part; and
2. The action is brought within 2 years after the date on which the direct physical loss or damage occurred.
The Minnesota Standard Fire Insurance Policy also mandates appraisal to resolve disputes over the amount of loss. Minn. Stat. § 65A.01, subd. 3. The MSI policy therefore provides:
If we and you disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding.
. . . .
If there is an appraisal, we will still retain our right to deny the claim.
Johnson argues that the two-year limitation in the MSI policy does not apply to her demand for appraisal, because appraisal, like arbitration, is not a “legal action” for recovery under the policy. Johnson asserts that her demand for appraisal is similar to an agreement to arbitrate that is governed by the six-year statute of limitations in Minn. Stat. § 541.05, subd. 1(1) (2006), which governs actions on a contract where “no other limitation is expressly prescribed.”
We previously considered the application of a two-year limitation
to a provision for appraisal in a policy insuring against wind damage. Vaubel
Farms, Inc. v.
The district court held that the policy was ambiguous,
and the ambiguity should be construed against the insurer.
We affirmed, concurring with the district court that the
policy language created an ambiguity and “should be construed according to what
a reasonable person in the position of the insured would have understood the
words to mean rather than what the insurer intended the language to mean.”
We adopted a definition of “suit” as “any proceeding by a
party or parties against another in a
court of law” and noted that an “action” is “confined to judicial
Although Vaubel Farms is similar to the case before us, it is distinguishable and does not compel the conclusion that the statutorily mandated appraisal language in MSI’s policy could be reasonably interpreted to provide for arbitration that could be demanded outside of the two-year limitation on actions for recovery under the policy. Unlike the policy in Vaubel Farms, MSI’s appraisal provision is not titled “arbitration” and does not include the term “award.” Additionally, MSI’s policy specifically provides that even if there is a determination of the amount of the loss through appraisal, MSI retains the right to deny a claim. The MSI policy therefore does not contain ambiguous language that would lead a reasonable insured to conclude that the policy contains an agreement to arbitrate MSI’s liability under the policy.
Johnson acknowledges the distinctions between the policy
involved in Vaubel Farms and MSI’s
policy and acknowledges that appraisal under MSI’s policy does not determine
MSI’s liability under the policy. Nonetheless,
she argues that because several cases have used the terms “arbitration” and “appraisal”
interchangeably when discussing the appraisal provision mandated by Minn. Stat.
§ 65A.01, subd. 3, appraisal is the equivalent of arbitration and is governed
by the Uniform Arbitration Act. We
acknowledge that the terms have often been used interchangeably. See,
e.g., Boston Ins. Co. v. A. H. Jacobson Co., 226 Minn.
479, 481, 33 N.W.2d 602, 604 (1948) (stating that the “[f]ailure or inability
of the parties to agree as to the amount of the loss conditions the right to an
appraisement or arbitration”); Kavli v. Eagle Star Ins. Co., 206 Minn. 360, 364-66, 288 N.W. 723,
725-27 (1939) (upholding district court’s authority to appoint an umpire and,
referring to the appraisal process, stating that “[t]he purpose of arbitration
is to provide a plain, speedy, inexpensive, and just determination of the extent
of the loss”); Glidden Co. v. Retail
Hardware Mut. Fire Ins. Co. of Minn., 181
It is well settled that appraisal does not determine liability under a policy. Liability depends on a judicial determination. Mork v. Eureka-Security Fire & Marine Ins. Co.,230 Minn. 382, 384, 42 N.W.2d 33, 35 (1950) (holding that appraisers’ finding that loss was not covered under the policy was not within their province, was a decision on a question of law, and was not final); Glidden, 181 Minn. at 522, 233 N.W. at 312 (stating that appraisal “does not determine liability but only the amount of the loss”); Itasca Paper Co. v. Niagara Fire Ins. Co., 175 Minn. 73, 79, 220 N.W. 425, 427 (1928) (stating that an appraisal award “does not preclude the insurer from subsequently having its liability on the policy judicially determined”). Therefore, even if Johnson succeeded in determining the amount of the loss through appraisal, she would have to bring an action to determine MSI’s liability, and she concedes such an action is barred by the limitation on actions contained in the policy.
We hold that the statutorily required appraisal provision is not an agreement to arbitrate governed by the Uniform Arbitration Act, and the appraisal provision is governed by the two-year limitation on actions or suits to recover under the policy. The district court did not err in granting summary judgment to MSI. See Myers Through Myers v. Price, 463 N.W.2d 773, 775 (Minn. App. 1990) (stating that this court will affirm summary judgment “if it can be sustained on any grounds”), review denied (Minn. Feb. 4, 1991).
Because the statutorily mandated appraisal clause in the MSI policy issued to Johnson is not an agreement to arbitrate MSI’s liability under the policy and MSI’s liability can only be determined by a court action, which is barred by the two-year limitation on suits or actions, the district court did not err in implicitly denying Johnson’s motion to stay judicial proceedings and to compel appraisal and did not err in dismissing Johnson’s actions for recovery under the policy.