The Minnesota Court of Appeals recently issued a favorable decision for insurers in Else v. Auto-Owners Insurance Company. That decision holds that first-party policy limits operate as a cap on prejudgment interest. In other words, an insurer is not liable for any prejudgment interest that, when added to the covered damages, exceed the policy limit. A more detailed explanation of the case can be found here, with some commonly asked questions answered below.
Q: This case involves a homeowner policy, will it be helpful in other types of cases?
A: Absolutely. The Court of Appeals expanded the reasoning and principles in a prior Minnesota Supreme Court case involving an Underinsured Motorist Claim to apply more broadly to this first-party property claim. Thus, Else should be helpful in any first-party claim, where the insured makes a claim directly against their own insurance company.
Q: Will prejudgment interest in a third-party claim be similarly capped by policy limits based on this case?
A: Unfortunately, no. Third-party claims and policies differ from first-party claims and policies. For example, the ISO CGL policy has a “Supplemental Payments” section that specifically covers “prejudgment interest awarded against the insured on that part of the judgment we pay.” This is above the limit.
Q: What is the significance of this being an “unpublished” decision?
A: Minnesota Court of Appeals opinions may be published or unpublished. When they are unpublished, they are not precedential. But, even unpublished decisions can be cited as “persuasive authority” in other proceedings. Thus, even if not binding precedent, this case is anticipated to be valuable in other cases.
Q: Will the Minnesota Supreme Court weigh in on this issue?
A: That is yet to be seen. Else has petitioned the Minnesota Supreme Court for review, but the Court has not yet granted or denied the Petition. Most Petitions to the Minnesota Supreme Court are denied, with the Court accepting review of only about 10-12 percent of cases from the Minnesota Court of Appeals. Whether this case will be one of that 10-12 percent is unknown, but the attorneys of Arthur Chapman will provide an update when the Supreme Court rules on the Petition.
