[GAVEL]
>> ALL RISE FOR THE HONORABLE
JUSTICES OF THE SUPREME COURT OF
MINNESOTA.
GOOD MORNING.
PLEASE BE SEATED.
WE HAVE ONE CASE FOR ARGUMENT
THIS MORNING.
STATE FARM FIRE FIRE AND
CASUALTY VERSUS AARON WESSER.
7 MINUTES FOR REBUTTAL.
WE WILL GIVE YOU 3 MINUTES OF
TIME UNINTERRUPTED AT THE
BEGINNING OF YOUR ARGUMENT.
AT THE THREE MINUTE MARK, I WILL
INTERRUPT YOU AND SEE IF MEMBERS
OF THE COURT OF QUESTIONS.
WITH THAT, MR. WILLIAMS, YOU MAY
PROCEED.
>> GOOD MORNING.
MAY IT PLEASE THE COURT, MY NAME
IS SCOTT WILLIAMS.
I REPRESENT APPELLANT
STATE FARM FIRE AND CASUALTY
COMPANY IN THIS MATTER.
THIS IS A CASE ABOUT CONTRACT
INTERPRETATION.
I THINK IT'S A STRAIGHTFORWARD
CASE THAT SIMPLY INVOLVES
APPLYING THE TEXT OF THE
CONTRACT TO FACTS OF THIS
INSURANCE CLAIM.
THE FACTS ARE ESSENTIALLY
UNDISPUTED.
IN POEHLER V. CINCINNATI
INSURANCE, THIS COURT CORRECTLY
OBSERVED THAT THE STATUTORY
FRAMEWORK IN MINNESOTA ALLOWS AN
INSURANCE COMPANY TO CONTRACT
WITH IS INSURED WITH THE ACCRUAL
OF INTEREST.
IN THE POEHLER V. CINCINNATI
INSURANCE CASE WHERE THE COMPANY
HAD NOT CONTRACTED WITH THE
INSURED REGARDING THE ACCRUAL OF
INTEREST.
IN THIS CASE, STATE FARM DID.
THE LANGUAGE AT ISSUE IS ADDED
TO THE POLICY AFTER THE POEHLER
V. CINCINNATI INSURANCE CASE AT
THE INVITATION OF THIS COURT.
THE LANGUAGE IS CLEAR AND
STRAIGHTFORWARD.
THE LANGUAGE IS FOUND IN THE
LAST PAYMENT PROVISION OF THE
POLICY CONTRACT.
THAT IS IMPORTANT BECAUSE TO
UNDERSTAND WHEN AND HOW INTEREST
WOULD ACCRUE, YOU HAVE TO
UNDERSTAND HOW THE LAST PAYMENT
PROCESS WORKS.
WHAT THE LOST PAYMENT PROVISION
AT ISSUE SAYS IS THAT STATE FARM
WILL ADJUST ALL LOSSES WITH THE
INSURED.
WE WILL PAY YOU UNLESS SOME
OTHER PERSON IS NAMED IN THE
POLICY OR IS LEGALLY ENTITLED TO
RECEIVE PAYMENT.
PAYABLE FIVE BUSINESS DAYS AFTER
WE RECEIVE YOUR PROOF OF LOSS
AND REACH AGREEMENT WITH YOU.
THERE IS A FINAL ENTRY.
THERE IS AN ENTRY OF A FINAL
JUDGMENT.
THERE IS A FILING OF AN
APPRAISAL BOARD WITH US.
THAT LANGUAGE TRACKS CLOSELY
WITH THE LANGUAGE IN THE
STANDARD FIRE POLICY IN
MINNESOTA STATUTE.
THEY KEY SENTENCE HERE THAT THIS
CASE TURNS ON IS THE NEXT ONE
WHICH SAYS, NO INTEREST ACCRUES
ON THE LOSS UNTIL AFTER THE LOSS
BECOMES PAYABLE.
THAT LANGUAGE I BELIEVE TRACKS
CLOSELY WITH THE LANGUAGE
REGARDING INTEREST IN THE
STANDARD FIRE POLICY COMMITMENT
THIS COURT ADDRESSED THE CASE
INVOLVING AUTO-OWNERS INSURANCE.
THE COURT NOTED THAT THE
LANGUAGE DISCUSSED ON THE LOSS
THAT THEY ARE ON AND ALSO NOTED
THAT THE LOSS PAYABLE PROVISION
IN THE STATUTORY TEXT ONLY
PROVIDES INTEREST FROM THAT TIME
THE LOSS BECOMES PAYABLE.
THAT IS TRUE HERE UNDER
STATE FARM'S POLICY LANGUAGE.
EFFECTIVELY, WHEN YOU READ THE
LANGUAGE IN THE CONTEXT OF A
POLICY CONTRACT, WHAT IT MEANS
IS THAT NO INTEREST WILL ACCRUE
ON A LOSS UNTIL AFTER THE LOSS
BECOMES PAYABLE.
WHEN YOU READ WHEN THAT HAPPENS
IN TERMS OF AN APPRAISAL
SITUATION, HE WOULD HAVE TO HAVE
ENOUGH FILING OF APPRAISAL AWARD
AWARD.
FIVE DAYS THEREAFTER WOULD BE
ALLOWED FOR THE INSURANCE
COMPANY TO MAKE PAYMENT ON THAT
AWARD.
>> I'M GOING TO STOP YOU BECAUSE
YOU 3 MINUTES AROUND.
THIS IS ABOUT PREAWARD INTEREST.
BY DEFINITION ACCRUES BEFORE
THERE IS A LOSS.
IT DOESN'T THAT MAKE A
DIFFERENCE HERE IN TERMS OF HOW
WE INTERPRET THAT PROVISION AT
ISSUE?
>> I DON'T KNOW NECESSARILY THAT
PREAWARD INTEREST CAN APPROVE
BEFORE LOSS.
YOU HAVE TO HAVE A LOSS TO
TRIGGER COVERAGE UNDER THE
POLICY CONTRACT.
THE LOSS COMES FIRST.
IF YOU DON'T HAVE A LOSS, YOU
DON'T HAVE ANY KIND OF APPRAISAL
SITUATION OR ANY KIND OF
COVERAGE AVAILABLE UNDER THE
POLICY CONTRACT.
LOSS HAS TO COME FIRST.
ONCE YOU HAVE THE LOSS, THEN YOU
CAN START TO DETERMINE HOW AND
WHEN INTEREST MAY ACCRUE ON THE
LOSS.
>> ISN'T THAT TRUE -- WOULDN'T
THAT PRECLUDE -- YOU DON'T KNOW
THAT THERE IS A LOSS UNTIL AFTER
THE LOSS IS DETERMINED AND THEN
YOU CAN GO BACK ONCE THE LOSS IS
DETERMINED, THEN YOU CAN GO BACK
AND RECOVER THEIR PREAWARD
INTEREST ON THE LOSS THAT WAS
DETERMINED DAYS.
>> I AGREE.
I THINK UNDER THE POLICY
CONTRACT, THE WAY IT IS WRITTEN
IS YOU COULDN'T HAVE PREAWARD
INTEREST.
HE WOULD HAVE TO HAVE --
>> I WAS TALKING ABOUT THE
ARGUMENT THAT THE LOSS OF THE
COME FIRST.
>> SURE.
>> IF THE LOSS -- I THINK WHAT
YOU'RE SAYING IS THE LOSS HAS TO
BE DETERMINED FIRST.
HERE THE LOSS ACTUALLY HAPPENED.
YOU GUYS DIDN'T AGREE ON WHAT
THE LOSS AMOUNT WAS UNTIL LATER.
I DON'T UNDERSTAND YOUR RESPONSE
TO THE CHIEF IS WHAT I'M SAYING.
>> IF I'M UNDERSTANDING THE
QUESTION CORRECTLY, I UNDERSTOOD
IT TO BE HOW DO YOU HAVE A
CIRCUMSTANCE -- CAN YOU
ESSENTIALLY START CALCULATING
INTEREST BEFORE YOU HAVE A LOSS.
I WOULD THINK YOU HAVE TO HAVE
THE LOSS FIRST.
THE LOSS IS WHAT DEFINES YOUR
COVERAGE UNDER THE POLICY
CONTRACT.
AND SO YOU HAVE YOUR LOSS.
TO BE ABLE TO DETERMINE WHAT THE
AMOUNT OF THE LOSS IS, YOU WILL
11 INSURANCE COMPANY COME OUT
AND GIVE YOU AN ESTIMATE.
YOU ARE FREE TO DISAGREE WITH
THAT ESTIMATE AND ULTIMATELY,
THERE IS AN APPRAISAL PROCESS
THAT CAN TAKE PLACE IF THERE IS
A DISAGREEMENT ABOUT THE AMOUNT
OF LOSS.
BUT YOU HAVE TO HAVE A LOSS
FIRST.
AND THEN YOU HAVE TO HAVE A
DETERMINATION OF THAT LOSS IN
SOME CAPACITY.
WHETHER THAT BE A COVERED LOSS,
AND COVERED LOSS.
WHAT ARE THE AMOUNT OF LOSS?
YOU END UP HAVING ULTIMATELY IN
THIS --
>> IS THIS INTERPRETATION OF THE
STATUTE OR AN INTERPRETATION OF
THE CONTRACT?
UNDER THE STATUTE, WHAT IF YOU
HAVE A CAR ACCIDENT?
WHICH IS A LOSS I SUPPOSE.
IT IS NOT DETERMINED UNTIL THE
TRIAL HAPPENS, RIGHT?
YOU'RE NOT SAYING THAT YOU CAN'T
GET PREAWARD INTEREST UNDER
549.09 IN THAT CONTEXT, RIGHT?
>> I'M NOT SAYING THAT IT ALL.
WHEN I AM SAYING IS THAT THIS
LANGUAGE I THINK IT IS ABOUT THE
CONTRACT LANGUAGE.
I THINK THE LANGUAGE IS
PERMITTED BY THE STATUTORY
FRAMEWORK.
THERE IS NOTHING UNDER 658 OH
ONE OR 549.09 THAT WOULD
PROHIBIT THE LANGUAGE.
THE QUESTION BECOMES HOW DO YOU
APPLY THE LANGUAGE TO A LOSS?
IT SAYS NO INTEREST ACCRUES ON
THAT LOSS.
>> WHAT YOU DO WITH THE FACT
THAT 549.09 DEALS WITH MULTIPLE
KINDS OF LOSSES?
THERE IS POST VERDICT, THERE IS
PREVERDICT OR PREAWARD, AND
THERE'S POST JUDGMENT.
THREE PHASES OF INTEREST.
IT COVERS ALL OF THOSE, RIGHT?
>> YES.
>> SUBDIVISION 1B ONLY DEALS
WITH PREVERDICT OR PREAWARD
INTEREST.
DOESN'T THAT TELL US THAT YOU
HAVE TO ACTUALLY SPECIFICALLY
EXCLUDE THAT TYPE OF INTEREST?
OR ARE NOT OTHERWISE PROVIDED BY
CONTRACT.
>> THE LANGUAGE IS UNLESS FOR BY
CONTRACT.
THE QUESTION HERE BECOMES, DOES
THIS LANGUAGE APPLY TO
ESSENTIALLY MAKE PREAWARD
INTEREST NONRECOVERABLE?
>> WHY DOES IT?
>> THAT IS THE ONLY REAL
INTERPRETATION OF THIS LANGUAGE
THAT MAKES SENSE.
TO SAY THAT THERE IS NO INTEREST
THAT ACCRUES ON A LOSS UNTIL A
LOSS BECOMES PAYABLE.
FIGURE OUT WHEN THE LOSS BECOMES
PAYABLE.
I DON'T THINK THERE IS A WAY OF
READING IT OTHERWISE.
WE HAVE TALKED THE COURT OF
APPEALS OPINION AND ULTIMATELY
DETERMINED THAT THE LANGUAGE IS
AMBIGUOUS.
THE CONCERN IS ESSENTIALLY
COMPLETELY REMOVES THAT LANGUAGE
FROM THE POLICY CONTRACT.
IT DOESN'T APPLY IT IN THE
CONTEXT OF THE POLICY OR GIVE
EFFECT TO IT.
IT ESSENTIALLY REMOVES IT.
THEY'RE CONCERNED THERE IS THE
WAY THE COURT OF APPEALS
INTERPRETED TO SAY WE COULD BE
TALKING ABOUT DIFFERENT KINDS OF
ACB, RCB.
IT DOESN'T REALLY MATTER.
IF THE LANGUAGE IS APPLIED AND
NO INTEREST ACCRUES ON THE LOSS
UNTIL THE LOSS BECOMES PAYABLE,
IT DOESN'T MATTER IF WE ARE
TALKING ABOUT ACTUAL CASH VALUE.
>> WHY IS THE CHIEF'S ARGUMENT
NOT AN ALTERNATIVE READING?
WHY IS THAT NOT A REASONABLE
ALTERNATIVE READING OF THE
CONTRACT BY WHICH?
HOW INTERESTED SHE WAS GETTING
AT IS THIS IS ONLY DEALING WITH
THIS SPECIFIC TYPE OF LOSS WHICH
IS INTEREST -- SPECIFIC TYPE OF
INTEREST, EXCUSE ME.
INTEREST POST AWARD, POST
ASCERTAINMENT.
YOU DON'T GET THAT TYPE OF
INTEREST UNTIL THE LOSS BECOMES
PAYABLE.
IT DOESN'T PRECLUDE THIS OTHER
KIND OF INTEREST WHICH IS IN
549.09 WHICH IS PREAWARD
INTEREST.
IT IS NOT DEALING WITH THAT.
WHY IS THAT NOT A REASONABLE
INTERPRETATION ON LANGUAGE?
>> WELCOME MUCH IS BECAUSE I
DON'T BELIEVE THAT -- ONE OF THE
SUBPARTS OF THE SLING WHICH IS
THAT THE LOSS BECOMES PAYABLE
WITHIN FIVE BUSINESS DAYS AFTER
THERE IS A FILING OF AN
APPRAISAL AWARD.
SO THE LOSS DOESN'T BECOME
PAYABLE UNTIL YOU HAVE THAT
5-DAY PERIOD AFTER THE AWARD IS
ISSUED.
TO BE ABLE TO APPLY THIS
LANGUAGE, YOU CAN HAVE INTEREST
OCCURRING UNTIL THE LOSS BECOMES
PAYABLE.
IT IS REALLY NO WAY YOU WOULD
EVER BE HELD PREAWARD INTEREST
UNDER THAT SET OF CIRCUMSTANCES
BECAUSE THE TRIGGER FOR THE
PAYMENT AS THE FILING OF AN
APPRAISAL AWARD.
THE ONE THING THAT I DID TAKE
ISSUE WITH IN TERMS OF THEIR
BRIEFING IS I DON'T THINK THIS
LANGUAGE SAYS THAT THERE COULD
NEVER EVER BE A CIRCUMSTANCE
WHERE INTEREST WOULD ACCRUE
RELATIVE TO APPRAISAL SITUATION.
IF AN INSURANCE COMPANY DOESN'T
FOLLOW THE 5-BUSINESS DAYS
OBLIGATION, INTEREST COULD
ACCRUE.
AND THE ONE THING THAT I THINK
IS IMPORTANT TO NOTE ABOUT THIS
CASE IN COMPARISON TO A LOT THAT
WERE CITED TO THE COURT IS THAT
THIS IS A CIRCUMSTANCE WHERE NO
ONE IS SUGGESTING THAT
STATE FARM BREACHED THE
INSURANCE CONTRACT.
I THINK THAT IS DIFFERENT THAN
THE ELSE CASE AND WAS DECIDED
LAST OCTOBER AND NUMEROUS OTHER
CASES THAT HAVE BEEN CITED IN
RESPONDENTS BRIEFING.
IN THOSE SITUATIONS WHEN YOU ARE
TALKING ABOUT AN INSURANCE
COMPANY BREACHING A CONTRACT IN
SOME WAY, I DON'T THINK THE
INSURANCE COMPANY CAN THEN RELY
UPON THE LANGUAGE IN ITS OWN
POLICY TO SAY WE WON'T PAY YOU
INTEREST.
ONCE YOU BREACHED THE CONTRACT,
YOU DON'T GET TO RELY ON THOSE
DEFENSES OR CONDITIONS ANYMORE.
>> WITH NET COVER -- ONE THING I
WORRY ABOUT IS AN INSURANCE
COMPANY JUST DRAGGING ITS FEET.
WE WILL GO TO APPRAISAL.
THEY ARE CONTESTING -- THEY ARE
TAKING THEIR TIME TO DO THIS.
DEMANDING SOME DISCOVERY OR NOT
DISCOVERY TECHNICALLY, BUT
INFORMATION.
THEN JUST TAKING FOREVER.
WHILE TIME IS PASSING AND THE
INSURED IT DOESN'T HAVE
NECESSARILY MAY BE THE MONEY TO
EVEN PURSUE THE APPRAISAL THEN.
>> UNDER THE LANGUAGE OF THE
POLICY IN THE STATUTE THAT IS
APPLICABLE HERE INSURANCE
COMPANY HAS TO RESPOND TO THE
DEMAND IN 20 DAYS.
WITHIN A 20 DAYS, THE INSURANCE
COMPANY HAS TO NAME ITS OWN
APPRAISER OR EXPLAIN WHILE THE
MATTER CAN GO TO APPRAISAL
BECAUSE IT'S A COVERAGE QUESTION
OR WHATEVER THE INSURANCE
COMPANY MAY BELIEVE IS THE
APPROPRIATE RESPONSE.
ULTIMATELY, THERE IS A DIFFERENT
FRAMEWORK HERE TO HOLD CARRIERS
ACCOUNTABLE.
IF A PERSON CHOOSES NOT TO GO
DOWN THE APPRAISAL FRAMEWORK OR
BELIEVE THAT THE INSURANCE
COMPANY IS DULY DELAYING THE
CLAIM HANDLING PROCESS, YOU HAVE
ALL OF THOSE OPTIONS AVAILABLE
TO YOU AS A CONSUMER THAT RELATE
TO BAD FAITH, THE 60418 STATUTE.
SEPARATE FROM YOUR APPRAISAL
PARADIGM THAT WE ARE TALKING
ABOUT HERE.
YOU HAVE ALL SORTS OF POTENTIAL
REMEDIES AVAILABLE TO YOU.
THIS ONE THAT WE ARE TALKING
ABOUT HERE TODAY RELATES TO THE
APPRAISAL CONCEPT.
IF SOME OF CHOOSES TO PROCEED
WITH AN APPRAISAL SOME OF THE
INTENT OF THIS LANGUAGE DOES SAY
WE ARE NOT GOING TO PAY PREAWARD
INTEREST ON THAT.
>> THIS IS A LITTLE DIFFERENT.
>> THE ONE THING I WANT TO POINT
OUT ON THAT IS, THERE IS
COMPETING PUBLIC POLICY REASONS
BEHIND THIS.
I CAN UNDERSTAND WHEN SOME
PEOPLE LOOK AT THIS LANGUAGE AND
GO, YOU KNOW, THE CARRIER IS
TRYING TO MAKE IT SO THAT IT
CANNOT PAY PREAWARD INTEREST NO
MATTER HOW LONG THIS DRAGS ON.
THERE'S A LOT OF CIRCUMSTANCES
THAT ARISE IN THE ESTIMATION
PROCESS IN THE APPRAISAL PROCESS
THAT CAUSES DELAYS THAT ARE NOT
THE FAULT OF THE CARRIER.
LET ME GIVE YOU AN INSTANCE JUST
BRIEFLY.
I HAVE SEEN NUMEROUS CLAIMS
WHERE YOU WILL HAVE A MULTIUNIT
TOWNHOME ASSOCIATION FOR EXAMPLE
WITH BIG DOLLARS AT STAKE.
THE CLAIMS FILED WITH THE
INSURANCE COMPANY, THE INSURANCE
COMPANY GOES OUT AND MAKES AN
ADJUSTMENT AND SAYS HERE'S OUR
ESTIMATE.
THIS IS WHAT WE THINK WAS WRONG.
TIME WILL PASS.
18 MONTHS WILL PASS OR MORE
UNTIL THE INSURED COMES BACK AND
SAYS, I DISAGREE WITH YOUR
ESTIMATE.
MY ESTIMATE IS ACTUALLY
$2 MILLION OR $3 MILLION MORE
THAN YOURS.
UNDER THE CURRENT LAW PARADIGM
THAT WE HAVE IN MINNESOTA, THAT
INTEREST CAN BEGIN ACCRUING AT
THE TIME OF THE WRITTEN
NOTIFICATION OF THE CLAIM TO THE
CARRIER.
IN THE INSURANCE COMPANY MAY NOT
EVEN KNOW THERE IS A DISPUTE
ABOUT THE CLAIM ADJUSTMENT FOR
MONTHS OR YEARS AFTER THAT
INITIAL ADJUSTMENT IS MADE.
UNDER THE CURRENT LAW, THERE IS
INTEREST ACCRUING ON THAT AMOUNT
AMOUNT.
ULTIMATELY, SOMEBODY CAN SAY,
TWO YEARS HAVE NOW PASSED.
I WANT TO GO TO APPRAISAL
BECAUSE I DISAGREE WITH YOUR
ADJUSTMENT.
NOW THE CARRIER IS DEALING WITH
TWO YEARS OF INTEREST ACCRUING
ON THAT CLAIM WITHOUT EVEN
KNOWING THERE WAS A DISPUTE.
I THINK THAT IS AN INSTANCE AND
I'M NOT SAYING THAT HAPPENS
UNIFORMLY.
OF COURSE, IT DOESN'T.
I THINK IT IS SORT OF A CONVERSE
OF THE IDEA THAT WELL, IF
INTEREST ISN'T ACCRUING HERE,
THAT IS ONLY A NEGATIVE TO THE
CLAIM PROCESS BEING DONE
EFFICIENTLY.
I THINK THERE ARE COMPETING
ANALYSES THAT COME INTO PLAY ON
THAT.
THE LANGUAGE HERE I THINK IT IS
HERE TO BASICALLY SAY, BOTH
SIDES SHOULD WANT TO MOVE THIS
FORWARD BECAUSE NO ONE IS GOING
TO BE COLLECTING INTEREST WHILE
THIS CLAIM PROCESS PLAYS OUT.
THERE IS NO INTEREST THAT
ACCRUES IN THE APPRAISAL PROCESS
CAN AND SHOULD MOVE VERY
EFFICIENTLY.
THAT I THINK IS THE INTENT
BEHIND THE LANGUAGE AND SO, I
JUST WANT TO MAKE THAT CLEAR
THAT I DON'T THINK IT IS JUST A
ONE SIDED WAY OF LOOKING AT THIS
THIS.
>> WOULDN'T IT BE BETTER THOUGH
TO HAVE PLAIN LANGUAGE THAT
ANYBODY CAN UNDERSTAND ACTUALLY
NAMING THE TYPES OF INTEREST
THAT AREN'T ACCUMULATING?
>> I THINK FIRST OF ALL, I DON'T
THINK THAT IS THE TEST IN TERMS
OF SAYING COULD IT HAVE BEEN
WRITTEN BETTER OR WITH MORE
LANGUAGE.
I THINK THE QUESTION IS CAN IT
BE APPLIED AS WRITTEN?
I THINK IT CAN ESPECIALLY UNDER
THIS THE COURT'S ANALYSIS.
>> IS THAT THE QUESTION OR CAN
BE UNDERSTOOD -- WE LIKE THESE
INSURANCE OR THE LAW LIKES THESE
INSURANCE CONTRACTS TO BE
WRITTEN SO THAT EVERY DAY PEOPLE
CAN UNDERSTAND THEM.
AND YOU HAVE DONE A PRETTY
GOOD JOB OF THAT AND LOTS OF
PARTS OF THE POLICY.
SPEAK OKAY, TO ANSWER THAT
DIRECTLY.
I THINK THE REASON THE LANGUAGES
AS IT IS, THAT'S WHAT FITS WITH
THE LOSS PAYMENT PROVISION.
IF YOU START -- FOR EXAMPLE, IF
THAT LANGUAGE DID NOT SAY WHAT
IT DOES AND INSTEAD SAID, NO
PREAWARD INTEREST ACCRUES ON A
LOSS.
NO POST INTEREST AWARD INTEREST
ACCRUES ON A LOSS, WE DON'T PAY
INTEREST ON YOUR ACTUAL CASH
VALUE.
WE DON'T PAY INTEREST ON -- YOU
COULD LAY OUT ALL DIFFERENT
FORMS OF THAT.
I WOULD AGREE, THERE'S WAYS THAT
YOU COULD LINK AND IT DO TRY TO
EXPLAIN MORE.
I THINK THE CONCERN BECOMES THAN
IT DID BECOME AMBIGUOUS.
NOW YOU HAVE TO LIST EVERY
POTENTIAL VARIATION UPON WHICH
INTEREST WOULD NOT ACCRUE?
I USE THE EXAMPLE IN THE
BRIEFING ABOUT THE LOSSES, THE
IDEA THAT WHILE THE LOSS HERE IS
SAYS NO INTEREST ACCRUES ON THE
LOSS.
THE LOSS UNDER THE POLICY
CONTRACT ISN'T DEFINED BECAUSE
IT HAS SO MANY VARIATIONS OF
POTENTIAL LOSSES THAT COULD BE
SUSTAINED.
YOU COULD HAVE A FIRE LOSS, WIND
LOSS, HAIL LOSS, LIGHTNING
STRIKE.
I THINK THE IDEA OF BEING ABLE
TO SAY COULDN'T YOU EXPLICITLY
SAY ALL THE DIFFERENT KINDS OF
CIRCUMSTANCES WHERE INTEREST
WOULDN'T ACCRUE, I THINK THAT IS
DIFFICULT BECAUSE THERE'S ALWAYS
VARIATIONS THAT CAN ARISE THAT
MAYBE WOULDN'T BE LISTED THERE.
I THINK WHAT WE ARE REALLY
SAYING IS LET'S MAKE THE POLICY
LONGER WITH MORE PHRASING AND
MORE DEFINITIONS AND SUB
DEFINITIONS.
I THINK THIS LANGUAGE DOES WHAT
IT IS INTENDING TO DO.
I THINK IT IS CLEAR.
IF YOU READ IT IN ITS CONTEXT OF
THE LOSS PAYMENT PROVISION, AND
SAYS NO INTEREST ACCRUES IN THE
LOSS UNTIL AFTER THE LOSS
BECOMES PAYABLE.
THE TRACKS WITH 65801.
THAT TRACKS WITH POEHLER IN THE
SENSE THAT THE COURT LOOKED AT
SIMILAR LOSS PAYMENT LANGUAGE
THAT DIDN'T HAVE THE LAST
SENTENCE BUT HAVE THE OTHER
LANGUAGE.
THE COURT DIDN'T FIND THAT
CONCERNING OR AMBIGUOUS IN ANY
WAY WE HAVE DECIDED TO EXTRUDE
JURISDICTION CASES THAT HAVE HAD
SIMILAR LANGUAGE THAT COURTS
HAVE APPLIED UNIFORMLY WITHOUT
CONCERN FOR AMBIGUITY.
WHEN YOU'RE SORT OF LOOKING AT
IT IN THE CONTEXT OF THE POLICY
AS A WHOLE, I THINK THE LANGUAGE
IS CLEAR AND FRANKLY, DEPARTING
FROM THE LOSS PAYMENT LANGUAGE
THAT EXISTS I THINK WOULD BE
MORE PROBLEMATIC.
NOW YOU ARE INJECTING ALL SORTS
OF CONCEPTS AND THOUGHTS THAT
DON'T EXIST UNDER THE STANDARD
FORM THAT HAS BEEN USED FOR THE
LAST 100 YEARS IN MINNESOTA.
I THINK THE LANGUAGE HERE IS
MEANT TO FIT EXACTLY IN WITH THE
POLICY PHRASING THAT EXIST IN
THE STANDARD FIRE POLICY IN THAT
HAS BEEN INTERPRETED BY THIS
COURT IN CASES OVER THE YEARS.
>> CAN I SHIFT TO A DIFFERENT --
LET'S ASSUME WE AGREE WITH YOU
ON THE INTERPRETATION OF
LANGUAGE.
THERE'S TWO OTHER ARGUMENTS
HERE.
UNCONSCIONABILITY.
AND A STATUTORY 549.09
ARGUMENTS.
CAN YOU TALK TO ME A LITTLE BIT
ABOUT -- IS IT YOUR POSITION
THAT THAT WAS FORFEITED?
>> IT IS.
I LITERALLY DID A TEXT SEARCH
THROUGH THE TRANSCRIPT, THE
BRIEFING AND EVERYTHING IN THE
LOWER COURTS.
THERE'S NEVER A TIME WHERE THE
TERM "UNCONSCIONABILITY" OR ANY
VARIATION THEREOF IS RAISED.
>> THAT IS THE DISTRICT COURT
AND COURT OF APPEALS?
>> YES.
I'M NOT HERE TO SUGGEST THAT
RESPONDENTS HAS NEVER SAID, IT
WOULD BE UNFAIR TO HAVE THIS IN
THERE.
IN SOME WAY, THAT ARGUMENT HAS
BEEN POTENTIALLY PUT ON THE
TABLE.
CERTAINLY NOT UNCONSCIONABILITY
IN TERMS OF THE ANALYSIS THAT
COURTS USE FOR THAT --
>> IT'S A LEGAL CONCEPT.
>> EXACTLY.
>> WHAT IF WE DECIDE IT IS NOT
FORFEITED?
>> I DON'T THINK THERE IS
ANYTHING THAT IS UNCONSCIONABLE
ABOUT IT IN THE SINS THAT THIS
TIES IN A LITTLE BIT WITH WHAT I
WAS SAYING BEFORE.
I THINK THERE ARE REASONS THAT
IT EXIST THAT ARE BENEFICIAL TO
BOTH INSURED AND THE INSURED.
I UNDERSTAND THAT MOST INSURED
WOULD SAY I WANT TO HAVE EVERY
POTENTIAL OPPORTUNITY TO COLLECT
AS MUCH INTEREST AS I CAN.
I DON'T THINK IT IS JUST A
ONE-WAY STREET IN TERMS OF WHAT
THIS CAN DO TO MAKE SURE THIS IS
BEING HANDLED EFFICIENTLY.
>> CONSIDER THAT THERE COULD BE
HIGHER PREMIUMS OR LOWER
PREMIUMS DEPENDING ON WHETHER
YOU CAN EXCLUDE INTEREST.
>> I DON'T KNOW THAT CUTS ONE
WAY OR THE OTHER.
THAT IS THE CONCERN.
YOU START TO SAY IF A CARRIER IS
GOING TO BE HIT WITH AN
APPRAISAL DEMAND ON EVERY CLAIM
AND IS GOING TO BE INTEREST
ATTACHED TO THAT, THAT'S THE
OTHER PART ABOUT APPRAISAL.
I THINK IT IS SOMEWHAT UNIQUE.
LIKE WHAT HAPPENED HERE IN THE
AARON WESSER CLAIM.
WHEN YOU GO TO APPRAISAL, THE
FOLKS INVOLVED ON THE APPRAISAL
PANEL SEE WHAT THEY CARRIER HAS
ESTIMATED.
THEY KNOW WHAT STATE FARM'S
ESTIMATE IS.
IT'S BEST OFFER SO TO SPEAK.
HIS BEST ANALYSIS OF THE CLAIM.
YOU REALLY DON'T HAVE ANYTHING
TO LOSE IF YOU ARE THE CONSUMER
HERE.
IN THIS INSTANCE, AARON WESSER
ENDED UP WITH A CASH VALUE AWARD
THAT WAS LESS THAN WHAT
STATE FARM HAD PAID HIM.
STATE FARM DOESN'T COLLECT THAT
MONEY BACK.
IT DOESN'T SAY, IT LOOKS LIKE WE
ACTUALLY OVERPAID YOU.
CAN YOU CUT US A CHECK?
THAT DOESN'T HAPPEN.
THERE IS SORT OF ALREADY AN
INCENTIVE I THINK -- I'M NOT
EVEN SAYING IT IS A BAD THING.
THERE ALREADY IS REALITY THAT
DEMANDING APPRAISAL DOESN'T
REALLY COST YOU MUCH AS A
CONSUMER OTHER THAN SOME OF THE
FEES THAT ARE ASSOCIATED WITH
HAVING THE APPRAISER ON YOUR
SIDE.
TO TURN BACK TO THAT
UNCONSCIONABILITY COMPONENT OF
IT, I WOULD THINK IT IS A
DIFFERENT -- THERE'S TWO THINGS
I WOULD SAY.
WANDA, I WOULD SAY IT IS
DIFFERENT IF STATE FARM IS
TRYING TO BASICALLY SAY IF WE
REACH OUR CONTRACT WITH YOU, YOU
CAN'T COLLECT INTEREST AGAINST
US.
THAT'S NOT WHAT IT'S SAYING.
THAT'S NOT WHAT THIS LANGUAGE
SAYS.
AGAIN, AND INSURED CAN BE HELD
ACCOUNTABLE.
YOU BREACH THE CONTRACT, YOU
WILL BE PAYING INTEREST.
THIS IS A CIRCUMSTANCE WHERE
NOBODY IS BREACHING THE
CONTRACT.
THE OTHER PART OF IT, IF THERE
WAS NO OTHER REMEDY HERE -- I
DELAY OR FOOL AROUND WITH YOU IN
TIME CAN GO ON AND ON AND THERE
IS NO OTHER RECOURSE, I MIGHT
SAY, THIS REALLY IS BAD.
AGAIN, AS A CONSUMER IF YOU FEEL
LIKE YOU HAVE BEEN MISTREATED,
THE INSURANCE COMPANY IS NOT
OPERATING IN A WAY IT SHOULD BE,
YOU HAVE PRIVATE REMEDIES UNDER
604.18.
YOU COULD ADD INTEREST TO YOUR
CLAIM BY GOING OUTSIDE OF THE
APPRAISAL PARADIGM.
>> IS THERE ANYTHING IN THE
RECORD ABOUT REPAIRS WERE
COMPLETED?
>> NO.
THAT IS PART OF THE ISSUE IN
TERMS OF REPLACEMENT COST VALUE.
THAT IS THE OTHER TIMING THING
TO KNOW ABOUT THIS.
WHEN WE TALK ABOUT LOSS BEING
PAYABLE FIVE BUSINESS DAYS AFTER
THERE IS NO FILING APPRAISAL
AWARD.
WITH THAT AMOUNT OWED CAN DEPEND
UPON WHETHER IT IS ACTUAL CASH
VALUE OR REPLACEMENT COST VALUE.
YOU WOULD BE ENTITLED TO
REPLACEMENT COST VALUE UNTIL YOU
ACTUALLY DO THE REPAIRS.
>> ON THAT IN TERMS OF PRACTICAL
REALITY.
ASSUMING CONTRARY TO WHAT I SAID
BEFORE.
ASSUME THAT YOU WILL LOSE ON THE
CONTRACT ARGUMENT AND YOU HAVE
TO PAY INTEREST.
WITH A PRACTICAL WAY THIS WOULD
WORK OUT AS YOU WOULD PAY
INTEREST ON THE ACTUAL COST
VALUE AND THEN ONCE THEY
COMPLETE THE REPAIRS, THEN YOU
PAY ADDITIONAL INTEREST ON THE
RCV?
>> THAT ISSUE HASN'T COME BEFORE
THIS COURT --
>> THE COURT OF APPEALS GOT INTO
A LITTLE BIT.
>> IT DID CREATE -- IN THAT
CASE, THE COURT OF APPEALS SAID
THAT YOU WOULD DETERMINE THE
AMOUNT OF INTEREST OWED BASED
OFF THE REPLACEMENT COST VALUE.
IT DIDN'T REALLY DETERMINE WHEN
AND HOW THAT CHECK WOULD BE CUT.
>> HOW WOULD YOU DO IT?
I WAS IT DONE IN PRACTICE?
YOU PAY THE INTEREST ASSUMING
THERE IS THAT SHE PAID INTEREST
ON THE ACTUAL COST VALUE.
ONCE IT IS COMPLETE, YOU PAY THE
REST OF IT WITH THE ADDITIONAL
INTEREST?
>> TO BE HONEST BECAUSE THIS HAS
BEEN SUCH A DEVELOPING ISSUE, I
CAN'T THINK OF HOW MANY TIMES
THAT IS AVEN.
I WILL POINT OUT REAL BRIEFLY
THERE WAS A CASE THAT JUDGE
DECIDED IN FEDERAL DISTRICT
COURTS THAT ANALYZE THE SAME
ISSUE AND SAID THEY CARRIER
WOULDN'T OWE ANDREA'S ON THE
REPLACEMENT COST VALUE UNTIL IT
HAS DEMONSTRATED THE AMOUNT IS
ACTUALLY OWED.
WHICH I THINK IS LOGICAL BECAUSE
OTHERWISE, YOU ARE EFFECTIVELY
PAYING INTEREST ON REPLACEMENT
COST VALUE THAT MAY NEVER BE
RECOVERABLE.
>> I'M SORRY TO KIND OF
BOUNCE BACK AND FORTH.
ASSUMING YOU WIN THE
COUNTERCLAIM, THE OTHER ARGUMENT
THE OPPOSING COUNCIL MAKES IS
THE STATUTE REQUIRES PREAWARD
INTEREST.
WHAT DO YOU THINK?
>> I THINK THAT IS INCORRECT.
FIRST OF ALL, I THINK POEHLER
HAS IT EXACTLY RIGHT TO SAY THE
STATUTE FRAMEWORK ALLOWS INSURED
TO CONTRACT WITH THE INSURED
RELATIVE TO THAT.
IF YOU LOOK AT 65A IN TERMS OF
THE ALSO DECISION, IT WAS NOTED
IN THERE AND I THINK CORRECTLY
THAT THE STATUTORY FRAMEWORK
SAYS THAT THE LOSS PAYABLE
PROVISIONALLY PROVIDES INTEREST
FROM THE TIME OF LOSS BECOMES
PAYABLE WHICH IS EXACTLY WHAT
STATE FARM'S LANGUAGE HERE IS
SAYING.
I THINK IT IS A DIFFERENT SET OF
CIRCUMSTANCES THAT WE ARE
TALKING ABOUT BREACHING
CONTRACTS.
>> IT DID ALLOW -- WE DID ALLOW
FOR PREAWARD INTEREST.
>> THAT IS BECAUSE THERE WAS A
BREACH OF THE CONTRACT.
AS I READ THAT CASE, YOU DIDN'T
COMPLY WITH YOUR CONTRACT.
AGAIN, I THINK THAT IS CORRECT.
IF AN INSURANCE COMPANY IS NOT
DOING WHAT IT IS SUPPOSED TO BE
DOING IN THE CONTRACT.
I THINK THIS IS JUST A DIFFERENT
ANALYSIS BECAUSE WE ARE TALKING
ABOUT APPRAISAL.
BOTH SIDES HAVE DIFFERENT VIEWS.
HERE, THE VIEW WAS NOT ADOPTED.
I DON'T THINK ANYBODY HERE WOULD
BE SAYING, WELL, THAT WAS
DEFENDING TO DEFRAUD STATE FARM
FOR IT HE GIVING IT HIGHER
ESTIMATE THAN WHAT REALLY
SHOULD'VE BEEN ALLOWED?
NO ONE IS SUGGESTING THAT.
HE HAD A DIFFERENT VIEW OF THE
AMOUNT OF LOSS AS DID STATE FARM
FOR THE AWARD ENDED UP BEING
SOMEWHERE KIND OF IN THE MIDDLE.
ON THE REPLACEMENT COST VALUE
SIDE.
I THINK THAT IS OKAY.
THAT IS THE PROCESS WORKING AS
IT SHOULD.
IT IS NOT SOMETHING TO SUGGEST
TIME TO PUNISH STATE FARM THEN
BECAUSE THE APPRAISAL CAME IN AT
SOMETHING HIGHER THAN WHAT
STATE FARM ANALYZED FOR THE SAME
REASON THAT WE WOULDN'T SAY,
MR. AARON WESSER NEEDS TO BE
PUNISHED BECAUSE THE APPRAISAL
PANEL DECIDED THAT HIS AMOUNT
WAS HIGHER THAN WHAT IT REALLY
WAS.
I THINK AGAIN, THIS IS A
DIFFERENT PARADIGM THAN WHAT WE
SAW FOR EXAMPLE.
I THINK THAT IS WHERE IT ALL
FITS TOGETHER.
YOU GOT A BREACH OF CONTRACT.
HERE, YOU DO NOT.
I DON'T THINK THERE IS ANYTHING
IN THE STATUTORY FRAMEWORK THAT
WOULD PROHIBIT THIS.
IN TERMS OF 549.09.
WE TALKED ABOUT THE LANGUAGE
SAYING THAT EXCEPT FOR PROVIDED
BY A CONTRACT --
>> DO WE DO ANYTHING WITH THE
FACT THAT THE LEGISLATURE USED
EXCEPT AS OTHERWISE PROVIDED BY
CONTRACT OR ALLOWED BY LAW?
DOES THE CHOICE OF TWO DIFFERENT
WORDS MAKING A DIFFERENCE IN THE
ANALYSIS HERE?
>> I DON'T THINK THEY DO.
IT'S A CREATIVE ARGUMENT.
TO BE ABLE TO SAY IT IS PROVIDED
BY CONTRACT.
ON THE FLIP SIDE, THE
LEGISLATURE IS SAYING THAT YOU
HAVE TO ALLOW FOR SOME SORT OF
INTEREST OR PREAWARD INTEREST,
THEN PRESUMABLY, THAT IS WHAT
THE STATUTE WOULD SAY.
I THINK IF YOU APPLIED IN THE
WAY THAT RESPONDENT IS
SUGGESTING HERE, YOU CAN SAY,
OKAY, WE WILL ALLOW YOU 1 PENNY
OF INTEREST PER ANNUM IF YOU
HAVE AN APPRAISAL.
THERE IS NO RESTRICTIONs THE
LANGUAGE IN 549.09 ON THE
MINIMUM AMOUNT.
AND SO FOR THAT REASON, I THINK
THAT THE LOGICAL READING OF IT
IS TO SAY, IT SAYS EXCEPT FOR IS
PROVIDED BY CONTRACT.
HERE THERE IS A CONTRACT IN PLAY
THAT DOES ANSWER THE QUESTION OF
WHAT AMOUNT OF PREAWARD INTEREST
WOULD BE OWED.
IN THIS INSTANCE, IT IS 0.
COULD THERE BE CIRCUMSTANCES FOR
THIS?
YES, IF THEY CARRIER DOES NOT
PAY WITHIN THE FIVE BUSINESS
DAYS ALLOWED BY THE CONTRACT.
I SEE MY TIME IS RUNNING SHORT.
I WILL TAKE A SEAT AND WAIT FOR
THE REBUTTAL.
THANK YOU.
>> WE WILL SEE ON REBUTTAL.
THANK YOU.
>> MAY IT PLEASE THE COURT.
ON BEHALF OF AARON WESSER.
THIS CASE WAS BEFORE THE COURT
RIGHT NOW IS INTERPRETATION OF
STATE FARM'S POLICY TO SEE IF IT
EFFECTIVELY PRECLUDES RECOVERY
OF PREAWARD INTEREST AS
STATE FARM CONTENDS IT DOES.
THERE ARE THREE MAIN POINTS AS
TO WHY IT DOES NOT.
IT INVOLVES INTERPRETING ITSELF
WHERE THE REQUIREMENT IS THE
LANGUAGE NEEDED TO CLEARLY AND
UNAMBIGUOUSLY PRECLUDE PREAWARD
INTEREST IN THE POLICY ITSELF
DOES NOT DO THAT.
THE SECOND STEP IS TO APPLY
RENTS THAT 549.09 WHICH PROVIDES
MINIMUM COVERAGE AND
CONTEMPLATES INTEREST
INDISPUTABLE THAT HER POEHLER,
IF YOU READ A POLICY THAT USES
THE EXACT SAME LANGUAGE OF 65A
ZERO ONE, YOU WILL GET PREAWARD
INTEREST AS AN INSURED FOR THE
ONLY THING THAT STATES PHARMACY
POLICY DOES IS INCLUDES AND
TRACKS ALONG VERY WELL.
AND INCLUDES ONE ADDITIONAL
LINE.
THAT IS SPECIFICALLY INTENDED TO
ELIMINATE A BENEFIT FROM
POLICYHOLDERS ACCORDING TO
STATE FARM WHICH IS NO INTEREST
ACCRUES ON THE LOSS UNTIL AFTER
THE LOSS BECOMES PAYABLE.
IT TRACKS VERY WELL WITH 65A
.01.
IT ELIMINATES A BENEFIT PROVIDED
FOR IN 65A.01.
NUMBER THREE IS THAT EXCLUDING
INTEREST AN INSURANCE POLICY
WHICH IS AN ADHESION CONTRACT IS
UNCONSCIONABLE.
I USE THE TERM UNCONSCIONABLE
PREVIOUSLY.
WE HAVE ARGUED THE PUBLIC POLICY
FOR PREAWARD INTEREST.
THE COURT OF APPEALS WE MADE
ARGUMENT ABOUT THE PUBLIC POLICY
TO THIS SPECIFIC CONTRACT BEING
STATE FARM'S THAT IS EXPANDED A
TOUCH DUE TO THE AMICUS BRIEF
FEDERATION OF INSURANCE
COMPANIES HAS STATED THAT THEY
HAVE NOW ALL GOT TOGETHER AND
DECIDED THAT IT SHOULD BE
EXCLUDED FROM ALL POLICIES.
THAT IS WHERE IT RAISES TO A
LITTLE BIT DIFFERENT LEVEL WITH
ARTICLE OF UNCONSCIONABLE PRAYER
WE HAVE MADE THE PUBLIC POLICY
ARGUMENT THAT THIS PARTICULAR
CONTRACT SHOULD BE VOID AS
AGAINST PUBLIC POLICY SINCE THE
DISTRICT COURT LEVEL.
THE PRECLUSION OF PREAWARD
INTEREST AS DEVASTATING EFFECTS
AND FLIPS THE INTENTION OF
PREAWARD INTEREST ON ITS HEAD.
THAT IS WHAT MAKES IT A BIG
ISSUE HERE IS THAT IT IS AN
INTENDED TO COMPENSATE THE
PERSON FOR LOST TIME VALUE OF
MONEY, ELIMINATE THE BENEFIT OF
THE HOLDER OF THAT MONEY, AND
THEN ALSO PROMOTE SETTLEMENT.
IN THIS CASE, IT WILL ELIMINATE
ALL THOSE AND ALSO FLIP IT ON IT
SAID WERE STATE FARM IS ACTUALLY
INCENTIVIZED TO UNDERVALUE
CLAIMS.
AT THIS PARTICULAR EXAMPLE, HAD
THEY DECIDED TO PAY WESSER
$100,000 LESS, IT WAS A YEAR
FROM START UNTIL THE APPRAISAL
AWARD.
STATE FARM WOULD HAVE GAINED
$10,000 WORTH OF INTEREST ON THE
UNDERPAYMENT WHERE THEY STILL
PAID THE EXACT SAME AMOUNT AS
THEY DID HERE EXCLUSIVE OF
INTEREST.
THEY WOULD'VE GAINED $10,000
MORE FOR UNDERVALUING THIS CLAIM
BY $100,000 MORE.
THAT CREATES AN INVERSE
INCENTIVE ON A VERY LARGE
PROBLEM.
>> I'M GONNA STOP YOU BECAUSE
YOU'RE 3 MINUTES ARE UP.
WHAT IS YOUR POSITION ABOUT WHAT
THE CLAUSE ISSUED, NO INTEREST
ACCRUES.
WHAT IS COVERED BY THAT IF IT
DOESN'T COVER PREAWARD INTEREST?
>> EXACTLY WHAT IT SAYS.
INTEREST ON THE LOSS BUT
IRREGULAR LOSS PAYMENT.
IF YOU AND I -- IF I HAVE AN
INSURANCE CLAIM AND I SAY
STATE FARM, I HAVE.
I THINK 60,000.
I THINK IT IS 30,000 FOR THEY
SEND ADJUSTERS OUT.
WE HAVE A COUPLE OF
CONVERSATIONS.
WE EVENTUALLY AGREE IT'S 50,000
AND THEY PAY 50,000.
I DON'T GET INTEREST ON THAT.
HOWEVER, IF STATE FARM CONTINUES
TO DENY THAT CLAIM AND I HAVE TO
GO ALL THE WAY TO GETTING AN
APPRAISAL AWARD OR A JUDGMENT,
THAT PROVIDES ME A DIFFERENT SET
OF RIGHTS.
I'M COLLECTING PAYMENT AND
INTEREST ON THAT JUDGMENT ON
THAT APPRAISAL.
I WOULD LIKE TO POINT OUT REAL
QUICK THAT UNDER THIS SCHEME, IF
THEY ARE ALLOWED TO ELIMINATE
PREAWARD INTEREST, IT WOULD ALSO
APPLY TO PREJUDGMENT INTEREST.
YOUR HONOR HAD MENTIONED THAT IF
THIS WOULD GO TO COURT, WHAT
ABOUT A JUDGMENT.
IT SAYS THAT THE LOSSES PAYABLE
FIVE DAYS AFTER ENTRY OF A FINAL
JUDGMENT.
NO INTEREST IS PAYABLE ON THE
LOSS UNTIL NO INTEREST ACCRUES
UNTIL THE LOSS BECOMES PAYABLE.
UNDER THIS READING, IT WOULD
ALSO APPLY TO A JUDGMENT.
IT ONLY ELIMINATES ALL FORMS OF
PREAWARD AND PREJUDGMENT
INTEREST.
>> WHAT IF YOU WOULD HAVE AGREED
IN DECEMBER OF 2020?
YOU GO THROUGH THE PROCESS AND
FILE YOUR CLAIM.
THERE IS APPRAISAL SOUGHT BUT
THE PARTIES DISCUSSED UP AND
AGREE IN DECEMBER OF 2020.
OR JANUARY 2021?
I DO YOUR ARGUMENT THAT YOU JUST
MADE, THERE WOULD BE NO INTEREST
ALLOWED?
>> CORRECT, YOUR HONOR.
>> WENT IN THE LANGUAGE OF THE
CONTRACTS DIFFERENTIATES BETWEEN
AGREEMENT AND APPRAISAL?
IT SAYS THE LOSS BECOMES PAYABLE
UPON AGREEMENT, UPON APPRAISAL,
OR UPON JUDGMENT.
WHERE ARE YOU MAKING -- HOW ARE
YOU MAKING THAT DISTINCTION?
WHAT ARE YOU BASING THAT ON?
>> 549.09 PROVIDES YOU TO
COLLECT INTEREST ON AN AWARD OR
JUDGMENT.
ONCE YOU HAVE THE AWARD OR
JUDGMENT, YOU ARE ABLE TO
COLLECT INTEREST.
BEFORE THAT, IT IS A DISPUTE.
YOU'RE NOT.
THAT IS WHY THAT SERVES TO
PROMOTE SETTLEMENT IF WE ALLOW
FOR PREAWARD INTEREST.
IF STATE FARM IS TAKING OFF
INTEREST EVERY DAY WHEN THEY CAN
ACTUALLY REEVALUATE THE INCOME
TO AN AGREEMENT ANY TIME BEFORE
THAT APPRAISAL HAPPENS AND
BEFORE THE APPRAISAL AWARD IS
ISSUED.
THEY CAN MAKE CONCESSIONS WHERE
THEY CAN HAVE CONVERSATIONS BACK
AND FORTH.
IF THERE IS AN AGREEMENT, THEY
DON'T OWE ANY MONEY.
>> I AM NOT -- I'M A LITTLE BIT
UNCERTAIN STILL ABOUT YOUR
ARGUMENT.
WHEN I READ THIS PROVISION, IT
SEEMS TO ME THAT IT IS
ELIMINATING INTEREST THAT
ACCRUES BEFORE THE AMOUNT OF
LOSS IS DETERMINED.
IN THE AMOUNT OF LOSS COULD BE
DETERMINED BY AN AGREEMENT, BY
FINAL JUDGMENT, OR BY AN
APPRAISAL AWARD FOR THIS
PROVISION IS LIMITING INTEREST
THAT ACCRUES BEFORE THE AMOUNT
OF THE LOSS IS DETERMINED.
SO THAT TO ME WOULD MEAN
PREAWARD INTEREST.
BY DEFINITION, THAT ACCRUES
BEFORE YOU KNOW THE AMOUNT OF
THE LOSS.
>> THE TERMS IS NO INTEREST
ACCRUES ON THE LOSS.
AND SO TO ME, THAT SIGNALS AND
TWO I THINK ALL POLICYHOLDERS,
THAT SIGNALS THAT IT IS A
PAYMENT ON THE LOSS, JUST A LOSS
PAYMENT WHERE I PRESENT A
STATE FARM THAT I HAVE A LOSS.
IF IT TAKES THEM TWO WEEKS AND
THEY ISSUE ME A PAYMENT, THAT IS
A LOSS PAYMENT FOR THAT'S
PAYMENT OF THE LOSS.
ONCE I HAVE TO CHALLENGE THEM
AND GO ALL THE WAY THROUGH COURT
OR ALL THE WAY THROUGH AND
APPRAISAL PROCESS, THEY ARE NOT
JUST PAYING A LOSS LOSS ANYMORE.
THEY ARE PAYING ON A JUDGMENT OR
THEY ARE PAYING ON AN APPRAISAL
AWARD.
IF THERE IS A CASE, YOU HAVE A
PERSONAL INJURY.
ONCE YOU COLLECT THE JUDGMENT,
WHAT YOU GET A JUDGMENT THAT
THEY OWE YOU A CERTAIN AMOUNT,
THAT IS WHERE YOU ARE COLLECTING
THE JUDGMENT NOW.
IT IS NO LONGER JUST A PAYMENT
FOR PERSONAL INJURY.
>> THOSE ARE DETERMINATIONS OF
WHAT THE LOSSES.
I MEAN, I AM HAVING A LITTLE
DIFFICULTY TRACKING THE
SEMANTICS YEAR.
IT STRIKES ME THAT INSURANCE
COMPANIES -- I SHOULD SAY NEVER.
IT IS ALWAYS DANGEROUS WITH
INSURANCE CONTRACTS.
IN GENERAL, INSURANCE PAYMENTS
ARE MADE BASED ON A
DETERMINATION OF A LOSS OF SOME
SORT.
AND HERE WE HAVE A POLICY
PROVISION THAT SAYS THAT NO
INTEREST ACCRUES ON THE LOSS.
STATE FARM DOESN'T HAVE UNDER
THE TYPICAL CONTRACT DOESN'T
HAVE ANY OBLIGATION TO PAY
ANYTHING UNTIL THERE IS A LOSS
THAT IS DETERMINED.
I MEAN, I CAN SEE WHERE IT WOULD
BE BENEFICIAL AND PERHAPS
STATE FARM SHOULD HAVE SAID NO
INTEREST ACCRUES ON -- NO
INTEREST PREAWARD POSTAWARD IN A
KIND OF AWARD WHATEVER COULD
INCLUDED ADDITIONAL QUALIFIERS
AND DIDN'T.
BUT I AM HAVING DIFFICULTY
UNDERSTANDING HOW THAT IS
AMBIGUOUS.
IT MAY NOT BE FAIR.
MAYBE THE LEGISLATURE SHOULD
CHANGE THE RULE.
WHAT IS UNCLEAR OR AMBIGUOUS
ABOUT THAT?
>> IT IS AMBIGUOUS BECAUSE IT'S
OBLIVIOUS COLLECT SPECIFIC TO
THE LOSS.
IT APPLIES TO A JUDGMENT OR
AWARD.
THAT'S WHERE IT BECOMES
AMBIGUOUS.
>> AND AWARD IS A DETERMINATION
OF A LOSS.
>> IT IS, BUT THERE'S ALSO A WAY
TO GET THERE BY AGREEMENT OR
THERE'S OTHER WAYS TO DETERMINE
THE AMOUNT OF LOSS.
ONE THING THAT IS SUPER
IMPORTANT IN THIS WHOLE THING IS
THAT STATE FARM SAID THAT THERE
IS NO BREACH OF CONTRACT YEAR
WHATSOEVER.
THAT IS NOT TRUE.
STATE FARM HAS A DUTY IN THE
POLICY TO ADJUST THE LOSS WHICH
IS TO DETERMINE THE AMOUNT OF
LOSS.
THEY GET FIRST CRACK AT THAT.
THEY GET THE ONLY CRACK AT THAT
THAT MATTERS.
THEY SET THE AMOUNT OF LOSS.
THEY DETERMINE THEIR OWN
PAYMENT.
IF THAT PAYMENT IS ACCURATE AND
CORRECT, THEY WILL NEVER BEAT A
JUDGMENT OR AN AWARD.
WHEN THEY MAKE A LOSS PAYMENT
AGREEMENT, THERE DOESN'T HAVE TO
MEAN AGREEMENT FOR THE FIRST
PAYMENT.
THEY JUST SET THE VALUE AT ALL
AND IT DOESN'T MATTER WHAT THE
INSURED THINKS.
>> I UNDERSTAND WHAT YOU'RE
SAYING.
>> THERE IS NO AGREEMENT ON
THOSE PAYMENTS.
ONCE THEY MAKE THOSE PAYMENTS,
THERE'S NO INTEREST ON THAT.
IF THEY DETERMINE --
>> WHAT ABOUT THE SITUATION IN
THIS CASE WHERE IN SOME SENSE,
AND A TIME I GOT TO APPRAISAL,
YOU HADN'T DONE -- DOES THE
RECORD SAY ANYTHING ABOUT
WHETHER YOUR CLIENT ACTUALLY
COMPLETED THE REPAIRS?
>> HE DEFINITELY HAD NOT DONE
THAT BEFORE APPRAISAL.
THAT IS VERY COMMON.
WESSER IN THIS CASE DID NOT KNOW
HOW MUCH MONEY HE WAS GOING TO
RECEIVE IN THE END.
HE DOESN'T KNOW HOW MUCH HE CAN
PAY TO REPAIR HIS HOME.
UNTIL THE REPLACEMENT COST VALUE
IS SET.
STATE FARM MAKES A BIG DEAL OF
THEM PAYING MORE THAN THE ACTUAL
CASH VALUE AND THE DIFFERENCE
BETWEEN ACV AND RCB.
I WOULD LIKE TO POINT OUT THAT
STATE FARM PAID THEIR OWN RCB
ESTIMATE WHEN THEY SAID THAT
THEY PAID HIM $242,000 IN THE
DECLARATION OF SUMMERFIELD, HE
SAYS THEY RECEIVED AN ESTIMATE
FOR REPAIRS AT $242,000.
SO THEY ARGUE THAT THEY DON'T
OWE THAT RCB OR THEY SHOULD NO
INTEREST ON THE RCV.
THEY PAID OFF OF THEIR OWN RCB
ESTIMATE.
>> YOU WOULD AGREE THAT IF YOUR
CLIENT NEVER COMPLETED THE
REPAIRS, THEY WOULD NEVER HAVE
TO PAY RCV.
>> I DON'T NECESSARILY AGREE
WITH THAT FOR A COUPLE OF
REASONS.
THIS GETS INTO A VERY LARGE.
>> I WOULD LIKE TO UNDERSTAND
HOW THE LANGUAGE -- HOW THAT
WORKS.
>> STATE FARM HAS A DUTY TO
IDENTIFY THE PROPER AMOUNT OF
THE CLAIM.
WHEN THEY TELL WESSER THAT WE
WILL NEVER PAY YOU MORE THAN
$242,000 EVEN IF YOU MAKE --
>> THE ONLY QUESTION I AM ASKING
IS IF YOUR CLIENT AND COMPLETE
THE REPAIRS, THEY WOULD NEVER
OWE UNDER THE CONTRACT MORE THAN
ACV.
>> THE SHORT ANSWER IS THAT
STATE FARM REPUDIATES THEIR
OBLIGATION TO PAY.
THEREFORE, EVEN STATE FARM SAID
THIS THAT ONCE THEY BREACHED THE
CONTRACT, THEY DON'T THINK THAT
THIS TERM APPLIES ANYMORE
BECAUSE THE INSURED --
>> WHAT TERM?
>> THE LOSS PAYMENT PROVISION.
STATE FARM STATED THAT IF THEY
ACTUALLY BREACH THE CONTRACT AND
THEY GET SUED --
>> YOU ARE SAYING THAT
STATE FARM AGREED THAT THEY HAVE
TO PAY YOUR CLIENT RCV EVEN IF
HE COMPLETES DOESN'T COMPLETE
THE REPAIRS?
>> TWO STEPS TO GET THERE.
I APOLOGIZE.
STATE FARM IS SAYING, THE LOSS
PAYMENT PROVISION OF NO INTEREST
WOULD NOT APPLY AFTER THEY
BREACHED THE CONTRACT BECAUSE
THE INSURED IS NO LONGER BOUND
BY THE CONTRACT THAT STATE FARM
ALREADY BREACHED.
MY POSITION IS THAT STATE FARM
REPUDIATES THE CONTRACT WHEN
THEY SAY YOU HAVE -- YOU ARE
ONLY GOING TO GET $242,000.
THEY ARE REPUDIATING THEIR
OBLIGATION TO PAY THEIR REAL
REPLACEMENT COST VALUE WHICH IS
$300,000.
AT THAT POINT, THEY HAVE
REPUDIATED THEIR CONTRACT AND
WESSER IS ENTITLED TO THE WHOLE
THINKER THAT IS A DIFFERENT
ARGUMENT ALTOGETHER.
>> REPUDIATING THEIR CONTRACT BY
FOLLOWING THE PROCESS THAT YOU
CAN DISPUTE -- THEY ARE SAYING
THIS IS WHAT WE THINK RCB IS.
YOU ARE SAYING IT IS SOMETHING
DIFFERENT THERE THAT HAS TO BE
RESOLVED THROUGH APPRAISAL.
YOU ARE SAYING JUST BECAUSE THEY
ARE DISPUTING WHAT YOUR CLIENT
THINKS IT IS, THEY ARE BREACHING
THE CONTRACT?
>> YES, YOUR HONOR.
THAT IS HOW CONTRACTS WORK.
IF I SEND IN A DELIVERY --
>> I DON'T THINK WE ARE GOING
AGREE ON THIS POINT.
>> I'M JUST SAYING --
>> COUNCIL, AT A MORE BASIC
QUESTION HERE.
WE SAID IN POEHLER, THAT THE
INSURER AND INSURED IS FREE TO
CONTRACT WITH THE INSURED ON THE
ACCRUAL OF INTEREST.
AND WE SAID IT IN THE CONTEXT OF
ANALYZING THE UNLESS OTHERWISE
PROVIDED LANGUAGE IN 549.09.
ISN'T THAT EXACTLY WHAT
STATE FARM HAS DONE HERE?
I'M NOT, WHAT IS IT?
>> IN POEHLER, AND SAYS
ACCORDING TO THAT STATUTE,
CINCINNATI WAS FREE TO CONTRACT
WITH POEHLER ON THE ACCRUAL OF
INTEREST ABOUT DID NOT.
THE CONDITIONAL PHRASE IN
IN-STAT 549.09 UNLESS OTHERWISE
PROVIDED BY CONTRACT WAS NOT
TRIGGERED.
POEHLER DID NOT ANALYZE HOW THIS
WOULD AFFECT IN 65A.01 OR HOW IT
WOULD BE AFFECTED BY
UNCONSCIONABILITY AND PUBLIC
POLICY.
THEY ONLY SAID, THIS POLICY
DOESN'T HAVE AN EXCLUSION.
SO WE DON'T NEED TO ENTER THAT
DISCUSSION FURTHER.
THEY SAID THEY COULD HAVE
ACCORDING TO THE STATUTE 549.09,
BUT THEY DIDN'T ANALYZE HOW THAT
WOULD AFFECT 65A.01 AND HOW THAT
WOULD AFFECT LOOK POLICY.
IN THIS CASE, PUBLIC POLICY
ARGUMENT IS VERY STRONG.
STATE FARM WILL HAVE NO
INCENTIVE TO CONTINUE
NEGOTIATIONS OR TO EVEN VALUE
CLAIMS PROPERLY FROM THE START
THEY MENTION BAD FAITH.
604 STATUTE, BAD FAITH IS NOT
AVAILABLE IF A CLAIM IS ALL THAT
APPRAISAL.
THE COURT HAS A STRONG HISTORY
OF SAYING THAT APPRAISAL --
>> IT DOES SEEM TO ME THOUGH
THAT IF WE DISAGREE WITH YOU
ABOUT THE SUBSTANCE OF THIS
LANGUAGE, YOU'VE GOT TO GET TO
UNCONSCIONABILITY IN SOME WAY.
I GUESS I'M GETTING IT
FUNDAMENTALLY, IF YOU WERE TO GO
TO A PARK, YOU KNOW, OR A
PRESERVE OF SOME KIND OF CANDY
AND YOU WALK UP OR YOU DRIVE UP
AND YOU ARE IN YOUR CAR AND YOU
SEE A SIGN IN ESSAYS, NO CARS IN
THE PARK.
WHAT IS NOT CLEAR ABOUT THAT?
IT DOESN'T SAY YOU HAVE TO SAY
NO HONDAS IN THE PARK FOR NO
CHEVYS IN THE PARK.
IF IT SAYS NO CARS IN THE PARK,
IT MEANS NO CARS IN THE PARK.
AND HERE WITH THIS LANGUAGE TO
ME SAYS, AND SAYS NO INTEREST.
ISN'T THAT THE END OF THE
ANALYSIS?
>> MAYBE IF IT SAID NO INTEREST,
THAT WOULD BE MORE CLEAR.
THIS HAS NO INTEREST ON THE LOSS
WHICH I THINK NARROWS IT DOWN TO
SPECIFICALLY THE LOSS PAYMENTS.
IT DOESN'T EVEN DEREFERENCE
PREAWARD OR PREJUDGMENT INTEREST
OTHER THAN BY GIVING THIS WEIRD
CALCULATION TO SAY THAT ANDRIST
WOULD START TO ACCRUE FIVE DAYS
AFTER THE APPRAISAL AWARD.
THAT CLEARLY CANNOT APPLY TO
PREAWARD INTEREST.
YOU ARE TALKING ABOUT NEGATIVE
FIVE DAYS OF INTEREST IF YOU
APPLY IT AS STATE FARM SAYS AT
THIS POINT.
THEY ARE SAYING IT WOULD START
TO ACCRUE FIVE DAYS AFTER IT
EXISTS WHEN PREAWARD INTEREST IS
CLEARLY FROM THE TIME THE
APPRAISAL AWARD EXISTS GOING
FORWARD OR GOING BACKWARDS IN
TIME.
>> DOESN'T THAT GET TO THE
CHIEFS QUESTION THAT IT
ELIMINATES INTEREST IN A CRUISE
BEFORE THE AMOUNT OF THE LOSS.
BY DEFINITION, ISN'T THAT
PREAWARD INTEREST?
>> IN A CONVOLUTED WAY, THAT IS
WHAT STATE FARM IS TRYING TO GET
TO BY THE WAY.
>> GO AHEAD.
CONVOLUTED TO ME.
>> SPARKED A LOT OF DISCUSSION
FOR THAT IS WHAT THE COURT OF
APPEALS STATED AS WELL.
THEY SAID THAT THE TERM OF THE
LOSS WAS AMBIGUOUS.
IT IS REALLY AMBIGUOUS IN TERMS
OF TRYING TO APPLY IT AS
STATE FARM SAYS TO APPLY IT.
IT IS NOT CLEAR AND UNAMBIGUOUS
THAT IT PRECLUDES RECOVERY OF
PREAWARD INTEREST.
THAT IS A STANDARD THAT THEY
WOULD NEED TO MEET IN ORDER TO
ACTUALLY RECRUIT RECOVERY OF
PREAWARD INTEREST.
NOT JUST THAT THERE IS
DISCUSSION ABOUT IT HERE MAKES
IT AMBIGUOUS.
THE TERMS IT CAN BE APPLIED.
>> IS THAT BECAUSE OF THE
LANGUAGE ASSUMING YOUR
ARGUMENT -- THAT IS BECAUSE OF
THE LANGUAGE WE USED IN POEHLER
ABOUT EXPLICIT -- HE NEEDS TO BE
EXPLICIT?
>> WHENEVER YOU ARE GOING TO
EXCLUDE ANY TYPE OF BENEFIT --
IT IS INDISPUTABLE THAT AS
WRITTEN, EXACTLY AS 65A.01, YOU
WOULD RECEIVE PREAWARD INTEREST
IF IT IS WRITTEN EXACTLY THAT
WAY.
IN ORDER TO ELIMINATE A BENEFIT
THAT YOU WOULD NORMALLY GET IN
ANY POLICY, ANY EXCLUSIONS, THE
STANDARD IS THAT THEY DRAFT IT.
IT IS VERY LOPSIDED.
IT'S A TAKE IT OR LEAVE IT
POLICY.
ANY TYPE -- ANY CHANCE TO
INCLUDE A BENEFIT MUST BE CLEAR
AND UNAMBIGUOUS.
THAT IS FOR ALL ATTEMPTS TO
EXCLUDE THINGS.
THAT BRINGS UP A REALLY BIG ONE
IN THIS.
AND YOU KNOW, STATE FARM TALKS
ABOUT HOW THE PARTIES ARE ON
EQUAL FOOTING AND SOMEBODY CAN
BE WRONG AND SOMEBODY ELSE CAN
BE WRONG AND ONLY GETS PUNISHED.
IT IS NOT ON EQUAL FOOTING.
STATE FARM GETS TO DRAFT THIS
POLICY ALL BY THEMSELVES OR GET
TOGETHER WITH A BUNCH OF OTHER
INSURANCE COMPANIES AND DECIDE
EXACTLY HOW BEST TO BENEFIT
THEMSELVES.
THERE IS NO POLICYHOLDERS.
UNITED POLICYHOLDERS ASSOCIATION
WASN'T INVITED TO THE ISO
MEETING TO DISCUSS HOW TO MAKE
THIS FAIR IN ANY WAY.
THEY ARE ALL DOING IT TOGETHER
MEANS THAT INSURANCE HAVE NO
OPTION TO SHOP FOR SOMETHING
DIFFERENT.
THEY CAN GO TO STATE FARM AGENCY
AND SAY, I DON'T LIKE THIS
BECAUSE IT INCENTIVIZES YOU TO
UNDERVALUE OR DENY MY CLAIM AND
GET IT CHANGED.
THEY HAVE NO POWER TO DO SO.
AND THEN, ONE OF THE JUSTICES
MENTION WOULD THIS AFFECT
PREMIUMS IN SOME WAY?
I DON'T BELIEVE SO.
I THINK THAT SAINT MATTHEW'S
CHURCHES CASE CAME DOWN THAT
KIND OF NARROWED TO REPAIRS.
I DID NOT HEAR AN OVERWHELMING
WAVE OF PRODUCED THE M'S AFTER
THAT.
PART OF STATE FARM'S ARGUMENT
HAS BEEN THAT THEY ARE
ESSENTIALLY JUST FREE TO
ELIMINATE THIS AND IT CAME UP A
LITTLE BIT BEFORE IF THE
LEGISLATURE SHOULD DO SOMETHING
ABOUT THIS, I THINK THE
LEGISLATURE HAS PROVIDED SOME
GUIDANCE IN 65A.01.
THIS COURT RECENTLY STATED, "WE
HOLD AT THE PLAIN LANGUAGE OF
THE STANDARD FIRE POLICY BY ITS
TERMS ENTITLES AN INSURED TO
PREJUDGMENT INTEREST IN AN
AMOUNT THAT MAY CAUSE INSURANCE
TOTAL RECOVERY TO EXCEED THE
COVERAGE.
I BELIEVE THAT IS VERY ANALOGOUS
TO WHAT IS GOING ON HERE.
WE ARE TALKING ABOUT IF
STATE FARM'S LANGUAGE DOES IN
FACT PRECLUDE PREAWARD INTEREST,
IT IS ATTEMPTING TO OVERRIDE
65A.01.
THAT IS IMPERMISSIBLE AS WELL.
>> COUNSEL, THE COURT OF APPEALS
CONCLUDED THAT THE STANDARD FIRE
POLICY HERE DOESN'T APPLY
BECAUSE THE STATE FARM POLICY
PROVIDES GREATER COVERAGE.
I DIDN'T SEE YOU CHALLENGING
THAT CONCLUSION NOR ANY PARTY.
YOU DIDN'T BRING UP
CROSS-APPEAL.
CAN WE EVEN CONSIDER -- DID YOU
FORFEIT THIS CLAIM THAT SOMEHOW
65A.01 PROHIBITS STATE FARM FROM
ELIMINATING PREAWARD INTEREST
HERE?
>> NO, BECAUSE IT IS A 2-PART
ARGUMENT.
AT THIS COURT AGREES WITH THE
COURT OF APPEALS THAT THE
LANGUAGE DOESN'T PRECLUDE
PREAWARD INTEREST, THERE'S NO
NEED TO GET TO 65A.01.
THAT IS WHY WE JUST SAID, YES,
THE COURT OF APPEALS IS RIGHT
FOR THE LANGUAGE DOES NOT DO IT.
STATE FARM DIDN'T ARGUE THE
OTHER WAY EITHER ABOUT 65A.01
APPLYING TO IT.
IF THE COURT --
>> SINCE YOU WON WELL THOUGH,
THERE WOULD BE NO REASON TO SAY
AND 65A.01 --
>> RIGHT, YEP.
>> IF WE LOOK AT THE WAY THE
COURT OF APPEALS DID THAT THE
WORD "LOSS" IS AMBIGUOUS, I
UNDERSTAND THAT YOU ARE MAKING
THAT ARGUMENT ALTERNATIVELY.
IS THAT RIGHT?
>> CORRECT.
IT IS THAT STATE FARM'S ATTEMPT
TO APPLY THIS TO AN APPRAISAL
AWARD.
THAT IS WHAT REALLY MAKES IT
AMBIGUOUS.
I THINK THE POLICY LANGUAGE IS
ACTUALLY CLEAR THAT APPLIES TO A
LAW SPECIFICALLY IN JUST THE
LOSS TERMS.
STATE FARM IS INTERPRETING IT A
DIFFERENT WAY SAYING THAT THIS
APPLIES TO A LOSS PAYMENT.
IT APPLIES TO A JUDGMENT.
AND APPLIES TO AN AWARD.
IT APPLIES TO ALL OF THESE
THINGS WHICH IT DOESN'T ACTUALLY
ENUMERATE.
AND SO, THEIR INTERPRETATION,
THEY ARE INTERPRETING IT ONE
WAY.
I'M INTERPRETING IT ANOTHER WAY
BUT THAT IS WHERE THE COURT OF
APPEALS GRABBED ON AND SAID, IS
EACH ONE ABSOLUTELY RIDICULOUS
OR IS THERE A PLAUSIBLE
INTERPRETATION OF THIS
PROVISION?
AT A DETERMINED THAT EACH ONE IS
POSSIBLE TO PREDICT AMBIGUOUS
BECAUSE IT COULD BE INTERPRETED
IN MULTIPLE WAYS.
FROM MY POSITION, HAVING
STATE FARM'S IS SO IMPLAUSIBLE
THAT IT IS ABSOLUTELY CLEAR.
STATE FARM PROBABLY THINKS THE
EXACT OPPOSITE.
THAT IS WHY IF BOTH ARE POSSIBLE
FROM INTERNS TO BE AMBIGUOUS.
I DON'T ARGUE THAT IT IS
AMBIGUOUS.
I SEE HOW IT GETS THERE.
>> THE ARGUMENT ABOUT 65A.01,
DID YOU MAKE THAT ARGUMENT TO
THE DISTRICT COURT?
>> YES.
AND THEN, BUT I DID WANT TO
TOUCH ON REAL QUICK --
>> JUST IN TERMS OF LC --
>> I'M NOT 100% SURE.
WHEN THAT'S FINE.
YOU ARE THE EXPERTS.
LANGUAGE ENTITLED TO PREJUDGMENT
INTEREST.
WHAT DO YOU DO WITH YOUR
OPPOSING COUNCIL'S ARGUMENT THAT
THAT CASE WAS INVOLVED IN A
SITUATION WHERE THEY BREACHED
THE OBLIGATION TO TO GO TO
APPRAISAL?
WHAT IN THE LANGUAGE OF 65A.01
ITSELF SAYS ANYONE IS ENTITLED
TO PREAWARD INTEREST?
>> CONTEMPLATES WITH INTEREST
THEREON AS PART OF THE LANGUAGE.
>> INTEREST THEREON THE LOSS
WHICH IS ASCERTAINED LOSS.
>> WELL, ELSIE APPLIED AT TWO
PREAWARD INTEREST.
>> WHAT YOU MAKE THE SETTING
ASIDE THE ACTUAL LANGUAGE OF THE
STATUTE THAT THERE WAS A
BREACH -- THAT WAS BECAUSE THERE
WAS A BREACH OF A CONTRACT AS
OPPOSED TO --
>> THERE IS A BREACH OF CONTRACT
OR THERE'S ALLEGE A BREACH OF
CONTRACT.
THIS IS WHERE I WAS GETTING OUT
EARLIER WITH THE REPUDIATION
PART.
JUST A MOMENT HERE.
WHEN STATE FARM SAYS THE HIGHEST
WE ARE GOING TO PAY U.S. 242,
THEY MIGHT NOT HAVE THE
ASCERTAINED AMOUNT THAT IT IS
EVENTUALLY $300,000.
IT IS AT THAT MOMENT WHEN THEY
BREACHED THE CONTRACT.
BECAUSE THEY ARE SAYING THIS IS
THE AMOUNT I'M GOING TO PAY YOU.
WESSER COULD HAVE GONE THAT DAY
AND MADE REPAIRS WHICH WAS HIS
CONTRACT ESTIMATE AND STATE FARM
WOULD NOT HAVE PAID IN THAT
PRAYER THEY WOULD'VE ACTUALLY
OWED HIM 330,000, BUT THAT IS
THE FACT FINDER QUESTION THAT WE
DON'T NECESSARILY KNOW THAT THEY
BREACHED IT AT THAT POINT.
THEY STILL BREACHED IT.
THAT IS THE SAME WITH SAYING,
EVEN IN BUSINESS BUYOUT
SITUATIONS, YOU MIGHT NOT KNOW
THE EXACT VALUE.
IF YOU HAVE A DISPUTE OVER THAT
VALUE, THEY STILL BREACHED IT AT
THAT POINT.
YOU DETERMINE THE VALUE WITH A
JURY TRIAL.
IT IS STILL AT THAT MOMENT WHERE
THEY SAY WE WILL NOT PAY YOU
MORE THAN $242,000 BECAUSE THAT
IS WHAT WE VALUED AT THAT.
THAT IS THE MOMENT THEY BREACHED
THEIR CONTRACT.
THEY HAVE A DUTY IN THE POLICY
TO ADJUST THE LOSS AND TO PAY
THE PROPER AMOUNT OF THE LOSS.
I BELIEVE THAT IS PART OF THE
BREACH.
WHEN THEY SAID, ELSIE
DECLINED --
>> CAN YOU POINT TO A CASE WHERE
WE HAVE SAID THAT?
>> NOT OFF THE TOP OF MY HEAD.
>> ARE THERE ANY PROCEEDINGS
OTHER THAN THIS ONE ARGUING
ABOUT PREAWARD INTEREST BETWEEN
THIS PROPERTY OWNER AND
STATE FARM ALLEGING THAT
STATE FARM HAS FAILED TO PAY
SOME AMOUNT THAT THEY OWE?
>> NO.
IN THIS CASE, RESOLVED AT
APPRAISAL.
APPRAISAL IS THE ALTERNATIVE
DISPUTE RESOLUTION MECHANISM FOR
THAT WAS INSTEAD OF COURT.
HAD APPRAISAL NOT EXISTED,
WESSER WOULD'VE SUED FOR BREACH
OF CONTRACT IN THAT AMOUNT.
THAT WILL QUESTION WE GO TO A
JURY.
THE JURY WOULD DETERMINE THAT
AMOUNT.
THIS MAKES IT A LITTLE BIT
DIFFERENT BECAUSE APPRAISAL IS
NOTHING FOR INSURANCE.
THAT IS WELL THAT IS PURE THERE
IS NO FORMAL LODGED TO GET TO AN
AWARD.
THERE IS NO FORMAL COMPLAINT
LODGED TO GET TO A VERDICT.
THAT IS WHY THAT ONE MAKES MORE
SENSE AND IT IS SO EASY TO
FIGURE THAT WENT OUT FOR THIS
ONE IS A LITTLE BIT DIFFERENT
FOR THERE IS NO FORMAL COMPLAINT
TO SAY I ALLEGE THAT YOU HAVE
DONE THE FOLLOWING.
AT SOME POINT, WESSER MAKES AN
APPRAISAL DEMAND THAT SAYS WE
FAILED TO AGREE ON THE AMOUNT OF
LOSS.
STATE FARM, YOU UNDERVALUE THE
LOSS FROM OUR POSITION WE NEED
MORE PAYMENT.
[INDISTINCT]
>> THAT IS KIND OF INCORRECT.
THE APPRAISAL AWARD SAID THAT
THE REPLACEMENT COST VALUE IS
$300,000.
IF AND WHEN WESSER MAKES
REPAIRS, THEY WOULD OWE UP TO
$300,000.
>> THAT'S WHY I'M ASKING THAT
QUESTION.
ARE THERE ANY OTHER ISSUES LEFT
WITH RESPECT TO PAYMENT IS TO
MARK WHEN I AM HEARING YOU SAY
IS, NO, NOTHING OTHER THAN THE
PREAWARD INTEREST BECAUSE THERE
HAS BEEN NO ADDITIONAL CLAIM
MADE FOR THE RECONSTRUCTION
COSTS.
RIGHT?
>> RIGHT, AT THIS TIME.
WESSER COULD STILL DO THAT.
HE COULD STILL COMPLETE REPAIRS
AND MAKE THAT CLAIM FOR THAT IS
THE WAY THESE TYPICALLY HAPPEN.
>> I UNDERSTAND THAT BUT AT THIS
POINT, THERE IS NO ALLEGATION
THAT STATE FARM HAS FAILED TO DO
ANYTHING OTHER THAN PAY THE
CLAIM THAT THIS IS PREAPPROVAL
INTEREST CLAIM.
>> THAT IS CORRECT AT THIS TIME
THROUGH THERE ALSO WAS THE
ALLEGATION THAT THEY UNDERVALUE
THE CLAIM FROM THE START WHERE
THAT GIRL RESOLVED BY THE
APPRAISAL AWARD.
NOW WE HAVE A SET VALUE PER
THERE WAS A DIFFERENT ALLEGATION
THAT THEY HAD REACHED THE POLICY
AT SOME POINT.
WHICH IS BY UNDERPAYING AND
UNDERVALUING THE CLAIM FROM THE
START.
THE APPRAISAL AWARD RESOLVED
THAT.
CURRENTLY, THE ONLY ISSUE LEFT
IS THE PREAWARD INTEREST.
>> THANK YOU, COUNSEL, YOUR TIME
HAS EXPIRED.
MR. WILLIAMS, YOU HAVE 7 MINUTES
FOR REBUTTAL.
>> IF I COULD ASK A QUESTION,
BECAUSE I WANT TO BE CLEAR FOR
THE RECORD.
IS IT ACCURATE THAT STATE FARM
PAID ABOVE WHAT THE ACTUAL --
THE CASH VALUE WAS BY 20 SOME
THOUSAND DOLLARS?
>> YES.
YES, IN THE APPRAISAL PANEL CAME
BACK WITH TWO DIFFERENT NUMBERS
IN THE ACTUAL CASH VALUE NUMBER
AND THE REPLACEMENT COST VALUE
NUMBER FOR THE ACTUAL CASH VALUE
NUMBER WAS LOWER THAN WHAT
STATE FARM HAD ADVANCED AND
PAID.
>> 242 VERSUS 220 SOMETHING.
>> MR. WILLIAMS BEFORE YOU GET
TO YOUR POINTS, FRANKLY, I'M
STILL CONFUSED ABOUT THE 65A.01
ARGUMENT.
WHAT I AM HEARING FROM
MR. REMICK IS THAT IF WE WERE TO
RULE IN YOUR FAVOR IN
STATE FARM'S FAVOR, WHICH WOULD
ESSENTIALLY BE A RULING SAYING
THAT PREAWARD INTEREST IS
PRECLUDED, THAT THAT IS A
VIOLATION OF 65A.01.
BECAUSE 65A.01 AT LEAST
IMPLICITLY ALLOWS PREAWARD
INTEREST.
AND SO, TELL ME AGAIN WHAT YOUR
POSITION IS WITH RESPECT TO THAT
IN TERMS OF HOW YOU THINK 65A.01
WORKS.
>> HERE IS HOW I THINK THEY ALL
FIT TOGETHER.
65A.01, THE EXACT TEXT IS "WITH
INTEREST THEREON FROM THAT TIME
WHEN THE LOSS SHALL BECOME
PAYABLE."
THAT IS IN THE TEXT FROM THE
LOSS SHALL BECOME PAYABLE.
WHEN YOU LOOK AT THE TEXT
ISSUING IN THE CONTRACT, YOU
HAVE TO DETERMINE WHEN THE LOSS
SHALL BE PAYABLE.
THAT FITS WITH THE STATUTORY
TEXT AND THAT THAT'S WHAT THE
POLICY CONTRACT.
IN THIS ANALYSIS, YOU THEN WENT
SAY, IT BECOMES PAYABLE ONCE YOU
HAVE AN APPRAISAL AWARD.
TO GO TO POEHLER WHERE THE COURT
CORRECTLY SAID AN INSURANCE
COMPANY CAN CONTRACT WITH ITS
INSURED ON THE ACCRUAL OF
INTEREST, THAT IS WHAT THAT NEXT
SENTENCE HERE ADDRESSES BEAR NO
INTEREST ACCRUES ON THE LOSS
UNTIL AFTER THE LOSS BECOMES
PAYABLE.
THEY ALL FIT TOGETHER FOR THE
POLICY CONTRACT BITS WITH 65A.01
65A.01'S LANGUAGE WHICH
SPECIFICALLY SAYS, INTEREST
THEREON FROM THAT TIME THE LOSS
SHALL BECOME PAYABLE.
IF THAT'S WITH POEHLER BECAUSE
POEHLER SAYS WITH INTEREST IN
THE ACCRUAL OF INTEREST CAN BE
SET BY THE POLICY CONTRACT.
THE LANGUAGE AT ISSUE HERE DOES
EXACTLY THAT.
IT SETS INTEREST ACCRUING AND
SAYS THAT NO INTEREST ACCRUES
UNTIL AFTER A LOSS BECOMES
PAYABLE.
>> THE ONLY EXCEPTION TO POEHLER
WOULD BE THE 65A.01.
YOU COULDN'T AVOID INTEREST AT
LEAST 60 DAYS AFTER THE LOSS
BECOMES PAYABLE.
THAT IS REQUIRED BY 65A.01.
ANY OTHER INTEREST UNDER YOUR
INTERPRETATION OF POEHLER CAN BE
EXCLUDED.
>> CORRECT IF YOU DON'T FILE THE
LOSS PAYABLE CLAUSE, INTEREST
ACCRUES.
>> ELSIE DOESN'T APPLY MORE
BROADLY THE LANGUAGE YOU ARE
OPPOSING COUNCIL -- WE DID SAY
IN ELSIE, YOU ARE ENTITLED
INSURERS UNDER 65A.01 ARE
ENTITLED TO PREJUDGMENT INTEREST
INTEREST.
>> I THINK WHAT IS HAPPENING AS
WE ARE MIXING SOME PARADIGMS.
WE ARE MIXING AN APPRAISAL
PARADIGM WITH A BREACH OF
CONTRACT PARADIGM.
I DON'T THINK THOSE TWO SHOULD
BE MIXED BECAUSE IN THIS
INSTANCE, THERE HAS BEEN NO
DETERMINATION THAT STATE FARM
BREACHED ANY CONTRACT.
>> WHAT YOU SAY TO THE ARGUMENT
THAT THEY BREACH THE CONTRACT BY
ADJUSTING AT A LOWER LEVEL LOWER
THAN WHAT THE APPRAISER
ULTIMATELY SAID?
>> I DISAGREE FOR THE SAME
REASON THAT MR. WESSER HERE --
THE IDEA WAS STATE FARM SAID
THIS IS ALL WE WILL PAY AND THAT
SAID AND THAT'S THE WAY IT GOES.
MR. WESSER SAID THIS IS WHAT MY
CLAIM IS.
IF YOU DON'T PAY IT AND WHAT WE
NOT RESOLVING THIS.
MR. WESSER WAS ALSO DUG IN AND
STATE FARM IS DUG IN AND THEY
WENT TO APPRAISAL TO HIS RESOLVE
THEIR DIFFERENCES.
TO SAY THAT STATE FARM BREACHED
ITS CONTRACT -- I WOULDN'T
SAY --
>> IS THERE ANY CASE LAW SAYING
THAT'S A BREACH OF CONTRACT?
>> NO, ABSOLUTELY NOT.
THE APPRAISAL PARADIGM EXISTS SO
THAT BOTH PARTIES CAN GO TO THIS
ALTERNATIVE DISPUTE RESOLUTION
PROCESS RATHER THAN GOING TO
COURT OVER THOSE ALLEGATIONS OF
A BREACH OF CONTRACT.
OPPOSING COUNCIL MENTIONS 65A.01
WHICH I THINK THAT IS THE
DIFFERENT PARADIGM.
THIS DOES NOT APPLY FOR
CIRCUMSTANCES WHERE YOU HAVE A
CLAIM THAT HAS BEEN CONFIRMED OR
RESOLVED BY APPRAISAL.
THAT IS BECAUSE THAT IS A
SEPARATE PARADIGM.
IF YOU ARE GOING DOWN THE
APPRAISAL PROCESS, THEN YOU GO
THROUGH THE APPRAISAL PROCESS.
IF YOU WANT TO SAY -- IF YOU
TRULY BELIEVE YOU HAVE BEEN
MISTREATED AND YOU HAVE A CLAIM
OF BAD FAITH AND THE INSURANCE
COMPANY IS ACTING
INAPPROPRIATELY, YOU CAN SUE
THAT OUT SEVERAL FROM THE
APPRAISAL PROCESS.
I THINK IT BECOMES PROBLEMATIC
WHEN YOU ARE MIXING THE TWO
PARADIGMS TO SAY, IF STATE FARM
IS FOUND TO HAVE TO PAY AN EXTRA
DOLLAR AT APPRAISAL, AND
BREACHED THE CONTRACT OR IF
STATE FARM AND HIT THE NUMBER ON
THE NOSE IT BREACHED THE
CONTRACT.
I WOULDN'T SAY THAT IS TRUE FOR
THE SAME REASON I WENT SAY THAT
MR. WESSER WAS INFLATING HIS
CLAIM BECAUSE HE WAS DUG IN AT A
HIGHER NUMBER.
THE PROCESS I THINK IN THIS CASE
WORKED AS IT SHOULD.
>> YOU SAY NO INTEREST MEANS NO
INTEREST EXCEPT BASICALLY ONCE
THE LOSS IS DETERMINED.
YOUR OPPONENT IS SAYING THAT
PROVISIONAL ONLY APPLIES ONCE
THE LOSS IS DETERMINED.
IT DOES NOT APPLY -- AND DOESN'T
TALK ABOUT PREAWARD INTEREST.
ONE ARGUMENT IS THAT THERE IS
ACTUALLY -- THE LANGUAGE IS
AMBIGUOUS BECAUSE THERE IS TOO
REASONABLE READINGS OF IT.
IN THAT CASE, DO WE APPLY THE
PRINCIPLE THAT IT HAS TO BE
CONSTRUED AGAINST YOU AND SO --
MR. WESSER WINS?
>> I THINK IF THERE REALLY WERE
AMBIGUITIES ARE UNREASONABLE
INTERPRETATIONS.
I HEARD COUNCIL SAY AT ONE POINT
WHEN YOU READ THE LANGUAGE, IT
IS CLEAR THAT STATE FARM IS
SAYING NO INTEREST.
>> WE MAY RESOLVE IT EITHER WAY.
IF WE DO FIND AMBIGUITY COME IS
THAT HOW THIS GETS RESOLVED?
WHAT ARGUMENT WOULD YOU MAKE IN
THAT SITUATION?
>> TO BE FAIR, I THINK THAT IS
WHEN POEHLER GETS OUT A LITTLE
BIT SAYING A STANDARD OF SAYING
THE LANGUAGE HAS TO BE CLEAR
BECAUSE THAT IS TRUE.
THE CASE LAW THAT EXISTS, THE
INSURANCE COMPANY HAS TO HAVE A
CLEAR POLICY.
IF IT'S NOT CLEAR, IT DOES GET
CONSTRUED AGAINST THE INSURANCE
COMPANY.
FOR THOSE REASONS, I THINK THIS
LANGUAGE IS CLEAR.
EVERYONE CAN READ IT AND SAY
THAT SCENES -- THEY CLEARLY SAYS
THAT NO INTEREST ACCRUES ON THE
LOSS UNTIL IT BECOMES PAYABLE
PER THERE WILL BE NO PREAWARD
INTEREST.
TALK ABOUT WHAT ELSE COULD HAVE
BEEN SAID.
I DON'T KNOW THAT THERE IS ANY
PERFECT ANSWER TO IT.
THE MORE YOU START TO INJECT --
>> THE OPPONENT'S ARGUMENT IS
THERE IS NO INTEREST ON THE
LOSS.
AND THERE'S NOT -- WHAT YOU SAY
ABOUT THAT?
>> THAT MIGHT BE FINE IF THAT'S
WHERE THE SENTENCE ENDED.
IF IT SAID NO INTEREST ACCRUES
ON THE LOSS.
MATT, BUT IT SAYS UNTIL AFTER
THE LOSS BECOMES PAYABLE.
YOU HAVE TO FIGURE OUT WINDOWS
THE LOSS BECOME PAYABLE?
IF IT BECOMES PAYABLE FIVE
BUSINESS DAYS --
>> YOU WOULD BE VIOLATING 65A.01
65A.01.
>> --
>> HE IS SAYING THERE IS NO LOSS
HERE.
>> THERE HAS TO BE A LOSS.
THAT IS WHY YOU GO TO APPRAISAL.
>> AS A PRACTICAL MATTER FROM AN
INSURANCE CARRIER STANDPOINT IN
TERMS OF THE WAY THE INSURANCE
CARRIER OPERATES, IF THERE IS NO
LOSS, THEN THERE IS NO
PREAWARD -- THERE IS NOTHING TO
CALCULATE A PREAWARD PAYMENT ON,
RIGHT?
THE DETERMINATION OF THE LOSS --
THE LOSS PAYABLE IS THE KEY
FACTOR IN DETERMINING WHAT
ULTIMATE PAYMENTS ARE OWED BY
STATE FARM OR ANY INSURANCE
CARRIER.
WE WENT EVEN AT THE BEGINNING OF
THE POLICY AS WE ADJUST LOSSES
WITH YOU, YOU HAVE TO HAVE THAT
THAT IS WHAT THE UNDERLYING
FOUNDATION OF THE POLICY
CONTRACT IS.
>> JUSTICE CHUTICH HAS A
QUESTION.
>> I WANTED TO ASK ONE MORE ON
THE PUBLIC POLICY OF IT.
CAN YOU RESPOND TO THE OPPOSING
COUNCIL SAID THAT COMPANIES IF
WE RULE IN YOUR FAVOR, INSURANCE
COMPANIES WILL HAVE AN INCENTIVE
TO UNDERVALUE THE CLAIMS.
I WANTED YOUR VIEW ON THAT.
WHEN I DISAGREE BECAUSE THERE
ARE SO MANY PRIVATE REMEDIES
AVAILABLE THAT ARE OUTSIDE THE
APPRAISAL PARADIGM THAT THERE IS
NO INCENTIVE TO UNDERVALUE
CLAIMS WHATSOEVER.
IF THE APPRAISAL PROCESS IS
MOVING EFFICIENTLY LIKE IT
SHOULD, THIS ALL SHOULD HAVE
TAKEN PLACE BETWEEN A MATTER OF
WEEKS OR MONTHS, NOT YEARS.
I DON'T BELIEVE THAT IT CREATES
ANY CONCERN IN THAT REGARD.
IF AN INSURANCE COMPANY IS DOING
THAT, IT CAN BE HELD
ACCOUNTABLE.
THAT IS WHAT IS IMPORTANT.
WE WANT THANK YOU DO BOTH
COUNCIL FOR THE HELP YOU HAVE
PROVIDED TO THE COURT IN THIS
CASE.
THIS MATTER IS SUBMITTED WE WILL
ISSUE AN OPINION AND DUE CORD.
WE ARE IN RECESS.