Most Minnesota property-insurance disputes I see aren’t really about whether the policy covers the loss. They’re about a number. The carrier says the roof is worth $9,000 and the homeowner’s contractor says $41,000. Then the two sides spend a year litigating a disagreement the policy already sends somewhere other than a courtroom.
That isn’t the carrier’s idea. Minnesota writes the fire policy by statute: Minn. Stat. § 65A.01, subd. 3, sets out the “Minnesota standard fire insurance policy” word for word, and the appraisal clause is part of it. It’s been mandated since 1895. Quade v. Secura Ins., 814 N.W.2d 703, 707 (Minn. 2012).
The whole subject comes down to one line, and nearly every loss on it comes from blurring that line: appraisal binds the amount, and the statute goes out of its way to say the carrier waives no coverage defense by participating. Treat appraisal like a trial on the merits and you lose. Treat a causation dispute as off-limits to appraisal and you lose. Run the claim through appraisal without thinking about Minn. Stat. § 604.18 and you may win the number and give up the statutory bad-faith remedy. I’ve watched all three mistakes get made, and every one of them was made with total confidence.
The clause itself
Subdivision 3 doesn’t describe a policy. It is the policy — the words a Minnesota fire policy has to contain. Here’s the appraisal paragraph:
In case the insured and this company, except in case of total loss on buildings, shall fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of such demand. In case either fails to select an appraiser within the time provided, then a presiding judge of the district court of the county wherein the loss occurs may appoint such appraiser for such party upon application of the other party in writing by giving five days’ notice thereof in writing to the party failing to appoint. The appraisers shall first select a competent and disinterested umpire; and failing for 15 days to agree upon such umpire, then a presiding judge of the above mentioned court may appoint such an umpire upon application of party in writing by giving five days’ notice thereof in writing to the other party. The appraisers shall then appraise the loss, stating separately actual value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual value and loss. Each appraiser shall be paid by the selecting party, or the party for whom selected, and the expense of the appraisal and umpire shall be paid by the parties equally.
Minn. Stat. § 65A.01, subd. 3. Five features do the practical work:
- The trigger is narrow — failure to agree “as to the actual cash value or the amount of loss.” Not liability, not exclusions, not the meaning of a policy term.
- Either side may demand it. It isn’t a policyholder tool the carrier can decline, or the reverse.
- Twenty days. A party who doesn’t name an appraiser within 20 days of the written demand can have one appointed for it by a district judge, on five days’ written notice.
- Both appraisers must be “competent and disinterested.” A public adjuster paid a percentage of the award, or the contractor who bid the job, is where that fight starts.
- Any two signatures decide it — two appraisers, or one appraiser and the umpire. The umpire doesn’t rehear the case; the appraisers “submit their differences, only,” to the umpire.
The award also has to itemize, “stating separately actual value and loss to each item” — and that requirement matters more than it looks. I’ll come back to why.
Does the statutory clause apply to a homeowner’s policy, or only to fire?
This is the question people most often skip right past. Modern homeowner’s and farmowner’s policies are multi-peril packages, and subdivision 1 lets them depart from the prescribed wording on a condition narrower than people remember. A package policy covering fire and other perils “may be issued without incorporating the exact language of the Minnesota standard fire insurance policy,” provided it “shall, with respect to the peril of fire, afford the insured all the rights and benefits of the Minnesota standard fire insurance policy and such additional benefits as the policy provides,” that the mortgagee provisions are incorporated without change, that the policy “is complete as to its terms of coverage,” and that the commissioner is satisfied it complies. Minn. Stat. § 65A.01, subd. 1.
The statutory floor runs to the peril of fire. For a wind or water loss under a package policy, the appraisal clause being enforced is the one the carrier wrote, and its mechanics may differ from the statute’s. Read the policy. Don’t assume the twenty days.
Hail gets its own statute, with its own numbers. Minn. Stat. § 65A.26 requires every hail policy to contain prescribed language, and it’s not the § 65A.01 language:
In case of loss under this policy, and failure of the parties to agree as to the amount of the loss, it is mutually agreed that, on written demand of either party, the company and the insured each shall select a competent appraiser and notify the other of the appraiser selected within ten days of the demand.
The same prescribed clause then gives the appraisers ten days to agree on an umpire before a judge of a court of record selects one, and it closes: “The written award of a majority of these referees is final and conclusive upon the parties as to amount of loss, and this selection, unless waived by the parties, is a condition precedent to any right of action to recover for a loss. No suit for the recovery of any claim by virtue of this policy may be sustained unless commenced within one year after the loss occurred.” Minn. Stat. § 65A.26.
| Fire — § 65A.01, subd. 3 | Hail — § 65A.26 | |
|---|---|---|
| Appraiser named within | 20 days of the written demand | 10 days of the demand |
| Party’s appraiser must be | “competent and disinterested” | “a competent appraiser” |
| Umpire deadlock period | 15 days, then a presiding district judge may appoint | 10 days, then a judge of a court of record selects |
| Effect of the award | “shall determine the amount of actual value and loss” | “final and conclusive upon the parties as to amount of loss” |
| Condition precedent to suit | not stated in the prescribed clause | stated expressly, “unless waived by the parties” |
| Suit limitation in the prescribed text | two years after inception of the loss | one year after the loss occurred |
Two statutes, two sets of numbers, one claim file. Mix up the ten-day hail deadline and the twenty-day fire deadline, and that’s the kind of error that ends a claim.
An appraiser can’t decide coverage — but can decide causation
Most policyholders learn the second half after the award.
In Quade v. Secura Insurance, a windstorm damaged farm buildings. The carrier paid some items and denied the roofs as deterioration, invoking a maintenance exclusion. The insureds sued instead of going to appraisal, arguing that you can’t run a coverage denial through an amount-of-loss clause. The Minnesota Supreme Court reversed and sent the case to appraisal, holding that “the phrase ‘amount of loss,’ as it relates to the authority of the appraiser under the policy, unambiguously permits the appraiser to determine the cause of the loss.” 814 N.W.2d 703, 704 (Minn. 2012).
Then the Court drew the boundary, and both halves matter:
We generally agree that appraisers have authority to decide the “amount of loss” but may not construe the policy or decide whether the insurer should pay.
Id. at 706.
Coverage questions, such as whether damage is excluded because it was not caused by wind, are legal questions for the court as this case goes forward. The Quades are incorrect that appraisers can never allocate damages between covered and excluded perils.
Id. at 707. An appraisal award, the Court added, “does not preclude the insurer from subsequently having its liability on the policy judicially determined,” id. (quoting Itasca Paper Co. v. Niagara Fire Ins. Co., 175 Minn. 73, 79, 220 N.W. 425, 427 (1928)), and “to the extent that determination goes beyond the scope of appraisal and interprets policy exclusions, that determination is reviewable by the district court,” id. at 708.
What that means in practice is procedural. Quade holds that “appraisal is a process that is generally intended to take place before suit is filed” and that “[a]ppraisal is generally understood to be a condition precedent to suit.” Id. at 708. File a first-party property suit while an unanswered appraisal demand sits on the desk, and it shows up with a dismissal motion attached.
Here’s where itemization earns its keep. An award that separates storm damage from pre-existing condition line by line gives a court something to work with on the coverage question later. A lump-sum award leaves the policyholder arguing about what the appraisers meant. When I sit in an appraisal, the itemization is the thing I’m there to protect.
The award fixes the number. The carrier keeps everything else.
The statute answers the second half in a sentence people skip. It’s in the same subdivision that mandates appraisal:
No provision, stipulation or forfeiture shall be held to be waived by any requirements or proceeding on the part of this company relating to appraisal or to any examination provided for herein.
Minn. Stat. § 65A.01, subd. 3. That’s the whole design in one line. Demanding an appraisal and sitting through one waives no coverage defense, no late-notice defense, no misrepresentation defense, and not the examination-under-oath condition — the statute’s non-waiver sentence reaches “any requirements or proceeding on the part of this company relating to appraisal.” The award fixes the number. Everything else survives.
The “examination provided for herein” is the examination under oath, and Minnesota’s prescribed text carries a warning many states’ don’t: the insured submits to examination “after being informed of the right to counsel and that any answers may be used against the insured in later civil or criminal proceedings.” Id. If a fire loss has any arson or overstatement undertone, I wouldn’t let anyone walk into that unrepresented.
Three other prescribed periods run alongside appraisal in the same subdivision. A signed, sworn statement of loss “shall within 60 days be rendered to the company.” Payment is due “60 days after proof of loss, as herein provided, is received by this company and ascertainment of the loss is made either by agreement between the insured and this company expressed in writing or by the filing with this company of an award as herein provided.” And no suit “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.” Id. Two years from inception of the loss. Not from the denial, and not from the award.
The carrier also holds an option that surprises homeowners who’ve already signed with a contractor: it may elect “to take all of the property at the agreed or appraised value, and also to repair, rebuild or replace the property destroyed or damaged with other of like kind and quality within a reasonable time, on giving notice of its intention so to do within 30 days after the receipt of the proof of loss herein required.” Id.
Why is a total loss on a building different?
Because there’s nothing to appraise. The appraisal trigger applies “except in case of total loss on buildings.” Minn. Stat. § 65A.01, subd. 3.
Minnesota fixes that number by statute instead. Subdivision 5 forbids any contrary policy term: “No provision shall be attached to or included in such policy limiting the amount to be paid in case of total loss on buildings by fire, lightning or other hazard to less than the amount of insurance on the same.” Minn. Stat. § 65A.01, subd. 5. Section 65A.08, subd. 2(a), states the same rule as an affirmative obligation — absent a risk-increasing change made without the insurer’s consent, on which the insurer carries the burden of proof, and absent intentional fraud by the insured, “the insurer shall pay the whole amount mentioned in the policy or renewal upon which it receives a premium, in case of total loss, and in case of partial loss, the full amount thereof.”
So a total loss on a building means the amount is the face amount, and appraisal isn’t the forum. A partial loss means the amount is contested, and appraisal is the forum. Which one a fire produced is sometimes the fight itself — and that’s a fight about the statute, not about an estimate. One carrier gets carved out. On a Minnesota FAIR plan policy issued under § 65A.36, the FAIR plan may contest the whole amount on a total loss, but it must prove a lesser value “by clear and convincing evidence” and refund the premium attributable to the difference if it pays less. Minn. Stat. § 65A.08, subd. 2(b).
Does going to appraisal cost you the bad-faith claim?
I ask this before any demand goes out. In my experience almost nobody else does.
Minnesota’s first-party bad-faith remedy is Minn. Stat. § 604.18, and it’s a taxable-costs statute, not a tort — I cover that structure separately in Minnesota never created a bad faith tort. Here’s subdivision 4(c):
An award of taxable costs under this section is not available in any claim that is resolved or confirmed by arbitration or appraisal.
Minn. Stat. § 604.18, subd. 4(c). The remedy in subdivision 3(a) is measured against a litigated record — one-half of the proceeds awarded in excess of an amount offered by the insurer at least ten days before trial, or $250,000, whichever is less, plus reasonable attorney fees actually incurred to establish the violation, which “must not exceed $100,000” — and subdivision 4(b) requires the award to be determined by the court “in a proceeding subsequent to any determination by a fact finder of the amount an insured is entitled to under the insurance policy.” Resolve the claim by appraisal and you’ve taken away the fact-finder determination the statute is built around.
That doesn’t make appraisal the wrong choice. Usually it’s the right one: it’s faster, it’s cheaper, and you don’t need a jury to follow a roofing scope. But it’s a choice with a price. An insured facing a genuinely indefensible denial — not a low estimate — should pick the track on purpose, not find out the answer after the award is filed.
And appraisal answers only that one question while the other clocks keep running. Where a construction defect sits in the causal chain, the ten-year construction repose statute governs whether a claim against the builder ever accrues. Where the loss exposes a condition the seller knew about, the seller-disclosure statutes put the seller’s knowledge at issue. And where a carrier denies coverage outright and leaves its insured exposed to a third party, the Miller v. Shugart stipulated judgment is what ends up on the table. That’s a very different situation from an argument about an amount.
Madgett Law, LLC
Madgett Law, LLC represents Minnesota property owners in first-party insurance disputes — fire, wind, hail, and water losses — including appraisal demands and appraiser selection, examinations under oath, proof-of-loss and suit-limitation deadlines, coverage denials, and litigation after an award. I also advise on the sequencing question this article raises: whether a claim belongs in appraisal at all, and what invoking it does to the remedies that are left. If you’re facing a denial or a number you can’t reconcile, call 612-470-6529 or send us a message.
Sources: Minn. Stat. § 65A.01, subd. 1 (conformity requirement; a multi-peril policy must afford standard-policy rights “with respect to the peril of fire”); subd. 3 (prescribed policy text — appraisal paragraph, 20-day appraiser selection, 15-day umpire deadlock, itemized award of “any two,” equal division of umpire expense, the “except in case of total loss on buildings” carve-out; the non-waiver sentence as to appraisal and examination; examination under oath with the right-to-counsel advisory; 60-day sworn proof of loss; payment 60 days after proof of loss and ascertainment; 30-day repair/rebuild/replace election; two-year suit limitation running from inception of the loss); subd. 5 (no policy provision may limit the amount paid on a total loss of buildings to less than the amount of insurance). Minn. Stat. § 65A.08, subd. 2(a) (insurer shall pay the whole amount mentioned in the policy on total loss and the full amount on partial loss), subd. 2(b) (Minnesota FAIR plan exception; clear-and-convincing burden; premium refund). Minn. Stat. § 65A.26 (prescribed hail appraisal clause — 10-day appraiser selection, 10-day umpire deadlock, award “final and conclusive … as to amount of loss,” condition precedent to any right of action, one-year suit limitation). Minn. Stat. § 604.18, subd. 3(a) (taxable-costs measure and the $250,000 and $100,000 caps), subd. 4(b) (court determines the award after the fact finder’s determination), subd. 4(c) (taxable costs unavailable in a claim resolved or confirmed by arbitration or appraisal). Quade v. Secura Insurance, 814 N.W.2d 703 (Minn. 2012) (No. A10-0714) — at 704 (holding that “amount of loss” permits the appraiser to determine the cause of the loss), at 706 (appraisers decide amount but “may not construe the policy or decide whether the insurer should pay”), at 707 (coverage questions are legal questions for the court; appraisers may allocate between covered and excluded perils; an award does not preclude judicial determination of liability, quoting Itasca Paper Co. v. Niagara Fire Ins. Co., 175 Minn. 73, 220 N.W. 425 (1928); appraisal mandated in Minnesota fire policies since 1895), at 708 (appraisal generally precedes suit and is generally understood to be a condition precedent to suit; determinations interpreting exclusions are reviewable by the district court).
This article is general legal information about Minnesota law. It is not legal advice, it does not address any particular claim or policy, and reading it does not create an attorney–client relationship with Madgett Law, LLC. No outcome is promised or implied.