Preverdict Interest Under Minn. Stat. § 549.09: Settlement Offers Do Not Excuse the Two‑Year Commencement Rule; Interest Runs on the Net Judgment Excluding Collateral Sources

Introduction

In Lee Michael Scheurer v. Douglas Shrewsbury, as Special Administrator for the Estate of Ann Maland (24 N.W.3d 670, Minn. Aug. 13, 2025), the Minnesota Supreme Court addressed two recurring and consequential questions about preverdict interest under Minnesota Statutes section 549.09, subdivision 1(b) (2024).

First, the Court resolved when preverdict interest begins to accrue if a plaintiff serves a written notice of claim but does not commence suit within two years, and later either party serves a written offer of settlement. Second, the Court determined whether preverdict interest is calculated on the gross jury verdict or on the net judgment after collateral source reductions under Minn. Stat. § 548.251.

The Court held that:

Serving a written offer of settlement does not negate section 549.09’s two-year commencement requirement; if an action is not commenced within two years of a written notice of claim, interest accrues only from the commencement of the action (the “accrual issue”).
Preverdict interest for the prevailing party is calculated on the judgment, not the jury verdict; therefore, collateral source payments are deducted before calculating interest (the “calculation issue”).

The decision affirms in part and reverses in part the court of appeals, reinstating the district court’s $53,320 preverdict interest award.

Background and Procedural History

The case arises from a January 2017 automobile collision in which negligence was admitted. Appellant Lee Scheurer served a written notice of claim on September 27, 2017, and later made a Rule 68 total-obligation offer of $250,000 on July 14, 2022; the defense countered with a $25,000 Rule 68 offer in July 2023. Scheurer did not commence suit until November 28, 2020—more than three years after serving the notice of claim. After the defendant’s death, respondent Douglas Shrewsbury was appointed as special administrator for the estate.

Following a 2023 jury trial limited to damages, the jury awarded $292,340: $165,984 for past medical expenses; $51,356 for past wage loss; and $75,000 for past pain, disability, and emotional distress. Applying Minn. Stat. § 548.251, the district court reduced past medical expenses to $88,275 and past wage loss to $31,356, leaving the $75,000 non-economic award intact, for a net judgment of $194,631 after collateral source reductions. Neither party challenged the amount of the reductions.

On the accrual issue, the district court held that because the action was not commenced within two years of the notice of claim, interest began at commencement (Nov. 28, 2020). On the calculation issue, the court computed interest on the net judgment (after collateral source reductions), awarding $53,320 in preverdict interest at the rate in Minn. Stat. § 549.09, subd. 1(c)(2).

The court of appeals affirmed on accrual but reversed on calculation, directing interest to be computed on the gross jury verdict. The Supreme Court granted review on both issues, affirming the accrual ruling and reversing on calculation.

Summary of the Opinion

Accrual: The two-year commencement requirement in section 549.09, subd. 1(b)—“[t]he action must be commenced within two years of a written notice of claim for interest to begin to accrue from the time of the notice of claim”—applies even when a party serves a written offer of settlement. Because Scheurer did not commence his action within two years of his 2017 notice of claim, interest began accruing only upon commencement in November 2020.
Calculation: The phrase “interest on any judgment or award” in the offer–counteroffer provision of section 549.09, subd. 1(b) is interpreted to mean interest on the judgment (in jury cases) or on the arbitration award (in arbitration). For jury trials, that judgment is the amount after collateral source deductions. The Court held that interest does not run on sums the plaintiff already received from collateral sources prior to verdict.
Disposition: Affirmed in part, reversed in part; the district court’s preverdict interest determination ($53,320 on the net judgment from the date of commencement) was reinstated.

Detailed Analysis

I. The Accrual Issue: Settlement Offers Do Not Override the Two‑Year Rule

The key statutory text appears in section 549.09, subd. 1(b), which sets the start date for accruing preverdict interest as the earlier of “the time of the commencement of the action … or the time of a written notice of claim,” but expressly qualifies that “for interest to begin to accrue from the time of the notice of claim, [t]he action must be commenced within two years of a written notice of claim.”

Scheurer argued that once either party serves a written offer of settlement, the offer–counteroffer provision in the same subdivision supersedes the two-year commencement requirement. The Supreme Court rejected that contention, holding the statute unambiguously maintains the two-year condition for notice-based accrual, regardless of any settlement offers.

The Court parsed the offer–counteroffer provision and emphasized it affects two things only:

the base on which interest is computed (judgment or the amount of the settlement offer, depending on whose offer is “closer”), and
the end date of interest (through verdict/award/report, or through the time the settlement offer was made).

Critically, the offer–counteroffer text repeats the same potential start dates—commencement or written notice of claim—but does not alter the prerequisite for notice-based accrual. Reading the subdivision as a whole (State v. Riggs, 865 N.W.2d 679, 683 (Minn. 2015)), the two-year commencement condition governs the start date throughout, including in the settlement-offer context.

Because Scheurer filed more than two years after his 2017 notice of claim, interest began at commencement in 2020. The Court did not need to reach the Estate’s alternative argument that the notice of claim, addressed to the insurer, was insufficient to trigger notice-based accrual.

II. The Calculation Issue: Interest Runs on the Net Judgment, Not the Gross Jury Verdict

The second question was whether “interest on any judgment or award” means interest on the gross jury verdict (before offsets) or on the net judgment after collateral source reductions under Minn. Stat. § 548.251. The Court held the latter.

A. Ambiguity of “Award”

The term “award” is undefined. Both Black’s Law Dictionary and Merriam‑Webster recognize “award” can refer to a final decision by either an arbitrator or a jury assessing damages. Because both readings were plausible, the term was ambiguous in this context.

B. Statutory History and Legislative Purpose

Turning to legislative history and purpose (Minn. Stat. § 645.16), the Court emphasized the 1991 amendments that added references to “awards” and “arbitrators” across section 549.09. Contemporary legislative statements explained that the change was meant to include arbitration within the prejudgment interest regime—a gap viewed as an oversight when the pre‑1988 statute focused on court judgments. The Court therefore read “award” as directed to arbitration awards.

The Court also returned to the fundamental purpose of preverdict interest: it is an element of damages intended to provide full, not more-than-full, compensation by converting time-of-demand damages into time-of-verdict damages (Lienhard v. State, 431 N.W.2d 861, 865 (Minn. 1988); Else v. Auto‑Owners Ins., 980 N.W.2d 319, 325 (Minn. 2022)). Awarding interest on dollars already paid to the plaintiff by collateral sources before verdict would overcompensate, contrary to the statute’s compensatory (not punitive) character and its express bar on interest for noncompensatory amounts (Minn. Stat. § 549.09, subd. 1(b)).

Consequently, in jury cases, “interest on any … judgment” means interest on the final money judgment after the collateral source hearing and mandated reductions under Minn. Stat. § 548.251. In arbitration, by contrast, “award” refers to the arbitrator’s award.

C. Harmonizing the Offer–Counteroffer Provision

The decision also harmonizes the “closer offer” mechanism with the base and timing rules:

If the prevailing party’s offer is closer to the judgment/award than the opponent’s, the prevailing party receives interest on the judgment or award from the proper start date through verdict/award/report.
If the losing party’s offer is closer, the prevailing party receives interest only on the lesser of the offer amount or the judgment/award, from the proper start date through the date the settlement offer was made.

Under either scenario in a jury case, the “judgment” is the post‑offset figure, not the gross jury verdict.

Precedents and Authorities Cited

Hodder v. Goodyear Tire & Rubber Co., 426 N.W.2d 826, 839 (Minn. 1988): Recognized and described the “offer–counteroffer” mechanism within section 549.09; frames how settlement offers affect interest entitlement and timing.
Lienhard v. State, 431 N.W.2d 861, 865 (Minn. 1988): Characterizes preverdict interest as an element of compensatory damages—converting time-of-demand to time-of-verdict damages.
Else v. Auto‑Owners Ins., 980 N.W.2d 319, 325 (Minn. 2022): Reaffirms the compensatory purpose of preverdict interest and its limitations.
Poehler v. Cincinnati Ins. Co., 899 N.W.2d 135, 139–42 (Minn. 2017): Confirms standard statutory-interpretation methodology and, in the insurance context, addresses pre‑award interest; notes that an appraisal demand triggered pre‑award interest where not disputed.
State v. Riggs, 865 N.W.2d 679, 683 (Minn. 2015): Emphasizes harmonizing statutory provisions when reading a statute as a whole.
State v. Serbus, 957 N.W.2d 84, 89 (Minn. 2021): Approves use of legislative purpose and consequences to resolve statutory ambiguity.
State v. Beganovic, 991 N.W.2d 638, 643 (Minn. 2023), and In re Estate of Ecklund, 20 N.W.3d 351, 354–55 (Minn. 2025): Articulate the plain-meaning approach and the threshold for finding ambiguity.
Welscher v. Myhre, 42 N.W.2d 311, 313 (Minn. 1950), and Mankato Citizens Tel. Co. v. Commissioner of Taxation, 145 N.W.2d 313, 318–20 (Minn. 1966): Approve using prior law to elucidate meaning when revised language is of doubtful import.
State v. Hanson, 543 N.W.2d 84, 89 (Minn. 1996): Gives weight to bill sponsors’ statements on statutory purpose.
Minn. Stat. § 549.09, subd. 1(b), (c)(2) (2024): Governs preverdict interest accrual and rate.
Minn. Stat. § 548.251 (2024): Collateral source statute requiring post-verdict reductions of certain economic losses.
Minn. R. Civ. P. 68: Total‑obligation offer practice; integrated with section 549.09’s offer‑counteroffer framework.

Legal Reasoning

Textual and Structural Analysis

The Court began with the statutory text, identifying the general accrual rule and its express two-year qualification for notice-based accrual. The offer–counteroffer provision repeats the same alternative start dates but is silent on how to select among them. By contrast, it explicitly controls the principal (judgment or the settlement-offer amount) and the stop date (verdict/award/report or the date the settlement offer was made). Applying whole‑statute harmonization, the Court held that the initial start‑date choice remains governed by the two-year commencement requirement.

Legislative History

Legislative materials from the 1991 amendments convinced the Court that “award” was introduced to ensure arbitration was treated comparably to court judgments for interest purposes. The history shows no intent to define “award” as a jury verdict; “judgment” already covered the judicial side of the house. This reinforced reading “award” as arbitration-specific.

Purpose and Consequences

The compensatory purpose of preverdict interest would be undermined by charging interest on sums already paid. If interest were computed on the gross verdict inclusive of amounts satisfied by collateral sources long before trial, plaintiffs would receive a windfall—interest on money already in hand—contrary to the statute’s remedial aim and its prohibition on interest for noncompensatory damages.

Application to the Case

Accrual: Scheurer served his notice of claim in September 2017 and commenced suit in November 2020—a gap exceeding two years. Accordingly, interest could not relate back to the notice; it began at commencement.
Calculation: Because this case was tried to a jury, interest is computed on the “judgment,” which, by operation of Minn. Stat. § 548.251, is determined after collateral source deductions. The district court therefore correctly used $194,631 as the principal and awarded $53,320 in interest.

Impact and Practical Implications

For Plaintiffs

Docket the two-year “interest-preservation” deadline. If you want interest to run from the notice of claim, you must commence the action within two years of that notice—regardless of any later settlement offers.
Expect interest to be calculated on the net judgment after collateral source reductions in jury cases. Offers, trial strategy, and interest expectations should be calibrated to the net, not the gross verdict.
Consider timing and documentation of special damages. Although the statute allows accrual from the time special damages are incurred, the two-year commencement rule still governs whether accrual can predate filing.

For Defendants and Insurers

Settlement offers remain powerful. The “closer offer” rule can limit the period of interest or confine the principal to the offer amount. But it does not expand the accrual start date beyond what the two-year rule permits.
Collateral source hearings are pivotal. Reductions under section 548.251 not only lower the payable judgment but also reduce the base on which interest is calculated.
Expect less exposure to “interest on interest.” This decision curtails windfalls by eliminating interest on amounts already paid by collateral sources.

For Arbitration Cases

“Award” means arbitration award. In arbitrations, interest is computed on the award per section 549.09, with start and stop dates governed by the statute and the offer–counteroffer mechanism if invoked.
Contract terms matter. As Poehler indicates in the appraisal context, parties’ contracts may alter or preclude pre‑award interest; absent explicit preclusion, statutory or common‑law pre‑award interest may apply.

Litigation Strategy and Settlement Dynamics

Front‑load case evaluation with a net‑recovery lens. Because interest is computed on the net judgment, offers should be benchmarked against anticipated post‑offset outcomes.
Mind the stop dates. Under the offer–counteroffer scheme, interest may end at the offer date or continue through verdict/award/report depending on whose offer is “closer.”
Coordinate with collateral source stakeholders. Subrogation claims and reimbursements can affect collateral source reductions and thus the interest base.

Complex Concepts Simplified

Preverdict Interest: Interest awarded for the period before verdict to compensate a plaintiff for the time value of money owed. It is part of compensatory damages, not a penalty.
Two‑Year Commencement Requirement: If a plaintiff wants interest to run from the date of a written notice of claim, the lawsuit must be commenced within two years of that notice; otherwise, interest starts at filing.
Offer–Counteroffer Provision: If either party serves a written settlement offer, interest is awarded using a “closer offer” test. The prevailing party’s entitlement and the accrual end date depend on which offer is closer to the final judgment or award.
Judgment vs. Award: In jury cases, “judgment” is the amount entered by the court after post‑verdict adjustments (including collateral source reductions). In arbitration, “award” is the arbitrator’s decision.
Collateral Sources: Payments a plaintiff received from sources like health or auto insurance. After a verdict, the court generally reduces certain economic damages by collateral sources under Minn. Stat. § 548.251.
Rule 68 Total‑Obligation Offer: A Minnesota procedure allowing a party to make a settlement offer that includes all recoverable costs and pre‑offer interest; its interaction with section 549.09 affects the amount and timing of interest.

Open Questions and Boundaries

Notice Sufficiency: The Court did not decide whether a notice of claim addressed to an insurer (rather than the defendant) is sufficient to trigger notice-based accrual; that issue remains open.
Scope of “Any Judgment” in Mixed Damage Cases: The decision aligns interest with the net judgment, which can include both economic and non‑economic components when the offer–counteroffer provision applies. Parties should still be attentive to the statute’s express limits on noncompensatory damages.
Special Damages Timing: The statute allows accrual “as to special damages from when the special damages were incurred.” The two‑year commencement rule still governs whether accrual can predate filing, and litigants should build records documenting when special damages were incurred.

Conclusion

The Minnesota Supreme Court’s decision in Scheurer v. Shrewsbury provides definitive guidance on two front‑line questions under Minn. Stat. § 549.09, subd. 1(b). First, the two‑year commencement requirement for notice‑based accrual is not displaced when a party serves a written offer of settlement. Interest will relate back to a written notice of claim only if the plaintiff files suit within two years of that notice; otherwise, it accrues from commencement. Second, in jury cases, preverdict interest runs on the net judgment after collateral source reductions, not on the gross jury verdict. In arbitration, “award” refers to the arbitrator’s award.

These holdings promote the statute’s compensatory purpose—ensuring plaintiffs are made whole without overcompensation—while preserving the settlement‑incentive structure of the offer–counteroffer provision. Practically, plaintiffs must vigilantly track the two-year filing window to preserve the most favorable accrual start date, and all parties should calibrate offers and trial strategies to the net judgment after mandatory collateral source offsets.