SF 2822

1st Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to insurance; regulating first party good faith insurance practices;
providing remedies; amending Minnesota Statutes 2006, section 471.982,
subdivision 3; proposing coding for new law in Minnesota Statutes, chapter 604.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2006, section 471.982, subdivision 3, is amended to read:

Subd. 3.

Exemptions.

Self-insurance pools established and open for enrollment
on a statewide basis by the Minnesota League of Cities Insurance Trust, the Minnesota
School Boards Association Insurance Trust, the Minnesota Association of Townships
Insurance and Bond Trust, or the Minnesota Association of Counties Insurance Trust and
the political subdivisions that belong to them are exempt from the requirements of this
section and deleted text begin section deleted text end new text begin sections new text end 65B.48, subdivision 3 new text begin , and 604.18 new text end . In addition, the Minnesota
Association of Townships Insurance and Bond Trust and the townships that belong to it
are exempt from the requirement to hold the certificate of surety authorization issued by
the commissioner of commerce as provided in section 574.15.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2008.
new text end

Sec. 2.

new text begin [604.18] FIRST PARTY GOOD FAITH INSURANCE PRACTICES.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) The definitions in this subdivision apply to this
section.
new text end

new text begin (b) "Insurance policy" means an insurance policy or contract other than: (1) a
workers' compensation insurance policy or contract; (2) a health policy, contract, or
certificate issued, executed, renewed, maintained, or delivered in this state by a health
carrier as defined in section 62A.011, subdivision 2; (3) a policy issued by a township
mutual fire insurance company or a farmers mutual fire insurance company under the
authority in chapter 67A, or by an insurer reinsuring a policy issued by a township mutual
or farmers' mutual fire insurance company; or (4) a policy or contract under section
60A.06, subdivision 1, clause (4), or 64B.16, subdivision 1.
new text end

new text begin (c) "Insured" means a person asserting a right to payment under the person's own
insurance policy arising out of the occurrence of the contingency or loss covered by the
policy or contract.
new text end

new text begin (d) "Insurer" means an insurance company: (1) incorporated or organized in this
state; or (2) admitted to do business in this state but not incorporated or organized in
this state. The term does not include the joint underwriting association operating under
chapter 62F or 62I.
new text end

new text begin Subd. 2. new text end

new text begin Good faith practices required. new text end

new text begin An insurer shall act in good faith in
connection with an insured's claim under an insurance policy. An insurer is acting in
good faith unless the insured can show the absence of a reasonable basis for denying the
benefits of the insurance policy and that the insurer knew of the lack of a reasonable basis
for denying the benefits of the insurance policy or acted in reckless disregard of the lack of
a reasonable basis for denying the benefits of the insurance policy.
new text end

new text begin Subd. 3. new text end

new text begin Remedies; limitations. new text end

new text begin (a) An insurer violating subdivision 2 is liable
to the insured for costs and damages caused by the violation. The court may award the
insured reasonable attorney fees.
new text end

new text begin (b) Any award of attorney fees must bear a reasonable relationship and be
proportional to the damages awarded and take into consideration the following factors:
the amount of time reasonably expended; a reasonable hourly rate; the outcome obtained;
the amount in dispute; and the nature and complexity of the matter.
new text end

new text begin (c) Noneconomic damages are not recoverable under this section.
new text end

new text begin Subd. 4. new text end

new text begin Insurance producers; liability limited. new text end

new text begin A licensed insurance producer
is not liable under this section for errors, acts, or omissions attributed to the insurer that
appointed the producer to transact business on its behalf, except to the extent the producer
has caused or contributed to the error, act, or omission.
new text end

new text begin Subd. 5. new text end

new text begin Fire investigations. new text end

new text begin An insurer does not violate this section by conducting
or cooperating with a fire investigation to its completion.
new text end

new text begin Subd. 6. new text end

new text begin Right to cure. new text end

new text begin (a) At least 60 days before bringing an action for a violation
of this section, the insured must give the insurer written notice of the alleged violation. The
notice must state with specificity the facts and circumstances giving rise to the violation.
new text end

new text begin (b) An action may not be brought for a violation of this section if the notice required
under paragraph (a) is not given or if the benefits are paid or the circumstances giving rise
to the violation contained in the notice are corrected before the action is commenced.
new text end

new text begin Subd. 7. new text end

new text begin Exception. new text end

new text begin This section does not apply to a claim arising out of a denial
of personal injury protection benefits if the matter was submitted to arbitration under
section 65B.525.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2008, and applies to causes
of action for conduct occurring on or after that date.
new text end