HF 1350

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:48am

A bill for an act
relating to insurance; amending the fair claims processing act as it applies to
certain automobile insurance claims; providing certain rights for third-party
claimants in insurance settlement of claims; amending Minnesota Statutes 2008,
section 72A.201, subdivision 6.

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

Section 1.

Minnesota Statutes 2008, section 72A.201, subdivision 6, is amended to
read:

Subd. 6.

Standards for automobile insurance claims handling, settlement offers,
and agreements.

new text begin (a) This subdivision applies to automobile insurance claims made
by insureds, claimants, or both, as those terms are defined in subdivision 3, depending
upon whether the claim is a first-party claim by an insured against the insured's own
insurer, or a third-party liability or other claim by a claimant against an insured, which the
insured has submitted to the insured's insurer. A person making a nonliability claim for
basic economic loss benefits, as defined in section 65B.43, subdivision 10, from a plan
of reparation security under which the person is not an insured, is considered a claimant
for purposes of this subdivision. Where a provision of this subdivision uses the phrase
"insured or claimant," it means the insured in the case of a first-party claim and means the
claimant in the case of a third-party claim.
new text end

new text begin (b) In connection with any settlement or offer of settlement made to:
new text end

new text begin (1) an insured under this subdivision, the insurer must provide the insured with a
written explanation of the basis for the amount of the settlement or offer of settlement; and
new text end

new text begin (2) a claimant under this subdivision, the insurer must provide the claimant with a
written explanation of the basis for the amount of the settlement or offer of settlement.
This does not limit the right of the insurer to also provide the written explanation, or any
other information, to the insurer's insured.
new text end

new text begin (c) new text end In addition to the acts specified in subdivisions 4, 5, 7, 8, and 9, the following
acts by an insurer, adjuster, or a self-insured or self-insurance administrator constitute
unfair settlement practices:

(1) if an automobile insurance policy provides for the adjustment and settlement of
an automobile total loss on the basis of actual cash value or replacement with like kind
and quality and the insured new text begin or claimant, whichever is appropriate under paragraph (a), new text end is
not an automobile dealer, failing to offer one of the following methods of settlement:

deleted text begin (a) deleted text end new text begin (i) new text end comparable and available replacement automobile, with all applicable taxes,
license fees, at least pro rata for the unexpired term of the replaced automobile's license,
and other fees incident to the transfer or evidence of ownership of the automobile paid, at
no cost to the insured new text begin or claimant, whichever is appropriate under paragraph (a), new text end other
than the deductible amount as provided in the policy;

deleted text begin (b) deleted text end new text begin (ii) new text end a cash settlement based upon the actual cost of purchase of a comparable
automobile, including all applicable taxes, license fees, at least pro rata for the unexpired
term of the replaced automobile's license, and other fees incident to transfer of evidence
of ownership, less the deductible amount as provided in the policy. The costs must be
determined by:

deleted text begin (i) deleted text end new text begin (A) new text end the cost of a comparable automobile, adjusted for mileage, condition, and
options, in the local market area of the insured new text begin or claimant, whichever is appropriate under
paragraph (a) new text end , if such an automobile is available in that area; or

deleted text begin (ii) deleted text end new text begin (B) new text end one of two or more quotations obtained from two or more qualified sources
located within the local market area when a comparable automobile is not available in the
local market area. The insured new text begin or claimant, whichever is appropriate under paragraph (a), new text end
shall be provided the information contained in all quotations prior to settlement; or

deleted text begin (iii) deleted text end new text begin (C) new text end any settlement or offer of settlement which deviates from the procedure
above must be documented and justified in detail. The basis for the settlement or offer
of settlement must be explained to the insured new text begin or claimant, whichever is appropriate
under paragraph (a) new text end ;

(2) if an automobile insurance policy provides for the adjustment and settlement
of an automobile partial loss on the basis of repair or replacement with like kind and
quality and the insured is not an automobile dealer, failing to offer one of the following
methods of settlement:

deleted text begin (a) deleted text end new text begin (i) new text end to assume all costs, including reasonable towing costs, for the satisfactory
repair of the motor vehicle. Satisfactory repair includes repair of both obvious and hidden
damage as caused by the claim incident. This assumption of cost may be reduced by
applicable policy provision; or

deleted text begin (b) deleted text end new text begin (ii) new text end to offer a cash settlement sufficient to pay for satisfactory repair of the
vehicle. Satisfactory repair includes repair of obvious and hidden damage caused by the
claim incident, and includes reasonable towing costs;

(3) regardless of whether the loss was total or partial, in the event that a damaged
vehicle of an insured new text begin or claimant, whichever is appropriate under paragraph (a), new text end cannot be
safely driven, failing to exercise the right to inspect automobile damage prior to repair
within five business days following receipt of notification of claim. In other cases the
inspection must be made in 15 days;

(4) regardless of whether the loss was total or partial, requiring unreasonable travel
of a claimant or insured new text begin , whichever is appropriate under paragraph (a), new text end to inspect a
replacement automobile, to obtain a repair estimate, to allow an insurer to inspect a repair
estimate, to allow an insurer to inspect repairs made pursuant to policy requirements, or
to have the automobile repaired;

(5) regardless of whether the loss was total or partial, if loss of use coverage
exists under the insurance policy, failing to notify an insured at the time of the insurer's
acknowledgment of claim, or sooner if inquiry is made, of the fact of the coverage,
including the policy terms and conditions affecting the coverage and the manner in which
the insured can apply for this coverage;

(6) regardless of whether the loss was total or partial, failing to include the insured's
deductible in the insurer's demands under its subrogation rights. Subrogation recovery
must be shared at least on a proportionate basis with the insured, unless the deductible
amount has been otherwise recovered by the insured, except that when an insurer is
recovering directly from an uninsured third party by means of installments, the insured
must receive the full deductible share as soon as that amount is collected and before any
part of the total recovery is applied to any other use. No deduction for expenses may be
made from the deductible recovery unless an attorney is retained to collect the recovery, in
which case deduction may be made only for a pro rata share of the cost of retaining the
attorney. An insured is not bound by any settlement of its insurer's subrogation claim with
respect to the deductible amount, unless the insured receives, as a result of the subrogation
settlement, the full amount of the deductible. Recovery by the insurer and receipt by the
insured of less than all of the insured's deductible amount does not affect the insured's
rights to recover any unreimbursed portion of the deductible from parties liable for the loss;

(7) requiring as a condition of payment of a claim that repairs to any damaged
vehicle must be made by a particular contractor or repair shop or that parts, other than
window glass, must be replaced with parts other than original equipment parts or engaging
in any act or practice of intimidation, coercion, threat, incentive, or inducement for or
against an insured to use a particular contractor or repair shop. Consumer benefits included
within preferred vendor programs must not be considered an incentive or inducement. At
the time a claim is reported, the insurer must provide the following advisory to the insured
or claimant new text begin , whichever is appropriate under paragraph (a) new text end :

"You have the legal right to choose a repair shop to fix your vehicle. Your policy
will cover the reasonable costs of repairing your vehicle to its pre-accident condition no
matter where you have repairs made. Have you selected a repair shop or would you
like a referral?"

After an insured new text begin or claimant, whichever is appropriate under paragraph (a), new text end has
indicated that the insured new text begin or claimant new text end has selected a repair shop, the insurer must cease all
efforts to influence the insured's or claimant's choice of repair shop;

(8) where liability is reasonably clear, failing to inform the claimant in an automobile
property damage liability claim that the claimant may have a claim for loss of use of
the vehicle;

(9) failing to make a good faith assignment of comparative negligence percentages
in ascertaining the issue of liability;

(10) failing to pay any interest required by statute on overdue payment for an
automobile personal injury protection claim;

(11) if an automobile insurance policy contains either or both of the time limitation
provisions as permitted by section 65B.55, subdivisions 1 and 2, failing to notify the
insured in writing of those limitations at least 60 days prior to the expiration of that time
limitation;

(12) if an insurer chooses to have an insured new text begin or claimant, whichever is appropriate
under paragraph (a), new text end examined as permitted by section 65B.56, subdivision 1, failing to
notify the insured new text begin or claimant new text end of all of the insured's new text begin or claimant's new text end rights and obligations
under that statute, including the right to request, in writing, and to receive a copy of the
report of the examination;

(13) failing to provide, to an insured new text begin or claimant, whichever is appropriate under
paragraph (a), new text end who has submitted a claim for benefits described in section 65B.44, a
complete copy of the insurer's claim file on the insured new text begin or claimant new text end , excluding internal
company memoranda, all materials that relate to any insurance fraud investigation,
materials that constitute attorney work-product or that qualify for the attorney-client
privilege, and medical reviews that are subject to section 145.64, within ten business days
of receiving a written request from the insured new text begin or claimant new text end . The insurer may charge the
insured new text begin or claimant new text end a reasonable copying fee. This clause supersedes any inconsistent
provisions of sections 72A.49 to 72A.505;

(14) if an automobile policy provides for the adjustment or settlement of an
automobile loss due to damaged window glass, failing to provide payment to the insured's new text begin
or claimant's, whichever is appropriate under paragraph (a), new text end chosen vendor based on a
competitive price that is fair and reasonable within the local industry at large.

Where facts establish that a different rate in a specific geographic area actually served
by the vendor is required by that market, that geographic area must be considered. This
clause does not prohibit an insurer from recommending a vendor to the insured new text begin or
claimant, whichever is appropriate under paragraph (a), new text end or from agreeing with a vendor
to perform work at an agreed-upon price, provided, however, that before recommending
a vendor, the insurer shall offer its insured new text begin or claimant, whichever is appropriate under
paragraph (a), new text end the opportunity to choose the vendor. If the insurer recommends a vendor,
the insurer must also provide the following advisory:

"Minnesota law gives you the right to go to any glass vendor you choose, and
prohibits me from pressuring you to choose a particular vendor.";

(15) requiring that the repair or replacement of motor vehicle glass and related
products and services be made in a particular place or shop or by a particular entity, or by
otherwise limiting the ability of the insured new text begin or claimant, whichever is appropriate under
paragraph (a), new text end to select the place, shop, or entity to repair or replace the motor vehicle
glass and related products and services; or

(16) engaging in any act or practice of intimidation, coercion, threat, incentive,
or inducement for or against an insured new text begin or claimant, whichever is appropriate under
paragraph (a), new text end to use a particular company or location to provide the motor vehicle glass
repair or replacement services or products. For purposes of this section, a warranty shall
not be considered an inducement or incentive.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2009, and applies to claims
submitted on or after that date.
new text end