1.1 	A bill for an act
1.2 	relating to commerce; regulating certain warranties; clarifying the legislature's 
1.3 	intent that housing warranties and insurance contract obligations remain 
1.4 	unaffected by corporate dissolution; prohibiting certain bad faith insurance 
1.5 	practices; providing remedies;amending Minnesota Statutes 2004, sections 
1.6 	60A.08, subdivision 6; 302A.781, by adding a subdivision; 322B.863, by adding 
1.7 	a subdivision; 327A.02, by adding a subdivision; 327A.05; proposing coding for 
1.8 	new law in Minnesota Statutes, chapter 604.
1.9 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.10 	Section 1. Minnesota Statutes 2004, section 60A.08, subdivision 6, is amended to read:
1.11 		Subd. 6.Bankruptcy or, insolvency, or dissolution clause. Every bond or 
1.12 	policy of insurance issued in this state insuring against either actual loss suffered by the 
1.13 	insured, and imposed by law for damages on account of personal injury, death, or injury 
1.14 	to property caused by accident, or legal liability imposed upon the insured by reason of 
1.15 	such injuries or death, shall, notwithstanding anything in the policy to the contrary, be 
1.16 	deemed to contain the following condition:
1.17 	The bankruptcy or, insolvency, or dissolution of the insured shall not relieve the 
1.18 	insurer of any of its obligations under this policy, and in case an execution against the 
1.19 	insured on a final judgment is returned unsatisfied, then such judgment creditor shall have 
1.20 	a right of action on this policy against the company to the same extent that the insured 
1.21 	would have, had the insured paid the final judgment.

1.22 	Sec. 2. Minnesota Statutes 2004, section 302A.781, is amended by adding a 
1.23 	subdivision to read:
2.1 		Subd. 4.Statutory homeowner warranty claims preserved. The statutory 
2.2 	warranties provided under section 327A.02 are not affected by a dissolution under this 
2.3 	chapter.

2.4 	Sec. 3. Minnesota Statutes 2004, section 322B.863, is amended by adding a 
2.5 	subdivision to read:
2.6 		Subd. 4.Statutory homeowner warranty claims preserved. The statutory 
2.7 	warranties provided under section 327A.02 are not affected by a dissolution under this 
2.8 	chapter.

2.9 	Sec. 4. Minnesota Statutes 2004, section 327A.02, is amended by adding a subdivision 
2.10 	to read:
2.11 		Subd. 2a.Remedies unaffected by corporate dissolution. The statutory 
2.12 	warranties provided in this section are not affected by the dissolution of a vendor or home 
2.13 	improvement contractor that is a corporation or limited liability company.

2.14 	Sec. 5. Minnesota Statutes 2004, section 327A.05, is amended to read:
2.15 	327A.05 REMEDIES.
2.16 		Subdivision 1.New home warranties. Upon breach of any warranty imposed by 
2.17 	section  327A.02, subdivision 1, the vendee shall have a cause of action against the vendor 
2.18 	for damages arising out of the breach, or for specific performance. If the vendee is the 
2.19 	prevailing party, the vendee may also be awarded the vendee's costs, disbursements, and 
2.20 	reasonable attorney fees. Damages shall be limited to: 
2.21 	(a) (1)  the amount necessary to remedy the defect or breach; or
2.22 	(b) (2)  the difference between the value of the dwelling without the defect and 
2.23 	the value of the dwelling with the defect.
2.24 		Subd. 2.Home improvement warranty. Upon breach of any warranty imposed by 
2.25 	section  327A.02, subdivision 3, the owner shall have a cause of action against the home 
2.26 	improvement contractor for damages arising out of the breach, or for specific performance. 
2.27 	If the owner is the prevailing party, the owner may also be awarded the owner's costs, 
2.28 	disbursements, and reasonable attorney fees. Damages shall be limited to the amount 
2.29 	necessary to remedy the defect or breach. 

2.30 	EFFECTIVE DATE. This section is effective the day following final enactment 
2.31 	and applies to causes of action pending on or commenced on or after that date.

3.1 	Sec. 6. [604.17] BAD FAITH INSURANCE PRACTICES.
3.2 		Subdivision 1.Prohibited conduct. (a) An insurer shall not act in bad faith in 
3.3 	connection with any matter involving a claim under an insurance policy.
3.4 	(b) Insurer bad faith includes insurer delay or denial of benefits offered or paid 
3.5 	without an objectively reasonable basis for its offer, delay, or denial. An insurer also 
3.6 	acts in bad faith if the insurer engages in any fraud, false pretense, false promise, 
3.7 	misrepresentation, misleading statement, or deceptive practice that others rely on in 
3.8 	connection with any matter involving a claim under an insurance policy.
3.9 	(c) For purposes of this section:
3.10 	(1) "insurance policy" means an insurance policy or contract issued, executed, 
3.11 	renewed, maintained, or delivered in this state, other than a workers' compensation 
3.12 	insurance policy or contract; and
3.13 	(2) "insurer" means an individual, corporation, association, partnership, or other legal 
3.14 	entity that issues, executes, renews, maintains, or delivers an insurance policy in this state.
3.15 		Subd. 2.Penalties and remedies. A person violating subdivision 1 is acting against 
3.16 	the public interest and is liable for costs, damages, and reasonable attorney fees.

3.17 	EFFECTIVE DATE. This section is effective August 1, 2006, and applies to causes 
3.18 	of action commenced on or after that date.

3.19 	Sec. 7. EFFECTIVE DATE.
 3.20 	Sections 1 to 4 are effective the day following final enactment and apply to actions 
3.21 	pending on or commenced on or after that date, provided that the action is brought within 
3.22 	the time limitation in Minnesota Statutes, section 541.051, subdivision 4.