1.1 	A bill for an act
1.2 	relating to insurance; regulating first party good faith insurance practices; 
1.3 	providing remedies;amending Minnesota Statutes 2006, section 471.982, 
1.4 	subdivision 3; proposing coding for new law in Minnesota Statutes, chapter 604.
1.5 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.6 	Section 1. Minnesota Statutes 2006, section 471.982, subdivision 3, is amended to read:
1.7 		Subd. 3.Exemptions. Self-insurance pools established and open for enrollment 
1.8 	on a statewide basis by the Minnesota League of Cities Insurance Trust, the Minnesota 
1.9 	School Boards Association Insurance Trust, the Minnesota Association of Townships 
1.10 	Insurance and Bond Trust, or the Minnesota Association of Counties Insurance Trust and 
1.11 	the political subdivisions that belong to them are exempt from the requirements of this 
1.12 	section and section sections65B.48, subdivision 3, and 604.18. In addition, the Minnesota 
1.13 	Association of Townships Insurance and Bond Trust and the townships that belong to it 
1.14 	are exempt from the requirement to hold the certificate of surety authorization issued by 
1.15 	the commissioner of commerce as provided in section 574.15.

1.16 	EFFECTIVE DATE. This section is effective August 1, 2008.

1.17 	Sec. 2. [604.18] FIRST PARTY GOOD FAITH INSURANCE PRACTICES.
1.18 		Subdivision 1.Definitions. (a) The definitions in this subdivision apply to this 
1.19 	section.
1.20 	(b) "Insurance policy" means an insurance policy or contract other than: (1) a 
1.21 	workers' compensation insurance policy or contract; (2) a health policy, contract, or 
1.22 	certificate issued, executed, renewed, maintained, or delivered in this state by a health 
1.23 	carrier as defined in section 62A.011, subdivision 2; (3) a policy issued by a township 
2.1 	mutual fire insurance company or a farmers mutual fire insurance company under the 
2.2 	authority in chapter 67A, or by an insurer reinsuring a policy issued by a township mutual 
2.3 	or farmers' mutual fire insurance company; or (4) a policy or contract under section 
2.4 	60A.06, subdivision 1, clause (4), or 64B.16, subdivision 1.
2.5 	(c) "Insured" means a person asserting a right to payment under the person's own 
2.6 	insurance policy arising out of the occurrence of the contingency or loss covered by the 
2.7 	policy or contract.
2.8 	(d) "Insurer" means an insurance company: (1) incorporated or organized in this 
2.9 	state; or (2) admitted to do business in this state but not incorporated or organized in 
2.10 	this state. The term does not include the joint underwriting association operating under 
2.11 	chapter 62F or 62I.
2.12 		Subd. 2.Good faith practices required. An insurer shall act in good faith in 
2.13 	connection with an insured's claim under an insurance policy. An insurer is acting in 
2.14 	good faith unless the insured can show:
2.15 	(1) the absence of a reasonable basis for denying the benefits of the insurance 
2.16 	policy; and
2.17 	(2) that the insurer knew of the lack of a reasonable basis for denying the benefits of 
2.18 	the insurance policy or acted in reckless disregard of the lack of a reasonable basis for 
2.19 	denying the benefits of the insurance policy.
2.20 		Subd. 3.Remedies; limitations. (a) An insurer violating subdivision 2 is liable 
2.21 	to the insured for costs and damages caused by the violation. The court may award the 
2.22 	insured reasonable attorney fees.
2.23 	(b) Any award of attorney fees must bear a reasonable relationship and be 
2.24 	proportional to the damages awarded and take into consideration the following factors: 
2.25 	the amount of time reasonably expended; a reasonable hourly rate; the outcome obtained; 
2.26 	the amount in dispute; and the nature and complexity of the matter.
2.27 	(c) Noneconomic damages are not recoverable under this section.
2.28 		Subd. 4.Insurance producers; liability limited. A licensed insurance producer 
2.29 	is not liable under this section for errors, acts, or omissions attributed to the insurer that 
2.30 	appointed the producer to transact business on its behalf, except to the extent the producer 
2.31 	has caused or contributed to the error, act, or omission.
2.32 		Subd. 5.Fire investigations. An insurer does not violate this section by conducting 
2.33 	or cooperating with a fire investigation to its completion.
2.34 		Subd. 6.Right to cure. (a) At least 60 days before bringing an action for a violation 
2.35 	of this section, the insured must give the insurer written notice of the alleged violation. The 
2.36 	notice must state with specificity the facts and circumstances giving rise to the violation.
3.1 	(b) An action may not be brought for a violation of this section if the notice required 
3.2 	under paragraph (a) is not given or if the benefits are paid or the circumstances giving rise 
3.3 	to the violation contained in the notice are corrected before the action is commenced.
3.4 		Subd. 7.Exception. This section does not apply to a claim arising out of a denial 
3.5 	of personal injury protection benefits if the matter was submitted to arbitration under 
3.6 	section 65B.525.

3.7 	EFFECTIVE DATE. This section is effective August 1, 2008, and applies to causes 
3.8 	of action for conduct occurring on or after that date.