1.1 	A bill for an act
1.2 	relating to insurance; providing for penalties and attorney fees for certain 
1.3 	insurance claims practices;proposing coding for new law in Minnesota Statutes, 
1.4 	chapter 604.
1.5 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.6 	Section 1. [604.18] INSURANCE STANDARD OF CONDUCT.
1.7 		Subdivision 1.Terms. For purposes of this section, the following terms have the 
1.8 	meanings given them.
1.9 	(a) "Insured" means a person who, or an entity which, qualifies as an insured under 
1.10 	the terms of an insurance policy on which a claim for coverage is made. An insured does 
1.11 	not include any person who, or entity which, has received any assignment of rights under 
1.12 	an insurance policy, and does not include any person or entity claiming a third-party 
1.13 	beneficiary status under an insurance policy.
1.14 	(b) "Insurer" means every insurer, corporation, business trust, or association engaged 
1.15 	in insurance as principal licensed to transact insurance under section 60A.06, but for 
1.16 	purposes of this section an insurer does not include a political subdivision providing 
1.17 	self-insurance or establishing a pool under section 471.981, subdivision 3.
1.18 	(c) "Insurance policy" means a written agreement between an insured and an insurer, 
1.19 	which obligates an insurer to pay proceeds directly to the insured. Insurance policy 
1.20 	does not include provisions of a written agreement, which obligate an insurer to defend 
1.21 	the insured, reimburse an insured's defense expenses, provide for any other type of 
1.22 	defense obligation, or provide for indemnification for judgments or settlements. Insurance 
1.23 	policy also does not include any written agreement providing workers' compensation 
1.24 	insurance under chapter 176, any written agreement of a health carrier, as defined in 
2.1 	section 62A.011, or any written agreement authorized under section 60A.06, subdivision 
2.2 	1, clauses (4) and (6).
2.3 		Subd. 2.Liability. (a) The court may award as taxable costs to an insured amounts 
2.4 	as provided in subdivision 3 if the insured can show:
2.5 	(1) the absence of a reasonable basis for denying the benefits of the insurance 
2.6 	policy; and
2.7 	(2) that the insurer knew of the lack of a reasonable basis for denying the benefits of 
2.8 	the insurance policy or acted in reckless disregard of the lack of a reasonable basis for 
2.9 	denying the benefits of the insurance policy.
2.10 	(b) The insured is not entitled to taxable costs under this section if it is determined:
2.11 	(1) the insurer did not breach the insurance policy; or
2.12 	(2) the insured is not entitled to proceeds under the insurance policy in an amount 
2.13 	that is in excess of an amount offered by the insurer.
2.14 	(c) A violation of this section shall not be the basis for any claim or award under 
2.15 	chapter 325D or 325F.
2.16 	(d) A disagreement between an insurer and an insured as to the value or amount of 
2.17 	proceeds owed to an insured or an arson investigation or a fraud investigation does not 
2.18 	violate this section.
2.19 		Subd. 3.Remedies. (a) An insured may be awarded either or both of the following 
2.20 	amounts by the court as taxable costs for an insurer's violation of subdivision 2:
2.21 	(1) an amount not exceeding the lesser of:
2.22 	(i) one-half of the proceeds awarded, which are in excess of an amount offered by 
2.23 	the insurer; or
2.24 	(ii) $100,000; and
2.25 	(2) reasonable attorney fees actually incurred to establish the insurer's violation 
2.26 	of this section. Attorney fees shall only be awarded if the fees sought are separately 
2.27 	accounted for by the insured's attorney, are not duplicative of the fees the insured's attorney 
2.28 	otherwise expends in pursuit of proceeds to an insured under an insurance policy and 
2.29 	which is in excess of an amount offered by the insurer, and shall not exceed the lesser of:
2.30 	(i) one-half of the disputed amount of the proceeds sought from the insurer; or
2.31 	(ii) $40,000.
2.32 	(b) An award under this section precludes the insured's right to an award under 
2.33 	sections 357.25; 549.02; 549.04; and 549.09, and under Minnesota Rules of Civil 
2.34 	Procedure, rule 68. An insured's request to the court for an award under sections 357.25; 
2.35 	549.02; 549.04; and 549.09, or Minnesota Rules of Civil Procedure, rule 68, shall preclude 
2.36 	the insured from an award under this section.
3.1 	(c) An insured is not entitled to recover punitive or exemplary damages, or attorney 
3.2 	fees under section 8.31, because of any violation of this section.
3.3 		Subd. 4.Claim for taxable costs. (a) Upon commencement of a civil action by 
3.4 	an insured against an insurer, the complaint must not seek a recovery under this section. 
3.5 	After filing the suit, a party may make a motion to amend the pleadings to claim recovery 
3.6 	of taxable costs under this section. The motion must allege the applicable legal basis 
3.7 	under this section for awarding taxable costs under this section, and must be accompanied 
3.8 	by one or more affidavits showing the factual basis for the motion. The motion may be 
3.9 	opposed by the submission of one or more affidavits showing there is no factual basis 
3.10 	for the motion. At the hearing, if the court finds prima facie evidence in support of the 
3.11 	motion, the court may grant the moving party permission to amend the pleadings to claim 
3.12 	taxable costs under this section.
3.13 	(b) An award of taxable costs under this section shall be determined by the court in a 
3.14 	proceeding subsequent to any determination as to whether the insured is entitled to any 
3.15 	proceeds under the insurance policy, and shall be governed by the procedures set forth in 
3.16 	Minnesota Rules of General Practice, rule 119.
3.17 	(c) An award of taxable costs under this section is not available in any claim that 
3.18 	is subject to any statutory or contractual arbitration, appraisal, or any alternative dispute 
3.19 	resolution proceeding.
3.20 	(d) The following are not admissible in any proceeding that seeks taxable costs 
3.21 	under this section:
3.22 	(1) findings or determinations made in arbitration proceedings conducted under 
3.23 	section 65B.525 or any administrative rules promulgated thereunder;
3.24 	(2) allegations involving, or results of, investigations, examinations, or 
3.25 	administrative proceedings conducted by the Department of Commerce;
3.26 	(3) administrative bulletins or other informal guidance published or disseminated by 
3.27 	the Department of Commerce; and
3.28 	(4) provisions under chapters 59A to 79A and all rules promulgated thereunder 
3.29 	are not admissible as standards of conduct.
3.30 	(e) Nothing in this section shall prohibit an insurer from asserting the defenses 
3.31 	of waiver, collateral or other estoppel, res judicata, or any other valid defense pursued 
3.32 	under the section.

3.33 	Sec. 2. EFFECTIVE DATE.
 3.34 	Section 1 is effective August 1, 2008, and applies to causes of action for conduct, 
3.35 	which occurs on or after that date.