HF 3115

as introduced - 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 section sections 65B.48, subdivision 3, and 604.18. 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.

EFFECTIVE DATE.

This section is effective August 1, 2008.

Sec. 2.

[604.18] FIRST PARTY GOOD FAITH INSURANCE PRACTICES.

Subdivision 1.

Required conduct.

(a) An insurer shall act in good faith in
connection with an insured's claim under an insurance policy.

(b) 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
the insurer's reckless disregard of the lack of a reasonable basis for denying the benefits
of the insurance policy.

(c) For purposes of this section:

(1) "insurance policy" means an insurance policy or contract other than: (i) a
workers' compensation insurance policy or contract; (ii) 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; or (iii) a policy issued by a township
mutual fire insurance company or a farmers mutual fire insurance company under the
authority in chapter 67A; and

(2) "insurer" means an insurance company: (i) incorporated or organized in this
state; or (ii) 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.

Subd. 2.

Remedies; limitations.

(a) A person violating subdivision 1 is liable to the
insured for costs, damages, and reasonable attorney fees.

(b) An award of attorney fees must bear a reasonable relationship and be proportional
to the compensation awarded and take into consideration the following factors: the
amount of time reasonably expended, a reasonable hourly rate, the outcome obtained, and
the nature and complexity of the matter.

(c) Noneconomic damages caused solely by the violation of the good faith obligation
of subdivision 1, paragraph (b), are not recoverable under this section.

Subd. 3.

Insurance producers; liability limited.

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.

Subd. 4.

Fire investigations.

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

Subd. 5.

Right to cure.

(a) As a condition precedent to bringing an action for
violation of this section, the insurer must have been given 60 days' written notice of
the violation.

(b) The notice shall state with specificity the facts and circumstances giving rise to
the violation.

(c) No action shall lie if, within 60 days after notice is given under paragraph (a),
the benefits are paid or circumstances giving rise to the violation contained in the notice
are corrected.

Subd. 6.

Evidence limitations.

Determinations made in an arbitration pursuant
to section 65B.525 and standards of conduct set forth under chapter 72A must not be
considered as evidence in any action commenced under this section.

EFFECTIVE DATE.

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