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Minnesota Legislature

Office of the Revisor of Statutes

HF 417

3rd Engrossment - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:37am

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 3rd Engrossment

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A bill for an act
relating to commerce; providing recovery of damages and attorney fees for
breach of an insurance policy; permitting a deceased professional's surviving
spouse to retain ownership of a professional firm that was solely owned by the
decedent for up to one year after the death; amending Minnesota Statutes 2008,
sections 319B.02, by adding a subdivision; 319B.07, subdivision 1; 319B.08;
319B.09, subdivision 1; 471.982, subdivision 3; proposing coding for new law
in Minnesota Statutes, chapter 60A.

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

Section 1.

new text begin [60A.0811] BREACH OF INSURANCE POLICY; RECOVERY OF
INTEREST.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin For purposes of this section:
new text end

new text begin (1) "insurance policy" means a commercial or professional insurance policy or
contract other than:
new text end

new text begin (i) a workers' compensation insurance policy or contract;
new text end

new text begin (ii) a health insurance policy or contract issued, executed, renewed, maintained, or
delivered in this state by a health carrier as defined in section 62A.011, subdivision 2;
new text end

new text begin (iii) a life insurance or disability insurance policy or contract; or
new text end

new text begin (iv) a policy or contract issued by a township mutual fire insurance company or
farmers mutual fire insurance company operating under chapter 65A or 67A;
new text end

new text begin (2) "insured" means any named insured, additional insured, or insured under an
insurance policy; and
new text end

new text begin (3) "insurer" means an insurer:
new text end

new text begin (i) incorporated or organized in this state; or
new text end

new text begin (ii) admitted, authorized, or licensed to do business or doing business in this state but
not incorporated or organized in this state. Insurer does not include the joint underwriting
association operating under chapter 62F or 62I; or a township mutual fire insurance
company or farmers mutual fire insurance company operating under chapter 65A or 67A.
new text end

new text begin Subd. 2. new text end

new text begin Interest. new text end

new text begin (a) An insured who prevails in any claim against an insurer based
on the insurer's breach or repudiation of, or failure to fulfill, a duty to provide services or
make payments is entitled to recover 10 percent per annum interest on monetary amounts
due under the insurance policy, calculated from the date the request for payment of those
benefits was made to the insurer.
new text end

new text begin (b) Punitive damages or damages for nonmonetary losses are not recoverable
under this section.
new text end

new text begin Subd. 3. new text end

new text begin Application. new text end

new text begin This section applies to a court action or arbitration
proceeding, including an action seeking declaratory judgment.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2009, and applies to a
cause of action existing on, or arising on or after that date.
new text end

Sec. 2.

Minnesota Statutes 2008, section 319B.02, is amended by adding a subdivision
to read:


new text begin Subd. 21a. new text end

new text begin Surviving spouse. new text end

new text begin "Surviving spouse" means a surviving spouse of a
deceased professional as an individual, as the personal representative of the estate of the
decedent, as the trustee of an inter vivos or testamentary trust created by the decedent, or
as the sole heir or beneficiary of an estate or trust of which the personal representative or
trustee is a bank or other institution that has trust powers.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to surviving spouses of professionals who die on or after that date.
new text end

Sec. 3.

Minnesota Statutes 2008, section 319B.07, subdivision 1, is amended to read:


Subdivision 1.

Ownership of interests restricted.

Ownership interests in a
professional firm may not be owned or held, either directly or indirectly, except by any of
the following:

(1) professionals who, with respect to at least one category of the pertinent
professional services, are licensed and not disqualified;

(2) general partnerships, other than limited liability partnerships, authorized to
furnish at least one category of the professional firm's pertinent professional services;

(3) other professional firms authorized to furnish at least one category of the
professional firm's pertinent professional services;

(4) a voting trust established with respect to some or all of the ownership interests
in the professional firm, if (i) the professional firm's generally applicable governing law
permits the establishment of voting trusts, and (ii) all the voting trustees and all the holders
of beneficial interests in the trust are professionals licensed to furnish at least one category
of the pertinent professional services; deleted text beginand
deleted text end

(5) an employee stock ownership plan as defined in section 4975(e)(7) of the
Internal Revenue Code of 1986, as amended, if (i) all the voting trustees of the plan are
professionals licensed to furnish at least one category of the pertinent professional services,
and (ii) the ownership interests are not directly issued to anyone other than professionals
licensed to furnish at least one category of the pertinent professional servicesnew text begin; and
new text end

new text begin (6) sole ownership by a surviving spouse of a deceased professional who was the
sole owner of the professional firm at the time of the professional's death, but only during
the period of time ending one year after the death of the professional
new text end.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to surviving spouses of professionals who die on or after that date.
new text end

Sec. 4.

Minnesota Statutes 2008, section 319B.08, is amended to read:


319B.08 EFFECT OF DEATH OR DISQUALIFICATION OF OWNER.

Subdivision 1.

Acquisition of interests or automatic loss of professional
firm status.

(a) If an owner dies or becomes disqualified to practice all the pertinent
professional services, then either:

(1) within 90 days after the death or the beginning of the disqualification, all of
that owner's ownership interest must be acquired by the professional firm, by persons
permitted by section 319B.07 to own the ownership interest, or by some combination; or

(2) at the end of the 90-day period, the firm's election under section 319B.03,
subdivision 2
, or 319B.04, subdivision 2, is automatically rescinded, the firm loses
its status as a professional firm, and the authority created by that election and status
terminates.

An acquisition satisfies clause (1) if all right and title to the deceased or disqualified
owner's interest are acquired before the end of the 90-day period, even if some or all of
the consideration is paid after the end of the 90-day period. However, payment cannot be
secured in any way that violates sections 319B.01 to 319B.12.

(b) If automatic rescission does occur under paragraph (a), the firm must immediately
and accordingly update its organizational document, certificate of authority, or statement
of foreign qualification. Even without that updating, however, the rescission, loss of
status, and termination of authority provided by paragraph (a) occur automatically at the
end of the 90-day period.

Subd. 2.

Terms of acquisition.

(a) If:

(1) an owner dies or becomes disqualified to practice all the pertinent professional
services;

(2) the professional firm has in effect a mechanism, valid according to the
professional firm's generally applicable governing law, to effect a purchase of the deceased
or disqualified owner's ownership interest so as to satisfy subdivision 1, paragraph (a),
clause (1); and

(3) the professional firm does not agree with the disqualified owner or the
representative of the deceased owner to set aside the mechanism,

then that mechanism applies.

(b) If:

(1) an owner dies or becomes disqualified to practice all the pertinent professional
services;

(2) the professional firm has in effect no mechanism as described in paragraph (a), or
has agreed as mentioned in paragraph (a), clause (3), to set aside that mechanism; and

(3) consistent with its generally applicable governing law, the professional firm
agrees with the disqualified owner or the representative of the deceased owner, before
the end of the 90-day period, to an arrangement to effect a purchase of the deceased
or disqualified owner's ownership interest so as to satisfy subdivision 1, paragraph (a),
clause (1),

then that arrangement applies.

(c) If:

(1) an owner of a Minnesota professional firm dies or becomes disqualified to
practice all the pertinent professional services;

(2) the Minnesota professional firm does not have in effect a mechanism as described
in paragraph (a);

(3) the Minnesota professional firm does not make an arrangement as described in
paragraph (b); and

(4) no provision or tenet of the Minnesota professional firm's generally applicable
governing law and no provision of any document or agreement authorized by the
Minnesota professional firm's generally applicable governing law expressly precludes an
acquisition under this paragraph,

then the firm may acquire the deceased or disqualified owner's ownership interest as
stated in this paragraph. To act under this paragraph, the Minnesota professional firm
must within 90 days after the death or beginning of the disqualification tender to the
representative of the deceased owner's estate or to the disqualified owner the fair value
of the owner's ownership interest, as determined by the Minnesota professional firm's
governance authority. That price must be at least the book value, as determined in
accordance with the Minnesota professional firm's regular method of accounting, as of the
end of the month immediately preceding the death or loss of license. The tender must be
unconditional and may not attempt to have the recipient waive any rights provided in this
section. If the Minnesota professional firm tenders a price under this paragraph within
the 90-day period, the deceased or disqualified owner's ownership interest immediately
transfers to the Minnesota professional firm regardless of any dispute as to the fairness
of the price. A disqualified owner or representative of the deceased owner's estate who
disputes the fairness of the tendered price may take the tendered price and bring suit
in district court seeking additional payment. The suit must be commenced within one
year after the payment is tendered. A Minnesota professional firm may agree with a
disqualified owner or the representative of a deceased owner's estate to delay all or part
of the payment due under this paragraph, but all right and title to the owner's ownership
interests must be acquired before the end of the 90-day period and payment may not be
secured in any way that violates sections 319B.01 to 319B.12.

Subd. 3.

Expiration of firm-issued option on death or disqualification of holder.

If the holder of an option issued under section 319B.07, subdivision 3, paragraph (a),
clause (1), dies or becomes disqualified, the option automatically expires.

new text begin Subd. 4. new text end

new text begin One-year period for surviving spouse of sole owner. new text end

new text begin For purposes
of this section, each mention of "90 days," "90-day period," or similar term shall be
interpreted as one year after the death of a professional who was the sole owner of the
professional firm if the surviving spouse of the deceased professional owns and controls
the firm after the death.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to surviving spouses of professionals who die on or after that date.
new text end

Sec. 5.

Minnesota Statutes 2008, section 319B.09, subdivision 1, is amended to read:


Subdivision 1.

Governance authority.

(a) Except as stated in paragraph (b), a
professional firm's governance authority must rest withnew text begin:
new text end

new text begin (1)new text end one or more professionals, each of whom is licensed to furnish at least one
category of the pertinent professional servicesnew text begin; or
new text end

new text begin (2) a surviving spouse of a deceased professional who was the sole owner of the
professional firm, while the surviving spouse owns and controls the firm, but only during
the period of time ending one year after the death of the professional
new text end.

(b) In a Minnesota professional firm organized under chapter 317A and in a foreign
professional firm organized under the nonprofit corporation statute of another state, at least
one individual possessing governance authority must be a professional licensed to furnish
at least one category of the pertinent professional services.

(c) Individuals who possess governance authority within a professional firm may
delegate administrative and operational matters to others. No decision entailing the
exercise of professional judgment may be delegated or assigned to anyone who is not a
professional licensed to practice the professional services involved in the decision.

(d) An individual whose license to practice any pertinent professional services is
revoked or suspended may not, during the time the revocation or suspension is in effect,
possess or exercise governance authority, hold a position with governance authority,
or take part in any decision or other action constituting an exercise of governance
authority. Nothing in this chapter prevents a board from further terminating, restricting,
limiting, qualifying, or imposing conditions on an individual's governance role as board
disciplinary action.

new text begin (e) A professional firm owned and controlled by a surviving spouse must comply
with all requirements of this chapter, except those clearly inapplicable to a firm owned
and governed by a surviving spouse who is not a professional of the same type as the
surviving spouse's decedent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to surviving spouses of professionals who die on or after that date.
new text end

Sec. 6.

Minnesota Statutes 2008, 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 deleted text beginsectiondeleted text endnew text begin sectionsnew text end 65B.48, subdivision 3new text begin, and 60A.0811new text end. 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.