Minnesota Legislature
SF 2822
1st Unofficial Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am
KEY: stricken = removed, old language.
underscored = added, new language.
1.2relating to insurance; providing for penalties and attorney fees for certain
1.3insurance claims practices;proposing coding for new law in Minnesota Statutes,
1.4chapter 604.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. [604.18] INSURANCE STANDARD OF CONDUCT.
1.7 Subdivision 1. Definitions. (a) For purposes of this section, the terms defined in this
1.8subdivision have the meanings given them.
1.9 (b) "Insurance policy" means a written agreement between an insured and an insurer,
1.10which obligates an insurer to pay proceeds directly to the insured. Insurance policy does
1.11not include provisions of a liability insurance policy obligating an insurer to defend the
1.12insured, reimburse an insured's defense expenses, provide for any other type of defense
1.13obligation, or provide indemnification for judgments or settlements. Insurance policy also
1.14does not include coverage for workers' compensation insurance under chapter 176; a
1.15written agreement of a health carrier, as defined in section 62A.011; a contract issued by a
1.16nonprofit health service plan corporation regulated under chapter 62C that provides only
1.17dental coverage; or a written agreement authorized under section 60A.06, subdivision 1,
1.18clauses (4) and (6).
1.19 (c) "Insured" means a person asserting a right to payment under an insurance policy
1.20insuring that person, that arises out of the occurrence of a contingency or loss covered
1.21by the policy. A person does not become an insured for purposes of this section if the
1.22insurance policy in question contained an anti-assignment clause and the person was
1.23assigned rights from another insured.
2.1 (d) "Insurer" means every insurer, corporation, business trust, or association engaged
2.2in insurance as a principal licensed or authorized to transact insurance under section
2.360A.06, 60A.206, or 60A.209, but for purposes of this section an insurer does not include
2.4a political subdivision providing self-insurance or a pool of political subdivisions under
2.5section 471.981, subdivision 3, or a township mutual fire insurance company or farm
2.6mutual fire insurance company operating under chapter 67A. The term does not include
2.7the Joint Underwriting Association operating under chapter 62F or 62I.
2.8 Subd. 2. Liability. (a) The court may award as taxable costs to an insured amounts
2.9as provided in subdivision 3 if the insured can show:
2.10 (1) the absence by an insurer of a reasonable basis for denying the benefits of the
2.11insurance policy; and
2.12 (2) that the insurer knew of the lack of a reasonable basis for denying the benefits of
2.13the insurance policy or acted in reckless disregard of the lack of a reasonable basis for
2.14denying the benefits of the insurance policy.
2.15 (b) In addition to taxable costs under this section, an insured is entitled from the
2.16insurer to the amount of actual damages incurred by the insured as determined by a fact
2.17finder, after appropriate reductions made by a judge under section 65B.51, subdivision 1,
2.18or section 548.36.
2.19 (c) A violation of this section shall not be the basis for any claim or award under
2.20chapter 325D or 325F.
2.21 (d) A disagreement between an insurer and an insured as to the value or amount of
2.22proceeds owed to an insured when there is an ongoing arson investigation or an ongoing
2.23fraud investigation does not justify an award of taxable costs under this section.
2.24 Subd. 3. Remedies. (a) In addition to pre- and post-judgment interest and costs
2.25and disbursements allowed under section 549.09 and the net award of actual damages
2.26described in subdivision 2, paragraph (b), an insured may be awarded, as taxable costs
2.27under this section for an insurer's violation of subdivision 2, a penalty in the discretion
2.28of the court as follows:
2.29 (1) an amount equal to one-half of the proceeds awarded, which are in excess of
2.30an amount offered by the insurer prior to ten days before jury selection begins, but in
2.31no case to exceed $100,000; and
2.32 (2) reasonable attorney fees actually incurred to establish the insurer's violation
2.33of this section. Attorney fees shall only be awarded if the fees sought are separately
2.34accounted for by the insured's attorney, are not duplicative of the fees the insured's
2.35attorney otherwise expended in pursuit of proceeds to an insured under the insurance
3.1policy, and shall not exceed an amount equal to the penalty in clause (1), and in no case
3.2may an award of attorney fees exceed $40,000.
3.3 (b) An insured may not also recover punitive or exemplary damages, nor attorney
3.4fees under section 8.31, for a violation of this section.
3.5 Subd. 4. Claim for taxable costs. (a) Upon commencement of a civil action by
3.6an insured against an insurer, the complaint must not seek a recovery under this section.
3.7Instead, after filing the action, a party may make a motion to amend the pleadings to
3.8claim recovery under this section. The motion must allege the applicable legal basis
3.9under this section and must be accompanied by one or more affidavits showing the
3.10factual basis for the motion. The motion may be opposed by the submission of one or
3.11more affidavits. At the hearing, if the court finds prima facie evidence in support of the
3.12motion, the court may grant the moving party permission to amend its pleadings to assert a
3.13claim under this section.
3.14 (b) An award of taxable costs under this section shall be determined by the court in a
3.15proceeding subsequent to any determination by a fact finder of the amount an insured is
3.16entitled to under the insurance policy, and shall be governed by the procedures set forth in
3.17Minnesota General Rules of Practice, Rule 119.
3.18 (c) An award of taxable costs under this section is not available in any claim that is
3.19submitted by the insurer and insured to binding arbitration or appraisal.
3.20 (d) The following are not admissible in any proceeding that seeks taxable costs
3.21under this section:
3.22 (1) findings or determinations made in arbitration proceedings conducted under
3.23section 65B.525 or any administrative rules promulgated thereunder;
3.24 (2) allegations involving, or results of, investigations, examinations, or
3.25administrative proceedings conducted by the Department of Commerce;
3.26 (3) administrative bulletins or other informal guidance published or disseminated by
3.27the Department of Commerce; and
3.28 (4) provisions under chapters 59A to 79A and all rules promulgated thereunder
3.29are not admissible as standards of conduct.
3.30 Subd. 5. Insurance producers; liability limited. A licensed insurance producer
3.31is not liable under this section for errors, acts, or omissions attributed to the insurer that
3.32appointed the producer to transact business on its behalf, except to the extent the producer
3.33has caused or contributed to the error, act, or omission.
3.34 Subd. 6. Expiration. This section expires upon a determination by the
3.35commissioner of commerce that: (1) average insurance premiums for lines of insurance
3.36affected by this act have increased by more than 20 percentage points above the percentage
4.1increase in the Consumer Price Index for all urban consumers in any 12-month period;
4.2and (2) at least 20 percentage points of the increase is attributable to this section. The
4.3commissioner of commerce shall make a determination on whether this criterion has been
4.4met at least once each year. The expiration applies to all causes of action as to which a
4.5court judgment has not been entered as of the date of the determination.
4.6 Sec. 2. EFFECTIVE DATE.
4.7 Section 1 is effective August 1, 2008, and applies to causes of action for conduct
4.8which occurs on or after that date.
1.3insurance claims practices;proposing coding for new law in Minnesota Statutes,
1.4chapter 604.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. [604.18] INSURANCE STANDARD OF CONDUCT.
1.7 Subdivision 1. Definitions. (a) For purposes of this section, the terms defined in this
1.8subdivision have the meanings given them.
1.9 (b) "Insurance policy" means a written agreement between an insured and an insurer,
1.10which obligates an insurer to pay proceeds directly to the insured. Insurance policy does
1.11not include provisions of a liability insurance policy obligating an insurer to defend the
1.12insured, reimburse an insured's defense expenses, provide for any other type of defense
1.13obligation, or provide indemnification for judgments or settlements. Insurance policy also
1.14does not include coverage for workers' compensation insurance under chapter 176; a
1.15written agreement of a health carrier, as defined in section 62A.011; a contract issued by a
1.16nonprofit health service plan corporation regulated under chapter 62C that provides only
1.17dental coverage; or a written agreement authorized under section 60A.06, subdivision 1,
1.18clauses (4) and (6).
1.19 (c) "Insured" means a person asserting a right to payment under an insurance policy
1.20insuring that person, that arises out of the occurrence of a contingency or loss covered
1.21by the policy. A person does not become an insured for purposes of this section if the
1.22insurance policy in question contained an anti-assignment clause and the person was
1.23assigned rights from another insured.
2.1 (d) "Insurer" means every insurer, corporation, business trust, or association engaged
2.2in insurance as a principal licensed or authorized to transact insurance under section
2.360A.06, 60A.206, or 60A.209, but for purposes of this section an insurer does not include
2.4a political subdivision providing self-insurance or a pool of political subdivisions under
2.5section 471.981, subdivision 3, or a township mutual fire insurance company or farm
2.6mutual fire insurance company operating under chapter 67A. The term does not include
2.7the Joint Underwriting Association operating under chapter 62F or 62I.
2.8 Subd. 2. Liability. (a) The court may award as taxable costs to an insured amounts
2.9as provided in subdivision 3 if the insured can show:
2.10 (1) the absence by an insurer of a reasonable basis for denying the benefits of the
2.11insurance policy; and
2.12 (2) that the insurer knew of the lack of a reasonable basis for denying the benefits of
2.13the insurance policy or acted in reckless disregard of the lack of a reasonable basis for
2.14denying the benefits of the insurance policy.
2.15 (b) In addition to taxable costs under this section, an insured is entitled from the
2.16insurer to the amount of actual damages incurred by the insured as determined by a fact
2.17finder, after appropriate reductions made by a judge under section 65B.51, subdivision 1,
2.18or section 548.36.
2.19 (c) A violation of this section shall not be the basis for any claim or award under
2.20chapter 325D or 325F.
2.21 (d) A disagreement between an insurer and an insured as to the value or amount of
2.22proceeds owed to an insured when there is an ongoing arson investigation or an ongoing
2.23fraud investigation does not justify an award of taxable costs under this section.
2.24 Subd. 3. Remedies. (a) In addition to pre- and post-judgment interest and costs
2.25and disbursements allowed under section 549.09 and the net award of actual damages
2.26described in subdivision 2, paragraph (b), an insured may be awarded, as taxable costs
2.27under this section for an insurer's violation of subdivision 2, a penalty in the discretion
2.28of the court as follows:
2.29 (1) an amount equal to one-half of the proceeds awarded, which are in excess of
2.30an amount offered by the insurer prior to ten days before jury selection begins, but in
2.31no case to exceed $100,000; and
2.32 (2) reasonable attorney fees actually incurred to establish the insurer's violation
2.33of this section. Attorney fees shall only be awarded if the fees sought are separately
2.34accounted for by the insured's attorney, are not duplicative of the fees the insured's
2.35attorney otherwise expended in pursuit of proceeds to an insured under the insurance
3.1policy, and shall not exceed an amount equal to the penalty in clause (1), and in no case
3.2may an award of attorney fees exceed $40,000.
3.3 (b) An insured may not also recover punitive or exemplary damages, nor attorney
3.4fees under section 8.31, for a violation of this section.
3.5 Subd. 4. Claim for taxable costs. (a) Upon commencement of a civil action by
3.6an insured against an insurer, the complaint must not seek a recovery under this section.
3.7Instead, after filing the action, a party may make a motion to amend the pleadings to
3.8claim recovery under this section. The motion must allege the applicable legal basis
3.9under this section and must be accompanied by one or more affidavits showing the
3.10factual basis for the motion. The motion may be opposed by the submission of one or
3.11more affidavits. At the hearing, if the court finds prima facie evidence in support of the
3.12motion, the court may grant the moving party permission to amend its pleadings to assert a
3.13claim under this section.
3.14 (b) An award of taxable costs under this section shall be determined by the court in a
3.15proceeding subsequent to any determination by a fact finder of the amount an insured is
3.16entitled to under the insurance policy, and shall be governed by the procedures set forth in
3.17Minnesota General Rules of Practice, Rule 119.
3.18 (c) An award of taxable costs under this section is not available in any claim that is
3.19submitted by the insurer and insured to binding arbitration or appraisal.
3.20 (d) The following are not admissible in any proceeding that seeks taxable costs
3.21under this section:
3.22 (1) findings or determinations made in arbitration proceedings conducted under
3.23section 65B.525 or any administrative rules promulgated thereunder;
3.24 (2) allegations involving, or results of, investigations, examinations, or
3.25administrative proceedings conducted by the Department of Commerce;
3.26 (3) administrative bulletins or other informal guidance published or disseminated by
3.27the Department of Commerce; and
3.28 (4) provisions under chapters 59A to 79A and all rules promulgated thereunder
3.29are not admissible as standards of conduct.
3.30 Subd. 5. Insurance producers; liability limited. A licensed insurance producer
3.31is not liable under this section for errors, acts, or omissions attributed to the insurer that
3.32appointed the producer to transact business on its behalf, except to the extent the producer
3.33has caused or contributed to the error, act, or omission.
3.34 Subd. 6. Expiration. This section expires upon a determination by the
3.35commissioner of commerce that: (1) average insurance premiums for lines of insurance
3.36affected by this act have increased by more than 20 percentage points above the percentage
4.1increase in the Consumer Price Index for all urban consumers in any 12-month period;
4.2and (2) at least 20 percentage points of the increase is attributable to this section. The
4.3commissioner of commerce shall make a determination on whether this criterion has been
4.4met at least once each year. The expiration applies to all causes of action as to which a
4.5court judgment has not been entered as of the date of the determination.
4.6 Sec. 2. EFFECTIVE DATE.
4.7 Section 1 is effective August 1, 2008, and applies to causes of action for conduct
4.8which occurs on or after that date.