Minnesota Session Laws - 1997, Regular Session

                             CHAPTER 47-S.F.No. 458 
                  An act relating to insurance; clarifying the right to 
                  escrow for certain losses in certain cases; amending 
                  Minnesota Statutes 1996, section 65A.50, subdivisions 
                  2, 3, 8, 16, and 17. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1996, section 65A.50, 
        subdivision 2, is amended to read: 
           Subd. 2.  [PARTIAL WITHHOLDING FROM SETTLEMENT PAYMENTS; 
        NOTICE.] Except as otherwise provided in this section, with 
        respect to insured real property located in a municipality which 
        has elected to apply this section as provided in subdivision 12, 
        when a claim is filed for a loss to insured real property due to 
        fire or explosion and a final settlement is reached on the loss 
        to the insured real property, an insurer shall withhold from 
        payment 15 25 percent of the actual cash value of the insured 
        real property at the time of the loss or 15 25 percent of the 
        final settlement, whichever is less.  At the time that 15 25 
        percent of the settlement or judgment is withheld, the insurer 
        shall give notice of the withholding to the treasurer of the 
        municipality in which the insured real property is located, to 
        the insured, and to any mortgagee having an existing lien or 
        liens against the insured real property, if the mortgagee is 
        named on the policy.  In the case of a judgment, notice shall 
        also be provided to the court in which judgment was entered.  
        The notice shall include all of the following: 
           (1) the identity and address of the insurer; 
           (2) the name and address of each policyholder, including 
        any mortgagee; 
           (3) location of the insured real property; 
           (4) the date of loss, policy number, and claim number; 
           (5) the amount of money withheld; 
           (6) a statement that the municipality may have the withheld 
        amount paid into a trust or escrow account established for the 
        purposes of this section if it shows cause, pursuant to 
        subdivision 3, within 15 30 days that the money should be 
        withheld to protect the public health and safety, otherwise the 
        withheld amount shall be paid to the insured at the expiration 
        of 15 30 days; and 
           (7) an explanation of the provisions of this section and a 
        verbatim reproduction of subdivision 16. 
           Sec. 2.  Minnesota Statutes 1996, section 65A.50, 
        subdivision 3, is amended to read: 
           Subd. 3.  [ESCROW PROCEDURE.] In order for a municipality 
        to escrow the amount withheld by the insurer, and to retain that 
        amount, the following procedure shall be used. 
           (a) An affidavit prepared by the chief fire official or 
        another authorized representative of the municipality designated 
        by the governing body of the municipality that the damaged 
        insured structure violates existing named health and safety 
        standards requiring the escrow of the withheld amount as surety 
        for the repair, replacement, or removal of the damaged structure 
        shall constitute cause for the escrowing of the withheld amount. 
           (b) In the case of a settlement, the affidavit shall be 
        sent to the insurer, the insured, and any mortgagees.  Upon 
        receipt of the affidavit, the insurer shall forward the withheld 
        amount to the treasurer of the municipality and shall provide 
        notice of the forwarding to the insured and any mortgagees.  
           (c) In the case of a judgment, the affidavit shall be sent 
        to the insurer, the insured, any mortgagees, and the court in 
        which the judgment was entered.  Upon the motion of the 
        municipality, the court shall order the withheld amount to be 
        transmitted to the treasurer of the municipality.  Upon receipt 
        of the affidavit, the insurer shall forward the withheld amount 
        to the treasurer of the municipality and shall provide notice of 
        the forwarding to the insured, any mortgagees, and the court in 
        which judgment was entered. 
           (d) Within 30 days after the escrowing of the withheld 
        amount under this section, the municipality may apply to the 
        district court for declaratory relief in order to establish its 
        rights to the policy proceeds held in escrow by the 
        municipality.  The municipality shall have such a right to the 
        proceeds upon a showing that the health, safety, and welfare of 
        the inhabitants of the municipality will be jeopardized unless 
        the proceeds are retained by the municipality.  If declaratory 
        relief is granted, the court shall issue an order permitting the 
        municipality to retain the proceeds as requested, in accordance 
        with the provisions of this section, to be used as provided in 
        this section.  If the municipality fails to apply for 
        declaratory relief within the 30-day period, or if declaratory 
        relief is denied, the municipality shall immediately return to 
        the insured the proceeds held in escrow. 
           Sec. 3.  Minnesota Statutes 1996, section 65A.50, 
        subdivision 8, is amended to read: 
           Subd. 8.  [USE OF RETAINED PROCEEDS.] If with respect to a 
        loss, reasonable proof is not received by or shown to a fire 
        official or another authorized representative of the 
        municipality designated by the governing body of the 
        municipality within 45 days after the policy proceeds portion 
        was received by the treasurer, the municipality shall use the 
        retained proceeds to secure, repair, or demolish the damaged or 
        destroyed structure and clear the property in question, so that 
        the structure and property are in compliance with local code 
        requirements and applicable ordinances of the municipality.  If, 
        before the lapse of the 45 days after the proceeds portion was 
        received by the treasurer, the municipality has secured, 
        repaired, or demolished the damaged or destroyed structure under 
        chapter 299F or 463 or other applicable law or ordinance, once 
        the 45 days lapse, the municipality may release the special 
        assessment placed on the property, if any, and reimburse itself 
        from the retained funds.  No more than 15 percent of the policy 
        proceeds used by the municipality under this subdivision may be 
        attributed to the municipality's administrative expenses, which 
        must be directly related to the actions authorized under this 
        subdivision.  Any unused portion of the retained proceeds shall 
        be returned to the insured. 
           Sec. 4.  Minnesota Statutes 1996, section 65A.50, 
        subdivision 16, is amended to read: 
           Subd. 16.  [EXCEPTIONS TO WITHHOLDING REQUIREMENTS.] The 
        withholding requirements of this section do not apply if all of 
        the following occur: 
           (1) within 15 30 days after agreement on a final settlement 
        between the insured and the insurer, the insured has filed with 
        the insurer evidence of a contract to repair as described in 
        subdivision 7; 
           (2) the insured consents to the payment of funds directly 
        to the contractor performing the repair services.  Funds 
        released under this clause may be forwarded only to a contractor 
        performing the repair services on the insured property; and 
           (3) on receipt of the contract to repair, the insurer gives 
        notice to the municipality in which the property is situated 
        that there will not be a withholding under this section because 
        of the repair contract. 
           Sec. 5.  Minnesota Statutes 1996, section 65A.50, 
        subdivision 17, is amended to read: 
           Subd. 17.  [DEMOLITION COSTS OR DEBRIS REMOVAL COSTS AS 
        PART OF FINAL SETTLEMENT; WITHHOLDING.] If the insured and the 
        insurer have agreed on the demolition costs or the debris 
        removal costs as part of the final settlement of the real 
        property insured claim, the insurer shall withhold one of the 
        following sums, whichever sum is the largest, and shall pay that 
        sum in accordance with this section: 
           (1) the agreed cost of demolition or debris removal; 
           (2) 15 25 percent of the actual cash value of the insured 
        real property at the time of loss; or 
           (3) 15 25 percent of the final settlement of the insured 
        real property claim. 
           Presented to the governor April 17, 1997 
           Signed by the governor April 21, 1997, 10:26 a.m.