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                            CHAPTER 370-H.F.No. 2588 
                  An act relating to insurance; providing a process for 
                  resolving state claims for certain landfill cleanup 
                  costs and associated damages with insurers; 
                  authorizing an action by the state for recovery from 
                  insurers after a reasonable opportunity for 
                  settlement; proposing coding for new law in Minnesota 
                  Statutes, chapter 115B; repealing Minnesota Statutes 
                  1994, sections 115B.44, subdivision 1; and 115B.46; 
                  Minnesota Statutes 1995 Supplement, sections 115B.44, 
                  subdivision 2; and 115B.45. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  [115B.441] [INSURANCE CLAIMS SETTLEMENT AND 
        RECOVERY PROCESS; FINDINGS AND PURPOSE.] 
           (a) The legislature finds that: 
           (1) insurers have issued certain insurance policies to 
        their policyholders that may have provided coverage for 
        environmental response costs related to qualified facilities for 
        which their policyholders bear legal responsibility; 
           (2) because the commissioner is required by law to take 
        over responsibility for environmental response actions relating 
        to all qualified facilities, any rights to coverage based upon 
        the insurers' contractual obligations to their policyholders to 
        pay environmental response costs that are assumed by the state 
        related to these facilities, to the extent the obligations may 
        exist, are rights that should fairly accrue to the state; and 
           (3) the resolution of these potential insurance coverage 
        rights should provide a fair share of the cost to the state of 
        taking over these environmental responsibilities consistent with 
        the insurers' potential coverage obligations to their 
        policyholders. 
           (b) The purposes of sections 1 to 5 are: 
           (1) to provide the means for the state and insurers to 
        resolve claims of the state for environmental response costs 
        related to qualified facilities that may be covered by insurance 
        policies of persons who bear legal responsibility for those 
        costs; and 
           (2) to create a fair and efficient settlement process that 
        provides insurers with an opportunity to settle claims based 
        upon a reasonable approximation of the insurers' potential 
        coverage exposure and a fair opportunity for the state to 
        recover claims by legal action from nonsettling insurers. 
           Sec. 2.  [115B.442] [SETTLEMENT PROCESS; INFORMATION 
        GATHERING.] 
           Subdivision 1.  [SELECTION OF QUALIFIED FACILITIES.] The 
        commissioner and the attorney general shall select qualified 
        facilities for which they intend to make offers of settlement to 
        insurers under section 3.  The first group of qualified 
        facilities, consisting of not less than ten facilities, must be 
        selected within 60 days after the effective date of this 
        section.  Upon selection of a qualified facility under this 
        subdivision, the commissioner shall commence reasonable efforts 
        to identify potential insurance policyholders and insurance 
        coverage for the qualified facility in accordance with this 
        section. 
           Subd. 2.  [POTENTIAL INSURANCE POLICYHOLDER.] For the 
        purpose of this section, "potential insurance policyholder" 
        means a person who may bear legal responsibility for 
        environmental response costs related to a qualified facility 
        including the following: 
           (1) a person who has been the subject of a request for 
        response action under section 115B.17, or an order under section 
        106 of the Federal Superfund Act with respect to a qualified 
        facility; 
           (2) an owner or operator of a qualified facility; 
           (3) a person who engaged in commercial, industrial, or 
        other activities generally known to produce waste containing a 
        hazardous substance, or pollutant or contaminant, and whose 
        waste was disposed of at a qualified facility; and 
           (4) a person who engaged in the business of hauling waste 
        for disposal and who accepted waste from one or more persons of 
        the type described in clause (3) for transport to a qualified 
        facility. 
           Subd. 3.  [IDENTIFICATION OF POTENTIAL INSURANCE 
        POLICYHOLDERS.] The commissioner may request information from a 
        person that the commissioner has reason to believe is a 
        potential insurance policyholder or has information needed to 
        identify potential insurance policyholders.  The recipient of 
        the request shall provide to the commissioner any information in 
        the person's possession, or which the person can reasonably 
        obtain, that the commissioner requires to identify potential 
        insurance policyholders for a qualified facility and to explain 
        to the commissioner the person's efforts to discover and provide 
        the information.  An owner or operator of a qualified facility 
        shall retain and preserve all documents and other information 
        relevant to the identification of potential insurance 
        policyholders for the qualified facility. 
           Subd. 4.  [IDENTIFICATION OF POTENTIAL INSURANCE COVERAGE.] 
        The commissioner may request a person that the commissioner has 
        reason to believe is a potential insurance policyholder to 
        provide, and the recipient of the request shall provide to the 
        commissioner, any information in the person's possession, or 
        which the person can reasonably obtain, regarding the person's 
        potential liability insurance coverage for environmental 
        response costs related to a qualified facility.  A potential 
        insurance policyholder for which evidence of potential coverage 
        has been identified shall cooperate with reasonable requests of 
        the commissioner or the attorney general for assistance in 
        preparing for and negotiating a settlement under this section or 
        in preparing or pursuing a claim under section 4 related to that 
        policyholder's potential coverage.  Nothing in this subdivision 
        relieves a potential insurance policyholder of any duties 
        imposed upon it pursuant to the terms, conditions, and 
        provisions of its insurance policy, including any duty to 
        cooperate with its insurer in the investigation, negotiation, 
        and settlement of claims or demands, or the defense of suits.  
        The commissioner may contract for the services of persons to 
        assist in reconstructing insurance policies and potential 
        coverage from incomplete insurance information.  The 
        commissioner may authorize the attorney general to carry out all 
        or a portion of the authority provided in this section. 
           Subd. 5.  [IDENTIFICATION OF POTENTIAL COVERAGE BY 
        INSURERS.] The commissioner may request an insurer to make 
        reasonable efforts to identify or confirm potential insurance 
        coverage of any potential insurance policyholder identified 
        under subdivision 4, or may direct the potential insurance 
        policyholder to make this request of an insurer.  An insurer 
        that is requested to identify or confirm potential coverage of a 
        potential insurance policyholder under this subdivision has 90 
        days after receiving the request to confirm coverage or to 
        provide all information in the possession of the insurer that 
        may assist in identifying potential coverage, and to explain the 
        insurer's efforts to discover and provide such information.  An 
        insurer requested to provide information under this subdivision 
        shall preserve all information relevant to the request until any 
        claim relating to the request is resolved. 
           Subd. 6.  [ENFORCEMENT.] Subdivisions 3 to 5 are 
        enforceable under sections 115.071 and 116.072. 
           Sec. 3.  [115B.443] [SETTLEMENT PROCESS.] 
           Subdivision 1.  [DETERMINATION OF FACILITY COSTS.] 
        Beginning not later than one year after selection of a qualified 
        facility under section 2, subdivision 1, the commissioner shall 
        determine the current total estimated amount of environmental 
        response costs incurred and to be incurred by the state for the 
        qualified facility under sections 115B.39 to 115B.43, including 
        reimbursement under section 115B.43. 
           Subd. 2.  [SETTLEMENT OFFERS.] The attorney general and the 
        commissioner shall select one or more insurers who have been 
        identified by the commissioner as providing potential coverage 
        to persons identified under section 2 as potential insurance 
        policyholders for a qualified facility and shall make settlement 
        offers with respect to one or more of the qualified facilities 
        to the selected insurers.  The attorney general and the 
        commissioner shall base the settlement offer on their evaluation 
        of the potential coverage available for environmental response 
        costs under policies issued by the insurer to persons identified 
        as potential insurance policyholders for that qualified facility 
        and on the total estimated costs for the qualified facility, as 
        determined under subdivision 1.  The attorney general shall 
        provide written notice of the settlement to the insurer together 
        with a written explanation of how the offer was calculated.  The 
        attorney general may exclude from a settlement offer claims 
        relating to policyholders who are known by the attorney general 
        to have claims against the insurer for coverage for 
        environmental liabilities at locations other than qualified 
        facilities, or who are actively litigating or settling claims 
        against their insurers relating to any qualified facility. 
           Subd. 3.  [SETTLEMENT NEGOTIATIONS; MEDIATION.] An insurer 
        shall have 60 days after receipt of a settlement offer and 
        written explanation from the state to evaluate the offer, after 
        which the insurer, the commissioner, and the attorney general 
        shall commence negotiations to attempt to reach a settlement 
        with respect to the potential insurance coverage and qualified 
        facilities subject to the settlement offer.  The insurer shall 
        have 180 days to negotiate and commit to a settlement with the 
        state before the attorney general may commence an action under 
        section 4, unless the commissioner and the attorney general 
        agree to extend the negotiation period upon request by the 
        insurer made before expiration of the 180-day period.  Any 
        extension shall be limited to one additional 60-day period. 
           The attorney general, commissioner, and the insurer may 
        agree to use any method of alternative dispute resolution for 
        all or a portion of the issues in the negotiation, or may agree 
        to negotiate all matters directly among themselves.  If the 
        parties do not agree in writing on the manner in which they will 
        negotiate a settlement within 60 days after commencement of the 
        negotiation period, the parties shall submit the negotiation of 
        the settlement to mediation by an independent and neutral 
        mediator selected by the Minnesota office of dispute 
        resolution.  The attorney general shall submit on behalf of all 
        parties a request to the office of dispute resolution to appoint 
        a mediator for the negotiations.  The cost of mediation under 
        this subdivision shall be divided equally between the state and 
        the insurer. 
           Any settlement offer or any proposal, statement, or view 
        expressed or document prepared in the course of negotiation 
        under this section shall not be considered an admission by any 
        party and shall not be admissible in evidence in any judicial 
        proceeding affecting matters subject to settlement negotiation, 
        provided that any matter otherwise admissible in a judicial 
        proceeding is not made inadmissible by virtue of its use in 
        negotiation under this section. 
           Subd. 4.  [PARTICIPATION BY AFFECTED POLICYHOLDERS.] (a) 
        Within 30 days of notifying an insurer of a settlement offer, 
        the attorney general shall make reasonable efforts to notify 
        policyholders who may be affected by settlement negotiations 
        under subdivision 3.  The notification shall inform the 
        policyholder of the commencement of negotiations between the 
        state and the insurer and the manner in which a policyholder, 
        with agreement of the insurer, may participate in the 
        negotiation process.  If the insurer and the state reach a 
        settlement of the state's claims, the attorney general shall 
        provide notice of any proposed settlement to any affected 
        policyholder who makes a written request for such notice. 
           (b) Subject to the limitations of this paragraph, an 
        insurer to whom a settlement offer is made under subdivision 3, 
        and any policyholder who may be affected by the negotiation, may 
        agree to negotiate a resolution of any other outstanding 
        environmental claims, related to the qualified facility or 
        facilities that are subject to the state's settlement offer, 
        within the settlement negotiation process provided under this 
        section.  Environmental claims unrelated to the qualified 
        facility or facilities that are subject to the state settlement 
        offer may be included within the settlement negotiation process 
        provided under this section at the discretion of the attorney 
        general, provided that the state will not bear any costs of 
        mediation or alternative dispute resolution arising from the 
        unrelated claims. The agreement of the insurer and affected 
        policyholders to negotiate must be reached by the time that the 
        insurer and the state commence negotiations as provided under 
        subdivision 3.  The policyholder shall not participate in the 
        selection of the method of negotiation by the state and the 
        insurer under subdivision 3.  If the attorney general in the 
        attorney general's discretion determines, at any time after the 
        first 60 days of the negotiation period, that continued 
        participation of the policyholders in the negotiation process 
        with the state and the insurer is detrimental to the effective 
        negotiation of a settlement between the state and the insurer, 
        the attorney general shall so notify the insurer and the 
        policyholders.  After such notification by the attorney general, 
        the insurer and policyholders may continue to negotiate 
        separately from the negotiation between the insurer and the 
        state, and may use the same mediator or other person who is 
        facilitating negotiation between the state and the insurer.  
        Policyholders shall be responsible for an equitable share of any 
        costs of mediation or other alternative dispute resolution 
        process in which they participate.  Notwithstanding a 
        determination to discontinue negotiations involving 
        policyholders, the attorney general may engage in an additional 
        30 days of negotiation with the insurer and policyholders if, 
        within the time limit for committing to a settlement provided 
        under subdivision 3, the attorney general finds, in the 
        discretion of the attorney general, that participation by the 
        policyholders in a settlement between the state and the insurer 
        would be beneficial to that settlement. 
        Inability of the insurer or the state to reach a settlement with 
        policyholders under this subdivision shall not preclude a 
        settlement between the state and the insurer. 
           Subd. 5.  [ADJUSTMENT FOR RETROSPECTIVE PREMIUMS.] A 
        settlement that includes payment of any amount under a policy 
        subject to a retrospective premium plan shall include terms 
        which assure that the settlement does not result in the 
        imposition of any retrospective premium on any policyholder.  In 
        negotiating with respect to any state offer of settlement which 
        is based in whole or in part on coverage known to the insurer to 
        be subject to a retrospective premium plan: 
           (1) the insurer shall calculate the amount of any 
        retrospective premium that would result from payment of the 
        state's settlement offer amount and shall disclose the 
        calculation and the basis for it to the attorney general and the 
        commissioner; and 
           (2) the attorney general and commissioner may reduce the 
        settlement offer amount by the amount of the retrospective 
        premium or agree to assume the obligation to pay the 
        retrospective premium in order to assure that no retrospective 
        premium is imposed on the policyholder. 
           Subd. 6.  [OPTION TO SETTLE NATURAL RESOURCE DAMAGES.] An 
        insurer who has received a settlement offer may request the 
        attorney general and the commissioner to address in any 
        settlement under this section natural resource damages related 
        to qualified facilities subject to the settlement offer.  The 
        attorney general and the commissioner, after receiving a request 
        under this subdivision, shall determine an amount to be added to 
        the state's settlement offer that would be sufficient to address 
        and resolve in the settlement any state claims for natural 
        resource damages related to the qualified facilities subject to 
        the settlement. 
           Subd. 7.  [SETTLEMENT OPTION FOR ALL QUALIFIED FACILITIES.] 
        If an insurer has entered settlements with the state under this 
        section with respect to qualified facilities for which the 
        aggregate amount of total estimated environmental response costs 
        equals at least 60 percent of the total estimated environmental 
        response costs for all qualified facilities as determined by the 
        commissioner, the attorney general and the commissioner, upon 
        request of the insurer, may settle with the insurer with respect 
        to the remaining qualified facilities for the amount determined 
        in this subdivision.  The amount of the settlement for the 
        remaining qualified facilities must be the amount that bears the 
        same proportion to the total estimated costs for the remaining 
        facilities that the amount payable under all of the insurer's 
        existing settlements under this section bears to the aggregate 
        of the total estimated costs for the qualified facilities 
        subject to those settlements. 
           Subd. 8.  [SCOPE OF RELEASE BY STATE; EFFECT OF 
        SETTLEMENT.] Except for any claims excluded from the settlement 
        process under section 3, subdivision 2, a settlement under this 
        section shall release a settling insurer, and its policyholders 
        to the extent of their insurance coverage under policies of that 
        insurer, from all liability for all environmental response costs 
        incurred and to be incurred by the state related to the 
        qualified facility or facilities that are the subject of the 
        settlement, including natural resource damages if addressed in 
        the settlement.  Except for claims excluded under section 3, 
        subdivision 2, the settlement shall release a settling insurer 
        and its policyholders from liability as described in this 
        subdivision under all insurance policies issued by the insurer, 
        regardless of whether the policies or policyholders were 
        identified by the commissioner or attorney general under section 
        2. 
           Subd. 9.  [OTHER SETTLEMENT TERMS.] (a) An insurer who 
        enters a settlement under this section is not liable for claims 
        for contribution regarding matters addressed in the settlement.  
        As a condition of settlement, an insurer shall waive its rights 
        to seek contribution for any amounts paid in the settlement or 
        to bring a subrogation action against any other person for any 
        amounts paid in the settlement. 
           (b) Settlement under this section does not discharge the 
        liability of an insurer that has not entered a settlement under 
        this section nor of a person to whom a nonsettling insurer has 
        issued insurance coverage to the extent of that coverage. 
           (c) No settlement offer, settlement, or negotiation under 
        this section shall affect any joint and several liability for 
        environmental response costs or damages related to the facility 
        of any person whose liability has not been settled under this 
        section. 
           (d) A settlement under this section or section 4, 
        subdivision 2, paragraph (b), reduces the state's claims for 
        environmental response costs, and natural resource damages if 
        addressed in the settlement, related to qualified facilities 
        subject to the settlement by the amounts paid to the state under 
        the settlement for the facilities. 
           (e) A settlement agreement approved by the attorney general 
        and the commissioner under this section shall be presumed to be 
        a reasonable settlement of the state's claims. 
           Subd. 10.  [REDUCTION OF OUTSTANDING COVERAGE.] Any amounts 
        paid by an insurer pursuant to a judgment under section 4 or 
        settlement under this section reduce the outstanding coverage 
        available under policies of the insurer to the extent permitted 
        under applicable law and policy provisions. 
           Sec. 4.  [115B.444] [STATE ACTION AGAINST INSURERS.] 
           Subdivision 1.  [STATE ACTION.] The state, by the attorney 
        general, may bring a state action against any insurer for 
        recovery of all environmental response costs incurred and to be 
        incurred by the state, which costs are related to qualified 
        facilities for which the state has assumed response action 
        obligations or responsibilities under sections 115B.39 to 
        115B.43, and for which costs policyholders of the insurer may be 
        liable.  No assignment of any rights of a policyholder to the 
        state and no judgment against the policyholder is required as a 
        condition for the state bringing an action under this 
        subdivision.  The state shall make reasonable efforts to notify 
        affected policyholders of the state's commencement of an action 
        under this section.  An affected policyholder may intervene in 
        an action under this section.  For purposes of this section, an 
        "affected policyholder" means a policyholder whose rights under 
        an insurance policy relevant to an action under this section may 
        be affected by the action.  All defenses available to a 
        policyholder to any claim of liability for environmental 
        response costs asserted or which could be asserted against it 
        shall be available to the insurer in an action brought by the 
        state under this subdivision.  In any action under this 
        subdivision, the claim of the state shall be limited by the 
        applicable terms, conditions, and provisions of the relevant 
        insurance policy under which coverage may be provided, and the 
        state shall have no greater rights than the rights of the 
        policyholder under its insurance policy subject to the statutory 
        and common law that applies to the determination of those rights.
        Nothing in sections 1 to 5 shall be construed to relieve any 
        policyholder of liability for environmental response costs to 
        the extent of any insurance coverage of the policyholder by 
        reason of the assumption of obligations or responsibilities by 
        the state for environmental response actions under sections 
        115B.39 to 115B.43.  Before the attorney general may commence an 
        action against an insurer under this subdivision, for any claims 
        with respect to a qualified facility, the attorney general and 
        the commissioner shall present to the insurer a written 
        settlement offer, and shall provide the insurer with an 
        opportunity to negotiate and enter a settlement with the state 
        as provided in section 3.  In any action under this subdivision, 
        the state shall have the same rights as individual policyholders 
        to recover its reasonable expenses and costs of litigation, 
        including attorney fees. 
           Subd. 2.  [ACTIONS BY POLICYHOLDERS; STATE APPROVAL OF 
        SETTLEMENTS.] (a) Except as provided in paragraph (b), nothing 
        in sections 1 to 4 affects the right of a policyholder to bring 
        or pursue any action against, or enter any settlement with, an 
        insurer for any claims for which the state has a right of action 
        against the insurer under this section and that have not been 
        resolved by a settlement or judgment under this section.  The 
        state may intervene in an action in which a policyholder seeks 
        to recover a claim for which the state has a right of action 
        under this section. 
           (b) A policyholder may not enter a settlement that releases 
        an insurer from any claims for which the state has an action 
        under subdivision 1, unless the attorney general has given prior 
        written approval to the settlement and the policyholder agrees 
        to assign to the state any amounts recovered under the 
        settlement from the insurer that are attributable to the 
        resolution of the claims. 
           Sec. 5.  [115B.445] [DEPOSIT OF PROCEEDS.] 
           All amounts paid to the state by an insurer pursuant to any 
        settlement under section 3 or judgment under section 4 must be 
        deposited in the state treasury and credited to the solid waste 
        fund. 
           Sec. 6.  [REPORT TO THE LEGISLATURE.] 
           The attorney general and the commissioner shall report to 
        the finance division of the senate environment and natural 
        resources committee and the house of representatives environment 
        and natural resources finance committee by January 15, 1998, 
        concerning the results achieved in carrying out the settlement 
        and recovery process established under sections 1 to 5.  The 
        report must include any recommendations for further legislation 
        that the attorney general and the commissioner believe will 
        assist in the fair and efficient resolution of claims related to 
        qualified facilities by the state and insurers. 
           Sec. 7.  [REPEALER.] 
           Minnesota Statutes 1994, sections 115B.44, subdivision 1; 
        and 115B.46; and Minnesota Statutes 1995 Supplement, sections 
        115B.44, subdivision 2; and 115B.45, are repealed. 
           Sec. 8.  [EFFECTIVE DATE.] 
           Sections 1 to 7 are effective the day following final 
        enactment. 
           Presented to the governor March 23, 1996 
           Signed by the governor March 26, 1996, 10:25 a.m.

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Revisor of Statutes