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Why Minnesota Needs Good Faith Insurance Practices Legislation

Posted by: euser
March 30, 2007
Topic: Minnesota No-Fault Law

Many people would agree that it would be good policy for insurance companies to be required to act in good faith in regards to their policyholders. In fact, 46 states have legislation mandating such a requirement. It is unfair that deserving plaintiffs are unable to receive the justice they deserve because of the bad faith acts of their insurers. Unfortunately, Minnesota is one of the four states that does not have such a requirement.

Some members of the Minnesota Legislature, however, are attempting to change that fact and we support their efforts. Under legislation introduced by Senator Tarryl Clark (DFL-St. Cloud) and Representative Joe Atkins (DFL-Inver Grove Heights), insurers would be required to act in good faith when dealing with claims made under an insurance policy. Section 3 of the bill would enact a new statute, which would read as follows:

Sec. 3. [604.18] GOOD FAITH INSURANCE PRACTICES.
Subdivision 1. Required conduct. (a) An insurer shall act in good faith in connection with any matter involving a claim under an insurance policy.
(b) An insurer does not act in good faith if the insurer delays or denies benefits offered or paid without an objectively reasonable basis for its offer, delay, or denial. An insurer also does not act in good faith if the insurer engages in any fraud, false pretense, false promise, misrepresentation, misleading statement, or deceptive practice that others rely on in connection with any matter involving a claim under an insurance policy.
(c) For purposes of this section:
(1) "insurance policy" means an insurance policy or contract issued, executed, renewed, maintained, or delivered in this state, other than a workers' compensation insurance policy or contract; and
(2) "insurer" means an individual, corporation, association, partnership, or other legal entity that issues, executes, renews, maintains, or delivers an insurance policy in this state.
Subd. 2. Penalties and remedies. A person violating subdivision 1 is acting against the public interest and is liable for costs, damages, and reasonable attorney fees.
Subd. 3. Report to commissioner. An insurer shall promptly report to the commissioner of commerce the date and disposition of every settlement and award against the insurer for a violation of subdivision 1.

Unfortunately, the Senate bill, S.F. 1152, failed to gain the approval of the Commerce and Consumer Protection Committee by a divided voice vote taken on March 20. However, the House bill, H.F. 1251, is still alive, as the Public Safety Finance Division laid over the bill on March 22 for possible inclusion in the Public Safety Finance Division omnibus bill. Let your state representatives know that we need this legislation!