Minnesota Senate Trims Back Proposed Bad Faith Legislation
The Minnesota Senate has approved bad faith legislation albeit only after significant insurance industry lobbying ameliorated some of the more onerous provisions of the original proposal.
As originally drafted, SF 2822, an insurer would be deemed to be acting in good faith unless the policyholder could prove the absence of a reasonable basis for denying benefits and that the insurer knew of the lack of a reasonable basis or acted in reckless disregard of the lack of a reasonable basis. A claimant must give written notice 60 days before bringing any such action during which time an insurer may avoid liability by acting to cure the violation.
The revised bill expands the definition of what constitutes good faith, caps the amount of economic damages and attorney’s fees that a prevailing insured may recover, and expressly limits the scope of the legislation to first party insurance (which is defined as precluding claims under liability insurance policies). The amended version caps attorneys fees at $40,000 while providing consumers up to $100,000 if insurers are found to have acted in “bad faith.”
