Good faith insurance bill passes Minnesota House

The Minnesota House Thursday okayed a measure that would make it easier for homeowners and motorists to sue their insurance companies over unpaid claims.

The Good Faith Insurance bill would allow policy holders to sue insurers for acting in bad faith, when it comes to denying claims. It's something currently available in all 49 of the other states, either as a law or common practice.

"All this does is provide a right for Minnesotans that every other person in the country has right now," the bill's sponsor Representative Joe Atkins told colleagues, "That their insurance company should act in good faith."

"It shouldn't be too much to ask that insurance companies live up to the same standard that an 11-year-old playing soccer has."

The Inver Grove Heights Democrat, held up a copy of a newspaper ad being run by the insurance industry, which blasts the bill as a "trial lawyers tax bill" and warns it will drive up insurance premiums to pad the pockets of attorneys.

"They're paying to run ads in various papers saying this is for trial lawyers," Atkins complained.

"Not one dime of this goes for trial lawyers and they're running an ad that says so."

Republican Steve Smith, himself a trial lawyer, agreed with Atkins that the insurance industry's ad campaign has been deceptive. He rejected the notion that the law would open the flood gates to frivolous lawsuits and outright attempts to defraud insurance companies.

"The only way a consumer could recover anything under this bill is when the insurance company has no basis for denying a claim and knows they have no basis for denying a claim."

And yet Smith said he preferred the version that passed in Senate the previous week, placing a cap on awards and attorneys fees. An amendment to do just that eventually won the day in the House, over the objections of the original author Atkins.

It would limit attorneys fees to $40,000 and cap total legal damages awarded to consumers making bad faith cases at $100,000. Those policy holders would also be entitled to the full amount of their claim against their policies.

The example given by Senator Linda Scheid is a person offered $50,000 by an insurance company on a claim, rather than the $250,000 actual loss connected to that claim and covered by the policy.

If the jury agrees with the customer and awards the full amount, the insured would get that plus up to $100,000 in damages sustained due to the delay or denial.

"So they would get $350,000," Scheid explained, "And they would get attorney fees up to $40,000."

As set out in the Senate bill the jury could award damages that are "one-half of the proceeds awarded, which are in excess of an amount offered by the insurer" or $100,000 whichever is less.

In other words, you'd calculate the damages by subtracting the amount offered by the company from what the court eventually awards and then dividing that figure in half. If that comes out to more than $100,000 you'd get the $100,000.

Insurance Federation lobbyist and spokesman Mark Kulda told the Associated Press the bill is still unnecessary, but is better in his industry's view than previous versions heard at the Capitol.

By John Croman, KARE 11 News

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