Litigation Expected on Minnesota Insurance Bill as Session Ends

The 2009 Minnesota legislative session has wrapped up with lawmakers taking action on a number of insurance bills. One in particular has insurer trade groups questioning whether litigation will follow after the measure becomes law on Aug. 1.

Lawmakers debated two versions of a so-called “one way loser pay” bill. The Senate version, SF 528, allowed for attorneys’ fees and 7 percent annual interest on amounts due for an insurer’s breach of contract. Its companion bill, HF 417, allowed for a 12 percent annual interest on awards, according to the Property Casualty Insurers Association of America (PCI). A final, compromise bill was passed that allows for 10 percent pre-judgment interest from the submission of the claim, but does not allow for attorneys fees.

In the final version the bill reads: “An insured who prevails in any claim against an insurer based on the insurer’s breach or repudiation of, or failure to fulfill, a duty to provide services or make payments is entitled to recover 10 percent per annum interest on monetary amounts due under the insurance policy, calculated from the date the request for payment of those benefits was made to the insurer.”

While PCI believes the bill is unnecessary, the trade group was encouraged that language that would have rewarded attorneys’ fees was removed in the final version. Still, PCI believes the measure is “poor public policy” and “will likely create excessive litigation at the expense of consumer interests.”

American Insurance Association (AIA) said in its original version, HF 417 was “highly objectionable” and “would have needlessly increased insurance litigation costs.” The business community, AIA and other industry trade groups, such as PCI, worked closely together in urging lawmakers to amend the bill.

“While we’re disappointed with the final language of HF 417, overall the legislation is a far better product than its original version,” said Steve Schneider, AIA vice president, Midwest Region. “HF 417 still contains the somewhat high prejudgment interest rate of 10 percent, and it will apply to claims dispute litigation already pending as of the new law’s effective date.”

Several bills opposed by insurance groups were successfully defeated.

Calling it and “onerous bill, AIA said it had opposed SF 263, which would have banned insurance companies from using credit information for rating and underwriting. This “proven risk factor that currently benefits a majority of Minnesotans in the form of lower premiums for their home and car insurance,” the AIA said.

Governor Pawlenty vetoed a budget omnibus bill, SF 2081, would have repealed the prohibition on alternative care in workers’ compensation, according to PCI.

Lawmakers also were unsuccessful in passing SF 842, which would have prohibited insurers from holding or acquiring any ownership interest in a body shop located in Minnesota, the PCI said.

Sources: PCI, AIA, Minnesota Legislature

Topics Lawsuits Carriers Legislation Minnesota