Bill Text: MN HF38 | 2011-2012 | 87th Legislature | Introduced
Bill Title: Fair Claims Practices Act amended as it applies to certain automobile insurance claims, and certain third-party claimant rights provided in insurance settlement of claims.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2011-01-10 - Introduction and first reading, referred to Commerce and Regulatory Reform [HF38 Detail]
Download: Minnesota-2011-HF38-Introduced.html
1.2relating to insurance; amending the Fair Claims Practices Act as it applies to
1.3certain automobile insurance claims; providing certain rights for third-party
1.4claimants in insurance settlement of claims;amending Minnesota Statutes 2010,
1.5section 72A.201, subdivision 6.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. Minnesota Statutes 2010, section 72A.201, subdivision 6, is amended to
1.8read:
1.9 Subd. 6. Standards for automobile insurance claims handling, settlement offers,
1.10and agreements. (a) This subdivision applies to automobile insurance claims made
1.11by insureds, claimants, or both, as those terms are defined in subdivision 3, depending
1.12upon whether the claim is a first-party claim by an insured against the insured's own
1.13insurer, or a third-party liability or other claim by a claimant against an insured, which the
1.14insured has submitted to the insured's insurer. A person making a nonliability claim for
1.15basic economic loss benefits, as defined in section 65B.43, subdivision 10, from a plan
1.16of reparation security under which the person is not an insured, is considered a claimant
1.17for purposes of this subdivision. Where a provision of this subdivision uses the phrase
1.18"insured or claimant," it means the insured in the case of a first-party claim and means the
1.19claimant in the case of a third-party claim.
1.20(b) In connection with a settlement or offer of settlement made to:
1.21(1) an insured under this subdivision, the insurer must provide the insured with a
1.22written explanation of the basis for the amount of the settlement or offer of settlement; and
1.23(2) a claimant under this subdivision, the insurer must provide the claimant with a
1.24written explanation of the basis for the amount of the settlement or offer of settlement.
2.1This does not limit the right of the insurer to also provide the written explanation, or any
2.2other information, to the insurer's insured.
2.3(c) In addition to the acts specified in subdivisions 4, 5, 7, 8, and 9, the following
2.4acts by an insurer, adjuster, or a self-insured or self-insurance administrator constitute
2.5unfair settlement practices:
2.6(1) if an automobile insurance policy provides for the adjustment and settlement of
2.7an automobile total loss on the basis of actual cash value or replacement with like kind
2.8and quality and the insured or claimant, whichever is appropriate under paragraph (a), is
2.9not an automobile dealer, failing to offer one of the following methods of settlement:
2.10(a) (i) comparable and available replacement automobile, with all applicable taxes,
2.11license fees, at least pro rata for the unexpired term of the replaced automobile's license,
2.12and other fees incident to the transfer or evidence of ownership of the automobile paid, at
2.13no cost to the insured or claimant, whichever is appropriate under paragraph (a), other
2.14than the deductible amount as provided in the policy;
2.15(b) (ii) a cash settlement based upon the actual cost of purchase of a comparable
2.16automobile, including all applicable taxes, license fees, at least pro rata for the unexpired
2.17term of the replaced automobile's license, and other fees incident to transfer of evidence
2.18of ownership, less the deductible amount as provided in the policy. The costs must be
2.19determined by:
2.20(i) (A) the cost of a comparable automobile, adjusted for mileage, condition, and
2.21options, in the local market area of the insured or claimant, whichever is appropriate under
2.22paragraph (a), if such an automobile is available in that area; or
2.23(ii) (B) one of two or more quotations obtained from two or more qualified sources
2.24located within the local market area when a comparable automobile is not available in the
2.25local market area. The insured or claimant, whichever is appropriate under paragraph (a),
2.26shall be provided the information contained in all quotations prior to settlement; or
2.27(iii) (C) any settlement or offer of settlement which deviates from the procedure
2.28above must be documented and justified in detail. The basis for the settlement or offer
2.29of settlement must be explained to the insured or claimant, whichever is appropriate
2.30under paragraph (a);
2.31(2) if an automobile insurance policy provides for the adjustment and settlement
2.32of an automobile partial loss on the basis of repair or replacement with like kind and
2.33quality and the insured is not an automobile dealer, failing to offer one of the following
2.34methods of settlement:
2.35(a) (i) to assume all costs, including reasonable towing costs, for the satisfactory
2.36repair of the motor vehicle. Satisfactory repair includes repair of both obvious and hidden
3.1damage as caused by the claim incident. This assumption of cost may be reduced by
3.2applicable policy provision; or
3.3(b) (ii) to offer a cash settlement sufficient to pay for satisfactory repair of the
3.4vehicle. Satisfactory repair includes repair of obvious and hidden damage caused by the
3.5claim incident, and includes reasonable towing costs;
3.6(3) regardless of whether the loss was total or partial, in the event that a damaged
3.7vehicle of an insured or claimant, whichever is appropriate under paragraph (a), cannot be
3.8safely driven, failing to exercise the right to inspect automobile damage prior to repair
3.9within five business days following receipt of notification of claim. In other cases the
3.10inspection must be made in 15 days;
3.11(4) regardless of whether the loss was total or partial, requiring unreasonable travel
3.12of a claimant or insured, whichever is appropriate under paragraph (a), to inspect a
3.13replacement automobile, to obtain a repair estimate, to allow an insurer to inspect a repair
3.14estimate, to allow an insurer to inspect repairs made pursuant to policy requirements, or
3.15to have the automobile repaired;
3.16(5) regardless of whether the loss was total or partial, if loss of use coverage
3.17exists under the insurance policy, failing to notify an insured at the time of the insurer's
3.18acknowledgment of claim, or sooner if inquiry is made, of the fact of the coverage,
3.19including the policy terms and conditions affecting the coverage and the manner in which
3.20the insured can apply for this coverage;
3.21(6) regardless of whether the loss was total or partial, failing to include the insured's
3.22deductible in the insurer's demands under its subrogation rights. Subrogation recovery
3.23must be shared at least on a proportionate basis with the insured, unless the deductible
3.24amount has been otherwise recovered by the insured, except that when an insurer is
3.25recovering directly from an uninsured third party by means of installments, the insured
3.26must receive the full deductible share as soon as that amount is collected and before any
3.27part of the total recovery is applied to any other use. No deduction for expenses may be
3.28made from the deductible recovery unless an attorney is retained to collect the recovery, in
3.29which case deduction may be made only for a pro rata share of the cost of retaining the
3.30attorney. An insured is not bound by any settlement of its insurer's subrogation claim with
3.31respect to the deductible amount, unless the insured receives, as a result of the subrogation
3.32settlement, the full amount of the deductible. Recovery by the insurer and receipt by the
3.33insured of less than all of the insured's deductible amount does not affect the insured's
3.34rights to recover any unreimbursed portion of the deductible from parties liable for the loss;
3.35(7) requiring as a condition of payment of a claim that repairs to any damaged
3.36vehicle must be made by a particular contractor or repair shop or that parts, other than
4.1window glass, must be replaced with parts other than original equipment parts or engaging
4.2in any act or practice of intimidation, coercion, threat, incentive, or inducement for or
4.3against an insured to use a particular contractor or repair shop. Consumer benefits included
4.4within preferred vendor programs must not be considered an incentive or inducement. At
4.5the time a claim is reported, the insurer must provide the following advisory to the insured
4.6or claimant, whichever is appropriate under paragraph (a):
4.7"You have the legal right to choose a repair shop to fix your vehicle. Your policy
4.8will cover the reasonable costs of repairing your vehicle to its pre-accident condition no
4.9matter where you have repairs made. Have you selected a repair shop or would you
4.10like a referral?"
4.11After an insured or claimant, whichever is appropriate under paragraph (a), has
4.12indicated that the insured or claimant has selected a repair shop, the insurer must cease all
4.13efforts to influence the insured's or claimant's choice of repair shop;
4.14(8) where liability is reasonably clear, failing to inform the claimant in an automobile
4.15property damage liability claim that the claimant may have a claim for loss of use of
4.16the vehicle;
4.17(9) failing to make a good faith assignment of comparative negligence percentages
4.18in ascertaining the issue of liability;
4.19(10) failing to pay any interest required by statute on overdue payment for an
4.20automobile personal injury protection claim;
4.21(11) if an automobile insurance policy contains either or both of the time limitation
4.22provisions as permitted by section65B.55, subdivisions 1 and 2 , failing to notify the
4.23insured in writing of those limitations at least 60 days prior to the expiration of that time
4.24limitation;
4.25(12) if an insurer chooses to have an insured or claimant, whichever is appropriate
4.26under paragraph (a), examined as permitted by section65B.56, subdivision 1 , failing to
4.27notify the insured or claimant of all of the insured's or claimant's rights and obligations
4.28under that statute, including the right to request, in writing, and to receive a copy of the
4.29report of the examination;
4.30(13) failing to provide, to an insured or claimant, whichever is appropriate under
4.31paragraph (a), who has submitted a claim for benefits described in section65B.44 , a
4.32complete copy of the insurer's claim file on the insured or claimant, excluding internal
4.33company memoranda, all materials that relate to any insurance fraud investigation,
4.34materials that constitute attorney work product or that qualify for the attorney-client
4.35privilege, and medical reviews that are subject to section145.64 , within ten business days
4.36of receiving a written request from the insured or claimant. The insurer may charge the
5.1insured or claimant a reasonable copying fee. This clause supersedes any inconsistent
5.2provisions of sections72A.49 to
72A.505 ;
5.3(14) if an automobile policy provides for the adjustment or settlement of an
5.4automobile loss due to damaged window glass, failing to provide payment to the insured's
5.5or claimant's, whichever is appropriate under paragraph (a), chosen vendor based on a
5.6competitive price that is fair and reasonable within the local industry at large.
5.7Where facts establish that a different rate in a specific geographic area actually served
5.8by the vendor is required by that market, that geographic area must be considered. This
5.9clause does not prohibit an insurer from recommending a vendor to the insured or
5.10claimant, whichever is appropriate under paragraph (a), or from agreeing with a vendor
5.11to perform work at an agreed-upon price, provided, however, that before recommending
5.12a vendor, the insurer shall offer its insured or claimant, whichever is appropriate under
5.13paragraph (a), the opportunity to choose the vendor. If the insurer recommends a vendor,
5.14the insurer must also provide the following advisory:
5.15"Minnesota law gives you the right to go to any glass vendor you choose, and
5.16prohibits me from pressuring you to choose a particular vendor.";
5.17(15) requiring that the repair or replacement of motor vehicle glass and related
5.18products and services be made in a particular place or shop or by a particular entity, or by
5.19otherwise limiting the ability of the insured or claimant, whichever is appropriate under
5.20paragraph (a), to select the place, shop, or entity to repair or replace the motor vehicle
5.21glass and related products and services; or
5.22(16) engaging in any act or practice of intimidation, coercion, threat, incentive,
5.23or inducement for or against an insured or claimant, whichever is appropriate under
5.24paragraph (a), to use a particular company or location to provide the motor vehicle glass
5.25repair or replacement services or products. For purposes of this section, a warranty shall
5.26not be considered an inducement or incentive.
5.27EFFECTIVE DATE.This section is effective August 1, 2011, and applies to claims
5.28submitted on or after that date.
1.3certain automobile insurance claims; providing certain rights for third-party
1.4claimants in insurance settlement of claims;amending Minnesota Statutes 2010,
1.5section 72A.201, subdivision 6.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. Minnesota Statutes 2010, section 72A.201, subdivision 6, is amended to
1.8read:
1.9 Subd. 6. Standards for automobile insurance claims handling, settlement offers,
1.10and agreements. (a) This subdivision applies to automobile insurance claims made
1.11by insureds, claimants, or both, as those terms are defined in subdivision 3, depending
1.12upon whether the claim is a first-party claim by an insured against the insured's own
1.13insurer, or a third-party liability or other claim by a claimant against an insured, which the
1.14insured has submitted to the insured's insurer. A person making a nonliability claim for
1.15basic economic loss benefits, as defined in section 65B.43, subdivision 10, from a plan
1.16of reparation security under which the person is not an insured, is considered a claimant
1.17for purposes of this subdivision. Where a provision of this subdivision uses the phrase
1.18"insured or claimant," it means the insured in the case of a first-party claim and means the
1.19claimant in the case of a third-party claim.
1.20(b) In connection with a settlement or offer of settlement made to:
1.21(1) an insured under this subdivision, the insurer must provide the insured with a
1.22written explanation of the basis for the amount of the settlement or offer of settlement; and
1.23(2) a claimant under this subdivision, the insurer must provide the claimant with a
1.24written explanation of the basis for the amount of the settlement or offer of settlement.
2.1This does not limit the right of the insurer to also provide the written explanation, or any
2.2other information, to the insurer's insured.
2.3(c) In addition to the acts specified in subdivisions 4, 5, 7, 8, and 9, the following
2.4acts by an insurer, adjuster, or a self-insured or self-insurance administrator constitute
2.5unfair settlement practices:
2.6(1) if an automobile insurance policy provides for the adjustment and settlement of
2.7an automobile total loss on the basis of actual cash value or replacement with like kind
2.8and quality and the insured or claimant, whichever is appropriate under paragraph (a), is
2.9not an automobile dealer, failing to offer one of the following methods of settlement:
2.10
2.11license fees, at least pro rata for the unexpired term of the replaced automobile's license,
2.12and other fees incident to the transfer or evidence of ownership of the automobile paid, at
2.13no cost to the insured or claimant, whichever is appropriate under paragraph (a), other
2.14than the deductible amount as provided in the policy;
2.15
2.16automobile, including all applicable taxes, license fees, at least pro rata for the unexpired
2.17term of the replaced automobile's license, and other fees incident to transfer of evidence
2.18of ownership, less the deductible amount as provided in the policy. The costs must be
2.19determined by:
2.20
2.21options, in the local market area of the insured or claimant, whichever is appropriate under
2.22paragraph (a), if such an automobile is available in that area; or
2.23
2.24located within the local market area when a comparable automobile is not available in the
2.25local market area. The insured or claimant, whichever is appropriate under paragraph (a),
2.26shall be provided the information contained in all quotations prior to settlement; or
2.27
2.28above must be documented and justified in detail. The basis for the settlement or offer
2.29of settlement must be explained to the insured or claimant, whichever is appropriate
2.30under paragraph (a);
2.31(2) if an automobile insurance policy provides for the adjustment and settlement
2.32of an automobile partial loss on the basis of repair or replacement with like kind and
2.33quality and the insured is not an automobile dealer, failing to offer one of the following
2.34methods of settlement:
2.35
2.36repair of the motor vehicle. Satisfactory repair includes repair of both obvious and hidden
3.1damage as caused by the claim incident. This assumption of cost may be reduced by
3.2applicable policy provision; or
3.3
3.4vehicle. Satisfactory repair includes repair of obvious and hidden damage caused by the
3.5claim incident, and includes reasonable towing costs;
3.6(3) regardless of whether the loss was total or partial, in the event that a damaged
3.7vehicle of an insured or claimant, whichever is appropriate under paragraph (a), cannot be
3.8safely driven, failing to exercise the right to inspect automobile damage prior to repair
3.9within five business days following receipt of notification of claim. In other cases the
3.10inspection must be made in 15 days;
3.11(4) regardless of whether the loss was total or partial, requiring unreasonable travel
3.12of a claimant or insured, whichever is appropriate under paragraph (a), to inspect a
3.13replacement automobile, to obtain a repair estimate, to allow an insurer to inspect a repair
3.14estimate, to allow an insurer to inspect repairs made pursuant to policy requirements, or
3.15to have the automobile repaired;
3.16(5) regardless of whether the loss was total or partial, if loss of use coverage
3.17exists under the insurance policy, failing to notify an insured at the time of the insurer's
3.18acknowledgment of claim, or sooner if inquiry is made, of the fact of the coverage,
3.19including the policy terms and conditions affecting the coverage and the manner in which
3.20the insured can apply for this coverage;
3.21(6) regardless of whether the loss was total or partial, failing to include the insured's
3.22deductible in the insurer's demands under its subrogation rights. Subrogation recovery
3.23must be shared at least on a proportionate basis with the insured, unless the deductible
3.24amount has been otherwise recovered by the insured, except that when an insurer is
3.25recovering directly from an uninsured third party by means of installments, the insured
3.26must receive the full deductible share as soon as that amount is collected and before any
3.27part of the total recovery is applied to any other use. No deduction for expenses may be
3.28made from the deductible recovery unless an attorney is retained to collect the recovery, in
3.29which case deduction may be made only for a pro rata share of the cost of retaining the
3.30attorney. An insured is not bound by any settlement of its insurer's subrogation claim with
3.31respect to the deductible amount, unless the insured receives, as a result of the subrogation
3.32settlement, the full amount of the deductible. Recovery by the insurer and receipt by the
3.33insured of less than all of the insured's deductible amount does not affect the insured's
3.34rights to recover any unreimbursed portion of the deductible from parties liable for the loss;
3.35(7) requiring as a condition of payment of a claim that repairs to any damaged
3.36vehicle must be made by a particular contractor or repair shop or that parts, other than
4.1window glass, must be replaced with parts other than original equipment parts or engaging
4.2in any act or practice of intimidation, coercion, threat, incentive, or inducement for or
4.3against an insured to use a particular contractor or repair shop. Consumer benefits included
4.4within preferred vendor programs must not be considered an incentive or inducement. At
4.5the time a claim is reported, the insurer must provide the following advisory to the insured
4.6or claimant, whichever is appropriate under paragraph (a):
4.7"You have the legal right to choose a repair shop to fix your vehicle. Your policy
4.8will cover the reasonable costs of repairing your vehicle to its pre-accident condition no
4.9matter where you have repairs made. Have you selected a repair shop or would you
4.10like a referral?"
4.11After an insured or claimant, whichever is appropriate under paragraph (a), has
4.12indicated that the insured or claimant has selected a repair shop, the insurer must cease all
4.13efforts to influence the insured's or claimant's choice of repair shop;
4.14(8) where liability is reasonably clear, failing to inform the claimant in an automobile
4.15property damage liability claim that the claimant may have a claim for loss of use of
4.16the vehicle;
4.17(9) failing to make a good faith assignment of comparative negligence percentages
4.18in ascertaining the issue of liability;
4.19(10) failing to pay any interest required by statute on overdue payment for an
4.20automobile personal injury protection claim;
4.21(11) if an automobile insurance policy contains either or both of the time limitation
4.22provisions as permitted by section
4.23insured in writing of those limitations at least 60 days prior to the expiration of that time
4.24limitation;
4.25(12) if an insurer chooses to have an insured or claimant, whichever is appropriate
4.26under paragraph (a), examined as permitted by section
4.27notify the insured or claimant of all of the insured's or claimant's rights and obligations
4.28under that statute, including the right to request, in writing, and to receive a copy of the
4.29report of the examination;
4.30(13) failing to provide, to an insured or claimant, whichever is appropriate under
4.31paragraph (a), who has submitted a claim for benefits described in section
4.32complete copy of the insurer's claim file on the insured or claimant, excluding internal
4.33company memoranda, all materials that relate to any insurance fraud investigation,
4.34materials that constitute attorney work product or that qualify for the attorney-client
4.35privilege, and medical reviews that are subject to section
4.36of receiving a written request from the insured or claimant. The insurer may charge the
5.1insured or claimant a reasonable copying fee. This clause supersedes any inconsistent
5.2provisions of sections
5.3(14) if an automobile policy provides for the adjustment or settlement of an
5.4automobile loss due to damaged window glass, failing to provide payment to the insured's
5.5or claimant's, whichever is appropriate under paragraph (a), chosen vendor based on a
5.6competitive price that is fair and reasonable within the local industry at large.
5.7Where facts establish that a different rate in a specific geographic area actually served
5.8by the vendor is required by that market, that geographic area must be considered. This
5.9clause does not prohibit an insurer from recommending a vendor to the insured or
5.10claimant, whichever is appropriate under paragraph (a), or from agreeing with a vendor
5.11to perform work at an agreed-upon price, provided, however, that before recommending
5.12a vendor, the insurer shall offer its insured or claimant, whichever is appropriate under
5.13paragraph (a), the opportunity to choose the vendor. If the insurer recommends a vendor,
5.14the insurer must also provide the following advisory:
5.15"Minnesota law gives you the right to go to any glass vendor you choose, and
5.16prohibits me from pressuring you to choose a particular vendor.";
5.17(15) requiring that the repair or replacement of motor vehicle glass and related
5.18products and services be made in a particular place or shop or by a particular entity, or by
5.19otherwise limiting the ability of the insured or claimant, whichever is appropriate under
5.20paragraph (a), to select the place, shop, or entity to repair or replace the motor vehicle
5.21glass and related products and services; or
5.22(16) engaging in any act or practice of intimidation, coercion, threat, incentive,
5.23or inducement for or against an insured or claimant, whichever is appropriate under
5.24paragraph (a), to use a particular company or location to provide the motor vehicle glass
5.25repair or replacement services or products. For purposes of this section, a warranty shall
5.26not be considered an inducement or incentive.
5.27EFFECTIVE DATE.This section is effective August 1, 2011, and applies to claims
5.28submitted on or after that date.
