Good faith, bad faith - it's back

Part of last year’s omnibus public safety finance bill dictated “good faith” practices for insurance companies. But the provision was stripped out when Gov. Tim Pawlenty threatened to veto the bill if the language remained.

This year, Rep. Joe Atkins (DFL-Inver Grove Heights) sponsors another “good faith” bill, HF3115. Approved by the House Commerce and Labor Committee Feb. 26, it’s headed for the House floor.

The original bill, HF1251, included “direct action,” which permits a plaintiff to name an insurance company as a defendant in a claim if certain conditions apply.

That clause is out of the new bill. But provisions would permit someone to sue their insurance company for not working in “good faith” if they can show the insurance company did not have a reasonable basis for denying a claim; and that the company knew it had no reasonable basis for denial, and acted with “reckless disregard” in denying benefits.

Atkins spoke of the Christensens, a family who lost their daughter in a car accident. They had insurance, but it was a matter of years before they would receive their claim. “This doesn’t happen a lot,” he said, “but Minnesota needs a law.”

As was the case the last time “good faith” was put forward, there was opposition.

Dale Thornsjo, co-chairman of the Minnesota Defense Lawyers Association’s Insurance Law Committee, said that although changes were made from last year, it still falls short. Thronsjo said the bill would punish carriers who try to handle cases appropriately, force an increase in premiums and create a new industry of attorneys seeking out these types of cases.

Representing the Minnesota Association of Farm Mutual Insurance Companies, Marcus Marsh said that although the association is specifically exempt from the bill, as it stands, the current language is not enough. “This would make every client a potential lawsuit,” he said.

A companion bill, SF2822, sponsored by Sen. Tarryl Clark (DFL-St. Cloud), awaits action by the Senate Commerce and Consumer Protection Committee.