New Law: ‘Good faith’ now law

An idea that almost killed last year’s omnibus public safety finance law is now law.

During a May 3, 2007, floor debate, House Minority Leader Marty Seifert (R-Marshall) read a letter from Gov. Tim Pawlenty that said, “This bill will be vetoed swiftly because of the provision related to ‘good faith’ insurance.” The provision was removed and the bill was signed.

A year later, the “good faith” provision is law.

Effective Aug. 1, 2008, the new law states that a policyholder can sue their insurance company for not settling a claim in “good faith,” meaning they can prove that the insurance company did not have a reasonable basis for denying a claim. The insurance company must also have known that it had no reasonable claim, or acted with “reckless disregard” for the lack of reason.

Sponsored by Rep. Joe Atkins (DFL-Inver Grove Heights) and Sen. Tarryl Clark (DFL-St. Cloud), it was signed by the governor April 18.

Removed by a conference committee was a requirement that said the law would be repealed if insurance rates increase more than 20 percent as a result of the law. It was presented as an amendment by Rep. Kurt Zellers (R-Maple Grove) on the House floor.

The conference committee also adjusted compensation limits. An award cap for the insured is now $250,000, while reimbursement for attorneys’ fees is capped at $100,000. Before the conference committee met, the caps in the bill were $100,000 and $40,000, respectively.

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