Insurance industry trade groups are praising a Minnesota Senate decision earlier this week to pass a more limited "bad faith" damages bill that they called a "reasonable alternative" to a version pending in the Minnesota House.

However, the Senate bill "is not ideal," said the trade groups in a joint release.

Wednesday the measure was passed by the Senate and sent to the House for consideration.

The Insurance Federation of Minnesota, Minnesota Association of Farm Mutual Insurance Companies, American Insurance Association, National Association of Mutual Insurance Companies, and Property Casualty Insurers Association of America are all part of a coalition of consumers, taxpayers, business and civic groups called Minnesotans Against Fraud and Higher Insurance Costs.

They are lobbying against a bad faith bill supported by the Minnesota Trial Lawyers Association, which remains alive in the form of House File 3115.

The Senate bill provides consumers with a monetary remedy if an insurer acts in "bad faith" while limiting attorneys' fees, and "therefore the incentive to file unnecessary lawsuits," the coalition said.

The amended version caps attorneys' fees at $40,000 while providing consumers up to $100,000 if insurers are found to have acted in "bad faith."

The original Senate version had no such attorneys' fee limit and was read by some to also allow for third-party bad faith, even though the supporters claim they intended it to be first-party only, according to a spokesman for the insurers' group.

The revised bill passed the Senate after rules were suspended to allow for its quick consideration and it is now in the House.

House File 3115, the bill supported by the trial lawyers, could come up for debate in the Minnesota House as early as Tuesday.

H.F. 3115 allows for "costs, damages and reasonable attorney fees" and "could drive up insurance costs because every insurance company would face more lawsuits and higher litigation costs for each insurance claim," the spokesman for the insurers said.

The insurance groups argue that insurers have the duty to protect all their policyholders by reviewing claim payments in cases of suspected fraud or arson.

The original S.F. 2822, and the current H.F. 3115, "encourages the filing of unnecessary lawsuits, and that often creates undue pressure on insurers to pay suspicious or fraudulent claims," the groups said in a statement. "Such additional costs most often get passed on to all consumers and businesses," the statement said.

The statement added that the bills supported by the trial lawyers, and introduced last year as well as this year, "are little more than veiled attempts to create a new opportunity for personal injury lawyers to file lawsuits and generate revenues for themselves at the expense of consumers."

The groups noted in their statement that California and West Virginia both eliminated bad faith lawsuits in their states, "after which analysis showed premiums decreased from 11-19 percent."

"Both states found that their bad faith law led to a dramatic increase in 'frivolous' lawsuits," the statement said.

"With gas prices increasing, home values falling and a forecast for a weaker economy, the insurance trade groups are urging members of the House to defeat legislation such as H.F. 3115.

"They argue the measure will add to the cost of insurance and benefit personal injury attorneys rather than consumers, and instead embrace a more prudent approach as seen in the amended version of S.F. 2822."

Special Reports /

Insurers See Improvement In Minn. Senate Bad Faith Bill

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