Minnesota: Trial Lawyers Continue Pursuit of 'Bad Faith' Proposal

Both House and Senate sponsors of last year’s “bad faith” bills have reintroduced their proposals and appear desperate to pass some form of bad faith legislation this year. Last week, H.F. 3115 was approved by the House Commerce Committee on a party-line vote.

The insurance industry is again mounting a vigorous defensive effort and has also drafted an “administrative remedies” proposal as an alternative approach.

Due in large part to the 2006 state and federal election results, trial attorney associations across the country pursued a myriad of anti-civil justice reform initiatives in 2007, chief among them being “bad faith” proposals. Bills in Maryland and Washington were approved and signed by their respective governors. Bills introduced in Oregon, New Hampshire, and Vermont ultimately died at various stages of the process.

The major industry victory of the session was in Minnesota, where the state trial lawyers association conducted a massive effort to pass “double lawsuit” bad faith direct action proposals that would have allowed multiple lawsuits for a single event. NAMIC, NAMICO, the Insurance Federation of Minnesota, and MAFMIC were all part of a business community coalition formed to educate consumers about the adverse impact of bad faith legislation. Despite vigorous opposition from the coalition, legislation was approved in the House and Senate but was ultimately vetoed by Gov. Tim Pawlenty.

According to IFM, during the House committee hearing, Rep. Joe Atkins did not call any witnesses and suggested the bill had been pared down significantly from last year. At one point Atkins said he would be willing to throw a dart at a map and take that state’s bad faith law because, as he claimed, 49 other states have a bad faith law and Minnesota does not.

IFM, MAFMIC, and other industry allies testified in opposition to the bill. The opponents testified about how the need for the bill had not been proven; how the bill had technical deficiencies; and that other alternatives should be seriously considered, including the IFM-sponsored proposal, H.F. 3426/S.F. 3116, which gives the Commerce Department additional authority to enforce the Unfair Claims Settlement Practices Act.

Passage of these “bad faith” proposals would have a severe impact on Minnesota’s litigation environment and would impact insurance markets and the state’s overall economic health. The state just announced a projected budget shortfall of $1 billion. Further complicating the state’s economic future is the proposed merger of Delta and Northwest Airlines, which could result in a loss of 5,000 jobs.

Direct questions to NAMIC's Director – State Affairs Joe Thesing.

Posted: Tuesday, March 04, 2008 12:00:00 AM. Modified: Tuesday, March 04, 2008 2:46:58 PM.

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