Understanding Good Faith Law, Insurance and Car Accidents in Minnesota

car accident lawyer minnesotaA “good faith law” is a law that makes it much tougher for insurance companies to wrongfully deny claims. Minnesota has a law of this nature, state statute 604.18, which went into effect in April of 2008. This was a major victory for residents of the state, as Minnesota was one of the few remaining at the time that previously did not have such a law on the books.

What Does The Minnesota Good Faith Law Say?

The law is called the “Insurance Standard of Conduct,” and it establishes conditions under which an insurance company is allowed to deny a claim. Specifically, the company must provide a “reasonable” basis for denying the claim or reducing the claim amount. If the insurance company does not establish a reasonable basis for the reduced claim amount, and the court finds in favor of the policyholder, the policyholder can collect damages and attorney fees in addition to forcing the insurance company to pay the policy limit.

Why This Law Is So Important To Consumers

Previously, insurance companies had a great deal of freedom to simply make an offer far below the policy limits and attempt to force the policy holder to accept it. They could do this without providing any specific reason as to why the offer was so low. If the policyholder wanted to challenge their valuation, they would have to take the company to court and attempt to convince a jury that the insurance company was unfairly withholding money from them. Time and legal costs prevented many consumers from fighting these unfair terms, especially with the insurance companies having a great deal of freedom to delay these cases through frivolous means. And even if a policyholder did win this legal battle, the company might only be forced to pay the policy limit that they were supposed to pay in the first place — no extra damages awarded as compensation for time and trouble, and no recovery of attorney’s fees.

The Good Faith Law greatly limits the ability of insurance companies to get away with this shady practice. If an insurance company intends to make an offer that is below the policy limits, they must provide a concrete reason as to why they are doing so that will stand up in court, explaining exactly how they came to this particular value. They cannot simply make a lowball offer and hope that the policyholder is too distracted, uninformed or intimidated to not challenge it.

The Good Faith Law and Car Accidents

This law applies to what are called “first-party” claims, or those made by a policyholder against their own policy. This means that the Good Faith Law covers automobile insurance, along with homeowner’s and disability insurance.

When will the court find an insurance company to not be acting in good faith, or to not have a reasonable basis for denying or limiting your insurance claim? The court will find in the policyholder’s favor if it can be demonstrated that the insurance company acted in reckless disregard of the new law or in their investigation of the claim. If that is not possible, the court will consider the facts and circumstances of the case and compare them to the hypothetical actions of a reasonable insurer.

What Are The Damage Limits?

Damages awarded generally range up to $250,000. At its discretion, the court can also award up to $100,000 in attorney’s fees.

Fighting A Claim? You Need Experienced Counsel

Though the Good Faith Law goes a long way toward protecting consumers, successfully bringing a case of this nature still requires adherence to complex technical requirements as well as argument in court. You’ll need a good attorney to recover the amount that you are owed. Contact us for an initial consultation.