Suffering property damage is never easy, but the loss is often compounded by the perception (or reality) that the insurance company is not properly handling the claim. If there is an actual mismanagement of the adjustment of the claim, there are several avenues available for a policyholder to seek redress.
First, the insurance policy itself is a contract that details the rights and obligation of the parties. The policyholder has various duties and obligations under the policy, which includes such things as timely reporting of a loss, cooperating with the investigation and adjustment of the loss and providing proof of the loss, among others. On the flip side, the insurance company has its own set of duties and obligations under the Policy, which, most importantly includes the timely payment of a covered loss. If the insurance company fails to comply with its contractual duties and obligations, a court can hold them in compliance.
A second, perhaps lesser-known option, is to file a complaint with the Minnesota Department of Commerce, which is tasked with regulating the insurance industry under the executive branch of government.
In addition to the duties and obligations detailed in an insurance policy, insurance companies licensed to issue insurance policies must comply with certain statutory obligations when adjusting an insurance claim. One of the statutes/laws governing insurers in the adjustment of an insurance claim in Minnesota is commonly known as the Unfair Claims Practices Act (Minn. Stat. §72A.201). The Unfair Claims Practices Act is enforced by the Minnesota Department of Commerce.
The Unfair Claims Practices Act details a number of acts that constitute an “unfair settlement practice”. Some, but not all, of these acts may be incorporated into the terms and conditions of insurance policies; therefore an insurer may be both in violation of the Unfair Claims Practices Act and in breach of the policy.
The section of the Unfair Claims Practices Act regulating claim filing and handling specifically detailing what an insurance company cannot do is stated below.
Subd. 4. Standards for claim filing and handling. The following acts by an insurer, an adjuster, a self-insured, or a self-insurance administrator constitute unfair settlement practices:
(1) except for claims made under a health insurance policy, after receiving notification of claim from an insured or a claimant, failing to acknowledge receipt of the notification of the claim within ten business days, and failing to promptly provide all necessary claim forms and instructions to process the claim, unless the claim is settled within ten business days. The acknowledgment must include the telephone number of the company representative who can assist the insured or the claimant in providing information and assistance that is reasonable so that the insured or claimant can comply with the policy conditions and the insurer’s reasonable requirements. If an acknowledgment is made by means other than writing, an appropriate notation of the acknowledgment must be made in the claim file of the insurer and dated. An appropriate notation must include at least the following information where the acknowledgment is by telephone or oral contact:
(i) the telephone number called, if any;
(ii) the name of the person making the telephone call or oral contact;
(iii) the name of the person who actually received the telephone call or oral contact;
(iv) the time of the telephone call or oral contact; and
(v) the date of the telephone call or oral contact;
(2) failing to reply, within ten business days of receipt, to all other communications about a claim from an insured or a claimant that reasonably indicate a response is requested or needed;
(3)(i) unless provided otherwise by clause (ii) or (iii), other law, or in the policy, failing to complete its investigation and inform the insured or claimant of acceptance or denial of a claim within 30 business days after receipt of notification of claim unless the investigation cannot be reasonably completed within that time. In the event that the investigation cannot reasonably be completed within that time, the insurer shall notify the insured or claimant within the time period of the reasons why the investigation is not complete and the expected date the investigation will be complete. For claims made under a health policy the notification of claim must be in writing;
(ii) for claims submitted under a health policy, the insurer must comply with all of the requirements of section 62Q.75;
(iii) for claims submitted under a health policy that are accepted, the insurer must notify the insured or claimant no less than semiannually of the disposition of claims of the insured or claimant. Notwithstanding the requirements of section 72A.20,subdivision 37, this notification requirement is satisfied if the information related to the acceptance of the claim is made accessible to the insured or claimant on a secured website maintained by the insurer. For purposes of this clause, acceptance of a claim means that there is no additional financial liability for the insured or claimant, either because there is a flat co-payment amount specified in the health plan or because there is no co-payment, deductible, or coinsurance owed;
(4) where evidence of suspected fraud is present, the requirement to disclose their reasons for failure to complete the investigation within the time period set forth in clause (3) need not be specific. The insurer must make this evidence available to the Department of Commerce if requested;
(5) failing to notify an insured who has made a notification of claim of all available benefits or coverages which the insured may be eligible to receive under the terms of a policy and of the documentation which the insured must supply in order to ascertain eligibility;
(6) unless otherwise provided by law or in the policy, requiring an insured to give written notice of loss or proof of loss within a specified time, and thereafter seeking to relieve the insurer of its obligations if the time limit is not complied with, unless the failure to comply with the time limit prejudices the insurer’s rights and then only if the insurer gave prior notice to the insured of the potential prejudice;
(7) advising an insured or a claimant not to obtain the services of an attorney or an adjuster, or representing that payment will be delayed if an attorney or an adjuster is retained by the insured or the claimant;
(8) failing to advise in writing an insured or claimant who has filed a notification of claim known to be unresolved, and who has not retained an attorney, of the expiration of a statute of limitations at least 60 days prior to that expiration. For the purposes of this clause, any claim on which the insurer has received no communication from the insured or claimant for a period of two years preceding the expiration of the applicable statute of limitations shall not be considered to be known to be unresolved and notice need not be sent pursuant to this clause;
(9) demanding information which would not affect the settlement of the claim;
(10) unless expressly permitted by law or the policy, refusing to settle a claim of an insured on the basis that the responsibility should be assumed by others;
(11) failing, within 60 business days after receipt of a properly executed proof of loss, to advise the insured of the acceptance or denial of the claim by the insurer. No insurer shall deny a claim on the grounds of a specific policy provision, condition, or exclusion unless reference to the provision, condition, or exclusion is included in the denial. The denial must be given to the insured in writing with a copy filed in the claim file;
(12) denying or reducing a claim on the basis of an application which was altered or falsified by the agent or insurer without the knowledge of the insured;
(13) failing to notify the insured of the existence of the additional living expense coverage when an insured under a homeowners policy sustains a loss by reason of a covered occurrence and the damage to the dwelling is such that it is not habitable;
(14) failing to inform an insured or a claimant that the insurer will pay for an estimate of repair if the insurer requested the estimate and the insured or claimant had previously submitted two estimates of repair.
The statutory language stated above details the acts that an insurance company cannot do, but the Unfair Claims Practices Act also includes provisions for what an insurance company must do under certain conditions. Failing to comply with any of these provisions likely violates the statute.
Under Minnesota law, a violation of the Unfair Claims Practices Act does not create a private right of action. This means that an insured may not commence litigation or sue an insurer for violations of the Unfair Claims Practices Act. The proper venue to address violations of the Unfair Claims Practices Act is a complaint filed with the Minnesota Department of Commerce. The resolution of a complaint to the Minnesota Department of Commerce will likely only address compliance with the Act.. The Department of Commerce cannot determine whether the insurance company breached the policy, but it can enforce the Act.
However, if there is a similar provision of the insurance policy that the insurer fails to comply with, then the insured may have a claim for breach of contract in court as well. You can file a complaint with the Minnesota Department of Commerce concurrently with commencing litigation against your insurer. These dispute resolution options are not mutually exclusive.
If you believe your insurance company has violated any of these provisions, you can contact SJJ for a complimentary consultation. SJJ routinely assists property owners with their property insurance claims for many different types of losses and we can help you assess whether the claims process was handled fairly..