In my first article I described rules that insured property owners must abide by for a successful claim. In this article I will address rules that insurance companies must follow. Many of these rules are imposed by state law.
State law writes part of an insurance policy. [1] The government has made sample language that can be copied into an insurance policy to cover losses from fire and lightning. An insurance policy that does not reflect the statutory language will be “reformed” to match it. [2] The form policy language includes several deadlines for insurance companies to follow. Property owners ought to know these deadlines and remind the insurer of them to keep a claim moving.
A state law says that if part of a claim is settled, that part of the claim must be paid within 60 days. Property owners can enforce this deadline. [3] The Minnesota Unfair Claims Practices Act requires payment in 5 days. [4] Unfortunately, only the Attorney General can enforce this statute. However, I have seen many policies that include the 5-day deadline. Property owners ought to check the policy to see if the deadline is 5 days or 60 days. If you don’t meet the deadlines in the policy, you’ve broken the contract (the insurance policy is a contract), and the property owner can go to court to get it enforced.
The insurance company is also obligated to elect whether to rebuild, repair or replace. Within 30 days after the property owner files a proof of loss. [5] The proof of loss is very helpful for property owners because it gives insurers a time limit to respond. The deadline keeps the process moving.
A property owner can write to the insurance company and ask for an appraisal. The insurance company has 20 days to choose an appraiser. As we’ll see below, an insurance appraisal is a way to settle a dispute without going to court. It’s a lot like arbitration. The insurance company has 20 days to choose an appraiser. If it doesn’t, the insurer may be seen as giving up its right to do so, and a district court judge can choose an appraiser with just five days’ notice. One of the appraisers chosen by the insurance company and one chosen by the property owner have 15 days to choose an umpire.
It is required by law for the insurance company to meet the above 60-day (or 5-day) deadline before sending payment following an insurance appraisal award. [7] An appraisal is described below. The deadline applies to partial settlements and appraisal awards.
Old case law defines the scope of an insurance loss to include any repair required by code. [8] If an insurance policy covers the cost of replacing something, it also has to cover repairs that meet the state building code. [9] In fact, contractors or property owners who order repairs that don’t follow the state building code are breaking the law! [10] Any repair covered by an insurance policy should meet the state building code for a repair. Property owners should demand the insurer issue payment that reflects state law. Nobody should be forced to commit a misdemeanor. Today, you can find the state building code on the web at a site run by the Department of Labor and Industry. [11].
If the owner of a property and the insurance company disagree about the amount of an insurance claim, an insurance appraisal should be the place to settle the matter. Appraisal is much like arbitration, and indeed is often referred to as arbitration. The rules that govern a fair arbitration apply to an insurance appraisal. [12].
I use the term “insurance appraisal” because this isn’t the same as hiring a single appraiser to find out how much a house is worth. Three people serve on this arbitration-like panel to decide the scope of the loss. One person is chosen by the property owner and one is chosen by the insurance company. These two “appraisers” then choose a neutral umpire. If two of the three agree on how much the loss is, all three must follow it.
A lot of disagreements are settled in appraisals about things like the cost of materials and labor, whether damage seen was caused by a storm or a problem with the construction that was there before the storm, whether the damage from a previous storm happened too late, and other similar issues. In Minnesota, any dispute about what caused an observed loss should be decided in appraisal. [13] Property owners need to appoint a highly qualified appraiser for the panel. The most important thing is that the appraiser must be neutral, which means that they can give a fair opinion. At a minimum, the appraiser should not have a financial interest in the outcome. The person doing the appraisal can get paid for the time it takes to prepare and do the appraisal, but they shouldn’t have a stake in how it turns out. The person who will do the work for the property owner and any public adjuster who has fought for the property owner should not be the appraiser. A good appraiser will also insist on selection of a true neutral umpire. A novice appraiser might agree to appoint a neutral umpire who has a strong bias towards insurance companies. If there is a disagreement about who should be the umpire, the Minnesota statute says that the parties should ask the judge to choose a neutral umpire. [14].
There are several safeguards in place to ensure a fair process. An insured person has the right to say what she thinks and have her “day in court,” which means being fully heard on all sides of the case. An appraisal panel should not consider evidence not presented to the panel. For example, an appraisal panel should not call lumber yards regarding current pricing. If the parties do not present that evidence the panel should not independently go obtain it. This rule gives both property owners and insurance companies a chance to see, understand, and question the evidence that is presented to an appraisal panel. Property owners have other rights as well such as reasonable notice of the date for an appraisal hearing. These safeguards, when properly followed, usually lead to a fair outcome regarding the scope of the loss.
In my next article, I’ll talk about “tips from the trenches” that homeowners can use to make sure their appraisal goes well.
[8] A. H. Jacobson Co. v. Commercial Union Assur. Co. , 83 F. Supp. 674, 677 (D. Minn. 1949), citing Larkin v. Glen Falls Ins. Co. , 80 Minn. 527, 83 N. W. 409, 81 Am. St. Rep. 286 (Minn. 1900).
[10] Minn. Stat. § 326B. 081 Subd. 3; § 326B. 082 Subd. 16; State v. Hardy, 2013 WL 118796 (Minn. Ct. App. 2013).
[12] QBE Ins. Corp. v. Twin Homes of French Ridge Homeowners Ass’n. , 778 N. W. 2d 393, 398 (Minn. Ct. App. 2010).
Navigating Home Insurance Claims in Minnesota: A Guide
Filing an insurance claim after property damage or loss can be a frustrating and confusing process. As a homeowner in Minnesota, it’s important to understand your rights under state law when navigating the claims process. This guide provides an overview of key Minnesota statutes related to home insurance claims that all policyholders should know.
Proof of Loss Requirements
One important law governing insurance claims in Minnesota is Statute 65A296, which establishes proof of loss requirements Here are some of the key provisions homeowners need to understand
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Insurance companies are allowed to require the policyholder submit a completed proof of loss form within 60 days of receiving written notice of the claim
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The insurance company must send the notice by certified mail and it must include the proof of loss form and instructions for completing it.
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If the insurer properly notified the insured but the policyholder failed to submit timely proof of loss without good cause, this can legally bar recovery of the claim.
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However, if the insurer failed to properly notify the insured, then the failure to submit timely proof of loss does not bar recovery of the claim, unless the insurer can prove actual prejudice.
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The proof of loss form and instructions provided by the insurer must meet “readability standards” under Minnesota statutes.
The bottom line is insurance companies can’t simply deny a claim because the homeowner missed the 60 day deadline for proof of loss. The insurer must show they properly notified the insured and prove the delay somehow harmed their interests.
Prompt Claim Handling
Another important Minnesota law governing home insurance claims is Statute 72A.201, which requires prompt and good faith claim handling. Here are some key provisions:
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Claims must be paid or denied within 30 business days of the insurer receiving a completed proof of loss form.
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If all or part of the claim is denied, the insurance company must provide the policyholder written notice explaining the reasoning for the denial.
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Insurers cannot deny a claim based on the insured’s failure to exhibit property, unless the insurer reasonably requested to inspect the property.
This statute empowers the Minnesota Department of Commerce to take enforcement action against unfair claims practices by insurers. Homeowners can file official complaints with the department if they believe the insurance company is unlawfully delaying resolution of a claim.
Recovering Damage Estimates
Minnesota law also grants policyholders the right to copies of damage estimates related to an insurance claim. Under Statute 72A.201, subd. 4(2), key provisions include:
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Insurers must provide copies of their damage estimates, repair bids, cost estimates, and justification for betterment deductions if requested by the insured.
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Estimates must be provided within 10 business days of receiving the request.
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Insurers must also provide written notice to the insured detailing their right to receive damage estimate information.
Having access to the insurance company’s estimates allows policyholders to verify the accuracy and fairness of claim payments.
Recovering Depreciation Holdbacks
Many insurance policies include depreciation holdbacks, where the insurer deducts money from the claim payment to account for depreciation of damaged property. But Minnesota law requires insurers to pay out depreciation holdbacks in increments as repairs are made. Key provisions under Statute 65A.01, subd. 3:
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If the insurer’s payment was reduced based on depreciation of damaged property, additional payments must be made as repairs are completed.
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The insurer cannot require that repairs be made by a specific vendor or contractor.
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Total claim payments including depreciation holdback cannot exceed the policy limits.
Understanding these requirements can help homeowners fully recover repair costs after a covered loss.
Recovering for Code Upgrades
Standard insurance policies only cover repairs to restore a home to its original condition before the loss. However, Minnesota law requires coverage for certain code-related upgrades under Statute 65A.01, subd. 3:
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If the insured must comply with building codes when making repairs, the insurer must pay up to $25,000 for code-required upgrades.
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Common covered code upgrades include improved roof sheathing, electrical, plumbing, and insulation.
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The insurer only pays the direct cost of complying with the codes. Upgrades to undamaged sections are not covered.
This provision gives important protection to policyholders making major repairs after a covered loss.
Temporary Living Expense Coverage
Homeowners policies in Minnesota generally provide coverage for additional living expenses if a covered loss makes the residence uninhabitable. Key provisions under Statute 65A.01, subd. 3 include:
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Insurers must cover losses up to policy limits for reasonable temporary living expenses if a loss makes the home unlivable.
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Covered expenses include costs of relocating, lodging, meals, and other essential purchases.
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The insurer cannot arbitrarily require the insured relocate more than 200 miles away or cap daily meal expenses.
Clearly understanding the details of temporary living expense coverage is critical for policyholders displaced from their home after a major covered loss.
Replacement Cost vs. Actual Cash Value
Two important insurance terms related to loss settlement are replacement cost and actual cash value:
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Replacement cost is the amount needed to fully repair or rebuild damaged property without deducting for depreciation. This allows for full recovery in most cases.
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Actual cash value provides for depreciation and is usually less than the cost of full repair or replacement. Insurers may initially pay ACV until repairs are made.
Minnesota law allows policies to be written on either a replacement cost or ACV basis. Policyholders should understand which method their particular insurer uses to avoid underpayment disputes.
Reviewing Policy Exclusions
While homeowners insurance provides broad property and liability protection, policies also contain exclusions that limit coverage in certain scenarios. Common Minnesota policy exclusions include:
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Damage from flooding, earth movement, groundwater seepage. Separate flood insurance is usually required.
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Intentional loss or damage caused by illegal acts committed by the policyholder.
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Gradual damage from wear and tear, deterioration, rust, or hidden defects.
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Losses occurring when the property has been vacant beyond a specified period (often 30 days).
Carefully reviewing the exclusions section of the insurance policy can help avoid unpleasant surprises in the event of a claim.
The claims process after a damaging home loss can be extremely stressful. Understanding Minnesota’s key home insurance claim laws allows policyholders to effectively assert their rights and work toward a fair insurance claim settlement. Critical protections include proof of loss requirements, prompt payment rules, access to damage estimates, recovering depreciation, coverage for code upgrades, and temporary living expenses. Any homeowner faced with a major insurance claim should review policy terms and Minnesota statutes to fully understand their legal rights.
MN Homeowners Insurance Claims | MN Laws Related to Material Match Coverage
FAQ
How long does an insurance company have to settle a claim in Minnesota?
How long do you have to file a homeowners insurance claim in Minnesota?
What are the disadvantages of filing a homeowners insurance claim?
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Pros
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Cons
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Reimbursement for repairs Reimbursement for personal items Cash for additional living expenses Help with medical and legal costs
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Potential premium increases Challenges with future coverage Required deductible Time-consuming process
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What is the statute 65a 29 in Minnesota?
How do I cancel a home insurance policy in Minnesota?
In all cases, a reason for the cancellation or nonrenewal must be stated in the notice and the homeowner advised of his or her right to send a letter of complaint to the Commissioner of Commerce. The homeowner must also be notified of the right to apply to the Minnesota FAIR Plan for coverage. Opportunity for coverage through the FAIR Plan.
What should I do if I receive a claim in Minnesota?
Promptly – After receiving notice of your claim, your insurer must promptly provide necessary claim forms, instructions, and the phone number of a company representative that will help you comply with the policy conditions and the insurer’s reasonable requirements. Minnesota Statute 72A.201, subdivision 4 Communicating information to you
What if my insurance claim is denied in Minnesota?
Minnesota Stat. 72A.201, subd. 4(3)(i) Paying or denying your claim 30 Business Days – An insurer must let you know if your claim is being accepted or denied within 30 business days after receipt of notification of a claim.
What are unfair claim practices in Minnesota?
Unfair Claim Practices Your insurer is prohibited from using unfair claim practices and/or treating you badly during the claim process. These practices are set out generally Minnesota Administrative Rulesand more specifically in the Minnesota Statutes. Minnesota has adopted the Unfair Claims Settlement Practices Act.