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What Is The Time for Responding to a Defense Tender?

An insurer has 10 business days to acknowledge the receipt of a claim. Minn. Stat. § 72A.201, Subd. 4(1).

An insurer must accept or deny a claim within 30 business days of receipt of notification of claim. Minn. Stat. § 72A.201, Subd. 4(3).

Does Reserving Rights Create a Conflict of Interest?

Not necessarily.  Issuance of a reservation of rights does not create an automatic conflict of interest.  Mutual Service Cas. Ins. Co. v. Luetmer, 474 N.W.2d 365, 368 (Minn. App. 1991).

Does a Reservation of Rights Create Additional Duties?

No cases.

What Must Be Done If A Conflict of Interest Exists?

An insurer must allow insured to choose independent counsel when a reservation of rights creates an actual conflict of interest.  Mutual Service Cas. Ins. Co. v. Luetmer, 474 N.W.2d 365, 368 (Minn. App. 1991). An “actual conflict” exists, for example, if the claims against the insured involve both covered and uncovered claims and the defense counsel could manipulate the case to establish liability for the uncovered claims and away from the covered claims.  Id.

Who Is Responsible for Fees of Independent Counsel?

Should an actual conflict arise, insurer is responsible for reasonable attorney’s fees incurred by independent counsel.  Prahm v. Rupp Construction Co., 277 N.W.2d 389, 390 (Minn. 1979).

What Are Independent Counsel’s Obligations?

None found.

What Settlement Duties Exist?

Insurer’s right to control settlement negotiations must be subordinate to the defense and indemnification (within limits of policy) of the insured.  Kissoondath v. U.S. Fire Ins. Co., 620 N.W.2d 909, 915 (Minn. App. 2001).

What Actions May Result in a Claim for Bad Faith?

Breach of duty to settle:  Short v. Dairyland Ins. Co., 334 N.W.2d 384 (Minn. 1983).

Bad faith claim handling: An insurer’s denial of claim does not constitute independent tort, absent exceptional circumstances.  Pillsbury Co. v. National Union Fire Ins. Co. of Pittsburg, 425 N.W.2d 244, 248 (Minn. App. 1988). 

Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?

An insured is entitled to recover attorneys’ fees incurred in defending itself in the underlying litigation, as well as the attorneys’ fees incurred in pursuit of a coverage action, where the liability carrier wrongfully denies its duty to defend, regardless of any bad faith determination. American Standard Ins. Co. v. Le, 551 N.W.2d 923, 927 (Minn. 1996), abrogated Rubey v. Vannett, 714 N.W.2d 417 (Minn. 2006); SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 316 (Minn. 1995) (overruled on other grounds).

Are Punitive Damages Recoverable in Insurer-Insured Dispute?

Punitive damages are not recoverable in actions for breach of contract, except in exceptional circumstances where the breach is accompanied by an independent, willful tort.  Olson v. Rugloski, 277 N.W.2d 385, 388 (Minn. 1979).

Alternative Coverage Options

An insurer who is obligated to defend its insured may contest coverage with creating a conflict of interest by instituting a declaratory judgment action prior to trial on the underlying claim. Prahm v. Rupp Construction Co., 277 N.W.2d 389, 390 (Minn. 1979).

If the insurer seeks a declaratory judgment, it should provide it’s insured with independent counsel. Mutual Service Cas. Ins. Co. v. Luetmer, 474 N.W.2d 365, 368 (Minn.Ct. App. 1991).

Relevant Statutes

Declaratory Judgment – Minn. Stat. § 555.01. 

“Courts of record within their respective jurisdictions, shall have power to declare rights, status, and other legal relations whether or not further relief is or could be claimed.  No action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is prayed for.  The declaration may be either affirmative or negative in form and effect; and such declarations shall have the force and effect of a final judgment or decree.”

Unfair Claims Settlement Practices Statute. Minn.Stat. § 72A.20 and

Insurance Standard of Conduct – Minn.Stat. § 604.18.

Minnesota does not recognize a private right of action for violation of the state’s claim handling statutes. See Morris v. American Fam. Mut. Ins. Co., 386 N.W.2d 233, 237 (Minn. 1986).

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