Minnesota District Court Grants Insureds Permission to Amend Complaint for Bad Faith Denial of First-Party Benefits

One of the most common questions our clients ask us is whether there is any way to make an insurance company pay for the legal fees and costs they have incurred in order to secure the coverage they’re entitled to. Because claims are based upon the insurance policy, the answer to that question is, “usually not, except in rare circumstances.”

Our clients are always disappointed in this answer. They justifiably feel that it is unfair that they must bear the brunt of the financial impact of costly litigation simply to prove their insurance company isn’t giving them the coverage they are owed under their policy. Naturally, the next question our clients ask us is, “what are the circumstances in which an insurance company could be liable to pay my attorney fees?”

Each state has different but similar mechanisms where an insured can demonstrate that an insurance company lacked a reasonable basis for its claim determination, then the insured can bring an additional claim against the insurance company for attorney fees and additional damages, above and beyond what the policy may afford them in coverage.

In Minnesota, Plaintiffs cannot begin a lawsuit by alleging that the insurance company acted in bad faith. Rather, they must make a formal motion to the court, showing facts which demonstrate that the insurance company may have acted without a reasonable basis for its claim determinations.

However, if the insurance company can show that its claim determination was “fairly debatable” then it is entitled to debate the claim-even if it ends up being wrong. For these reasons, it is notoriously difficult to amend a complaint to add a count for Bad Faith in Minnesota.

Attached a recent order from a district court which grants insureds permission to amend their complaint to seek additional damages and attorney fees from their insurance company. The insureds’ house was damaged by a tornado. Their insurance company hired an engineering firm which the insureds allege conducted an unreasonably limited investigation, concluding that no structural damage had been caused to the home. Even though the insurance company’s engineers specifically stated in their report that their report could not be used as a basis for repairs, the insurance company based all of its repair estimates on this cursory report. The Court concluded a jury may eventually find this demonstrated a lack of reasonable basis for the insurance company’s determination, and granted the insureds permission to add a count of bad faith. The case is still ongoing.

If you think your insurance company acted in bad faith or was unreasonable in handling your claim, Call Smith Jadin Johnson today!

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