The Minnesota Supreme Court recently reconsidered the application of Minnesota’s “bad faith” insurance statute. At issue was whether an insurance company has denied a claim in bad faith if it has any conceivable basis to deny the claim at all, or whether a denial must be consistent with what a reasonable insurance company would do with similar facts. SJJ attorneys Tim Johnson and Karly Kauf were called upon to represent United Policyholders, a national non-profit organization that defends the rights of policyholders across the country.
On Wednesday, July 29, 2020, the Minnesota Supreme Court issued its opinion in Peterson v. Western National Mutual Insurance Company, A18-1081 (Minn. July 29, 2020), available here. The Court agreed with SJJ’s position and held that an insurance company must have a reasonable basis to deny a claim, not just any conceivable basis. The decision in Peterson clarifies bad faith liability in Minnesota by making sure that insurance companies are held accountable when they fail to conduct a full and fair evaluation of a claim. In doing so, the Court disagreed with the insurance industry’s argument that if an insurance company could identify “any evidence to support its denial of the benefits of the insurance policy even if there is substantial—even overwhelming—evidence to the contrary, it is not liable.” Instead, the Court reasoned that “the proper objective test . . . is whether a reasonable insurer, having conducted a full investigation and a fair evaluation that considers and weighs all of the facts, would have denied the insured the benefits of the insurance policy.”
This case is just one of several where SJJ attorneys have defended policyholder rights in the highest court in the jurisdiction. At Smith Jadin Johnson, we are proud of the work we do on behalf of policyholders across the country.