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Insurance Law Suits in Minnesota and North Dakota

In the small-business context, insurance law often comes into play with regard to coverage disputes or insurance fraud.  An insurance company may claim that the small business or individual is not entitled to coverage because of lack of a timely tender (i.e. failing to inform the insurer of the claim within the period required in the policy), a coverage exclusion such as for intentional torts, or due to a failure of the insured to inform the insurance company of a fact (such as a pre-existing condition) during the application process.

In these cases, the small business or individual may have no choice but to hire a lawyer to sue the insurance company.  If an insurance agent and/or insurance agency was negligent in failing to provide the requested insurance, the small business or individual should also sue that agent and/or agency in the same lawsuit.  The agent and/or agency’s professional malpractice insurer will then typically defend the agent/agency and provide the funds for settlement, if the malpractice insurer’s attorney believes the case has merit.

Insurance law suits often occur as a result of a misunderstanding of the differences between replacement cost coverage and actual cash value coverage.  In layman’s terms, replacement cost coverage means the cost of replacing the property after its destruction while actual cash value coverage means the “blue book” value of the property destroyed or, in other words, the amount paid for the property minus depreciation.  As an example, if a restaurant burns to the ground and the owner had replacement cost coverage, the insurer is obligated to pay the entire cost of replacing the restaurant.  However, if the restaurant owner only had actual cash value coverage, the insurer is only required to pay the owner what the building was worth at the time of its destruction.  Disputes sometimes arise over what the small business owner requested from his insurance agent.  Disputes can also arise over policies that only provide replacement cost coverage if the property is actually replaced within a certain number of days, weeks, or months.  Obviously, it may be impossible for a small business to replace all of the property immediately after payment from the insurer, particularly if the coverage limits are less than the amount needed to actually replace the property.  Such fact situations are often litigated due to the large amounts of money at stake.

Finally, insurance companies often deny coverage due to so-called intentional tort exclusions.  These are particularly evident in medical malpractice insurance policies which specifically exclude coverage for doctors who are accused of sexual improprieties with their patients.  While some plaintiff’s attorneys are savvy enough to draft their complaints to attempt to keep the insurance company on the hook by minimizing the sexual impropriety and maximizing the medical malpractice portion of the patient’s law suit, many insurance companies will see through this façade and will refuse to defend the law suit, even under a reservation of rights.  However, if at least part of the claim is truly for medical malpractice, a suit against the insurance company will then have to be considered.