Minnesota Supreme Court Rules That State Statute Caps Damages At Policy Limits
04.28.17
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(Article from Insurance Law Alert, April 2017)
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The Minnesota Supreme Court ruled that a state statute that authorizes damages to an insured when an insurer unreasonably denies policy benefits is subject to a cap based on policy limits. Wilbur v. State Farm Mutual Auto. Ins. Co., 2017 WL 1245282 (Minn. Apr. 5, 2017).
Minnesota statutory law provides a remedy for first-party policyholders when an insurer denies a claim without a reasonable basis. Under the statute, a court may award “an amount equal to one-half the proceeds awarded that are in excess of an amount offered by the insurer at least ten days before the trial begins or $250,000, whichever is less.” Minn. Stat. § 604.18. The court ruled that the phrase “proceeds awarded” refers to an amount capped by the insurance policy limit, explaining that the term “proceeds” indicates a monetary amount defined by an insurance policy. Based on this interpretation, the policyholder’s statutory damages were limited to $36,000 (one-half the difference between policy limits and the insurer’s settlement offer), rather than $114,578.30 (one-half the difference between the final jury award and the insurer’s settlement offer).