STATE LAW – MINNESOTA LIBRARY – GUIDE 09
Minnesota Claims Handling & Insurance Bad Faith
Minnesota separates first-party statutory insurer-conduct remedies from no-fault payment rules and from third-party failure-to-settle exposure. The correct cause of action depends on the relationship and conduct at issue.
Claims Handling
Section 604.18 is Minnesota’s principal first-party insurer-conduct remedy
Minn. Stat. § 604.18 permits specified taxable costs when an insurer lacked a reasonable basis for denying benefits and knew or recklessly disregarded the lack of a reasonable basis, subject to the statute’s procedure and limits.
Peterson defines the two-part standard
Peterson v. Western National Mutual Insurance Co., 946 N.W.2d 903 (Minn. 2020), interprets the objective and subjective components of § 604.18. An incorrect coverage position does not automatically satisfy the statutory standard.
No-fault payment rules are separate
Minn. Stat. § 65B.54 provides that basic economic loss benefits are overdue if not paid within 30 days after the reparation obligor receives reasonable proof of the fact and amount of loss, subject to the statute’s accumulation rule. Overdue payments bear 15% simple annual interest. Rejections must be communicated in writing with the reason.
Small no-fault disputes may go to mandatory arbitration
Section 65B.525 requires binding arbitration for qualifying no-fault, comprehensive, or collision claims at issue in the amount of $10,000 or less at the commencement of arbitration. Minnesota’s No-Fault Arbitration Rules were amended effective August 4, 2026, creating a standing maintenance item.
Keep third-party settlement duties separate
Section 604.18 is not a substitute for the separate common-law doctrine governing a liability insurer’s handling of settlement opportunities when its insured faces excess exposure.
Authorities
Primary Minnesota authority for this topic
Use the current statute, controlling decisions, and operative policy before legal reliance.