Showdown builds at Capitol between trial lawyers, insurers

A bill that pits the insurance industry against the trial lawyers -- two of the Capitol's most powerful lobbying groups -- appears headed for another showdown with the promise of expending more cash and more rhetoric.

The bill, which has been the subject of intense lobbying for years, would require insurers to act in "good faith" when dealing with policyholders' "first party" claims, which are disputes between a policyholder and his or her insurer.

On Tuesday, the Senate passed an amended version of the bill that includes a limit on damages and attorneys' fees, a move that was cautiously accepted by the insurance industry as a reasonable compromise. But the author of the bill, Sen. Tarryl Clark, DFL-St. Cloud, predicted the provision would not make it into a final version when the Senate bill is reconciled with a version moving through the House, which does not limit legal fees.

"The goal here is to try to make sure that if you've purchased insurance and something bad happens, you get what you've paid for," Clark said during debate on the measure.

The Senate version passed by a voice vote after Sen. Linda Scheid, DFL-Brooklyn Park, who has bucked her caucus over the bill, offered the amendment to cap fees, saying that would make the insurance companies know the risk going into a potential court case and likely encourage them to settle.

"This benefits the consumer, and I look at it as if we are all consumers and all our constituents are insurance consumers," Scheid said.

Nevertheless, she said, premiums would probably rise as a result of the bill.

The bill, which is limited to auto and home insurance, would require a policyholder to show that the insurer had no reason to deny the claim and was reckless in its denial.

Joe Crumley, president of the Minnesota Association for Justice, formerly the Minnesota Trial Lawyers Association, said the vote was a good step in getting a bill passed. "I fully expect to see fewer people coming to my door, because their insurance company is going to treat them better," he said. "The point of the bills is to make the insurance company pay what they should pay, not more than what they should pay. It's only the ones who fail to act in good faith who have anything to worry about in these bills."

Mark Kulda, vice president of public affairs for the Insurance Federation of Minnesota, said the industry was more accepting of the bill with Scheid's amendment, which he said makes it better for consumers.

The focus now turns to the House, where the trial lawyers have historically focused considerable donations to the DFL majority caucus. As it did last year with an aggressive media campaign costing more than $500,000, the insurance industry is already countering with newspaper advertisements warning of "the trial lawyers tax" and advising citizens to call their legislators to urge them to reject the bill.

On Monday, Rep. Steve Smith, R-Mound, asked for a personal privilege on the House floor to denounce what he said were personal attacks against him being made by the insurance industry. Smith, an attorney whose work does not involve suing insurance companies, said he has been accused of supporting the bill for personal professional benefit.