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A fair investigation means that all facts and circumstances are considered and weighed | Property Insurance Coverage Right Blog



The Supreme Court of Minnesota issued an opinion in late July that substantially addresses the Minnesota Statute § 604.18, commonly known as Minnesota's "Bad Faith Law." While it arose in connection with a car accident, the case Peterson v Western National Mutual Insurance Company 1 is still applicable to vehicle insurance claims as § 604.18 applies to both car and car insurance property insurance claims.

In order to establish bad faith in Minnesota, two dioceses must be established:

  1. the absence of a reasonable basis for denying insurance benefits, and
  2. the insurer knew that there was no reasonable basis for denying benefits, or act with ruthlessness or breach of the insured's rights to the benefits of the insurance.

The Supreme Court of Peterson treated the first pin holding as follows:

[T] he right investigation under the first bar in section 604.1
8, subsection 2 standard is whether a reasonable insurance company in the circumstances would not have denied the insured benefits of the insurance policy. In applying this standard, the fact finder should consider the level of investigation that a reasonable insurer would have carried out in the circumstances of the case and how a reasonable insurance company would have evaluated the claims in the light of that investigation. The insurer's evaluation of the insured's claim must be fair. A fair evaluation means an evaluation that takes into account and weighs all the facts and circumstances that a reasonable insurance company would consider relevant.

The Minnesota Supreme Court went on to argue that an insurance company that received a premium for coverage is reasonably expected to investigate all the facts and evaluate the fairness claim in the light of all the evidence. The insurer “cannot ignore evidence that supports coverage; they must weigh all the evidence in the balance to determine if coverage is available. 2

This decision supports what policyholders' advocates have long argued: an insurer should not ignore evidence provided by an insured person during the investigation. Thankfully, the Peterson decision in Minnesota reinforces that an insurer should not only ignore information provided by an insured, but now it can be considered an element of bad faith if they do.
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1 Peterson v. Western National Mutual Ins. Co. No. A18-1081, 2020 WL 4342929 (Minn. 29 July 2020).
2 Id. at 12


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