Thought Leadership

Attention Insurance Contractors: Law Now Requires Additional Notice About Insurance Deductibles

On May 29, 2018, Minnesota Gov. Mark Dayton signed an amendment to the law prohibiting payment or rebate of insurance deductibles on residential construction projects. Minnesota law already stated that a residential contractor providing home repair or improvement services was prohibited from paying, rebating or otherwise compensating a residential property owner for any part of the customer’s insurance deductible. The amended law now requires that as of August 1, 2018, the contractor must provide “written notification of the requirements of this section with the initial estimate.”

The most efficient way to comply with this new law would likely be for the contractor to use its estimating software to automatically add the required notice to every insurance estimate.  Alternatively, contractors could provide each residential customer with a separate notice at the time the initial estimate is presented.

Oddly, the new law does not state the following:

  • Exactly how the notice must be worded.
  • Whether the notice must be in bold type or in a minimum font size
  • Whether the notice must included in the actual estimate or instead as a separate document.
  • Whether the “written” notice must be on paper or could instead be given in an email.
  • To whom the notice is required to be given. The law simply states “[t]he residential contractor must provide a written notification of the requirements of this section with its initial estimate,” but does not state to whom the notice is given. Presumably it is intended that the notice be given to the insured, but sometimes the customer does not even seen initial estimate and it is sent directly to the insurance adjuster.

Also interesting is that the legislature chose to require this type of notice not in the written contract between the contractor and customer but instead when the insurance estimate is created. Arguably the time to warn a customer that it is illegal to cover deductibles is when the contract is signed. By the time the initial insurance estimate is created it is very likely that the customer is already bound by a written contract.

The following is a sample of the language that could be included in the initial estimate or in a separate written notice provided with the initial estimate:

 

NOTICE:  Under Minnesota law, a residential contractor providing home repair or improvement services to be paid by an insured from the proceeds of a property or casualty insurance policy shall not, as an inducement to the sale or provision of goods or services to an insured, advertise or promise to pay, directly or indirectly, all or part of any applicable insurance deductible or offer to compensate an insured for providing any service to the insured. If a residential contractor violates this section, the insurer to whom the insured tendered the claim shall not be obligated to consider the estimate prepared by the residential contractor. (Minn. Stat. §325E.66)

 

Although not required, we suggest putting the notice in at least 10-point and bold type, as that is the requirement for all other notices given to residential customers. Again, the requirement to provide this notice does not apply until August 1, 2018.

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Blake R. Nelson
Phone: 952-746-2131
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