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MNCLS Contracts Already Contain New Deductibles Notice

If your construction company is using documents for insurance projects that Minnesota Construction Law Services drafted in the past few years, they already comply with the new Minnesota law on deductibles that took effect on August 1. Meanwhile, clients with very old MNCLS contract sets may contact the firm to add the clause at no cost.

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The new statutory provision requires contractors to state in their written estimates and contracts that they are legally barred from offering any inducement that may be construed as offsetting clients' out-of-pocket insurance deductibles. Although the prohibition is nothing new, the written notice requirement is.

"Minnesota Construction Law Services included the written notice in contracts years before the new provision took effect so our clients don't have to spend extra money now to comply with the Aug. 1 law," said MNCLS attorneys Bill Gschwind and Courtney Ernston.

Proponents of the law say the new written requirement educates consumers and discourages unscrupulous contractors who might otherwise cheat to get their business. The lawyers at Minnesota Construction Law Services take a different view.

"We recognize that regulations have their place. However, we are skeptical of regulations aimed at bad contractors that are unlikely to change the bad behavior but force good contractors to spend money to update their contracts," Gschwind said.

"It's understandable that many consumers don't know the law and might ask a contractor to offset all or part of their deductible in the form of a cash reimbursement, gift card or free service, Ernston added. "But it is against the law."

" We were way ahead of the curve with our contract sets," Gschwind said. "If you are our client, the new law will not hurt you. If not, perhaps it's time to change your law firm, not just your documents.

Updated Insurance Contracts Statute

Minnesota Statutes 2016, section 325E.66 Subdivision 1 - Payment or rebate of insurance deductible.

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. The residential contractor must provide a written notification of the requirements of this section with its initial estimate. The adjuster or insurer must provide a written notification of the requirements of this section in the initial estimate relating to the claim.

For purposes of this section, "residential contractor" means a residential roofer, as defined in section 326B.802, subdivision 14; a residential building contractor, as defined in section 326B.802, subdivision 11; and a residential remodeler, as defined in section 326B.802, subdivision 12.

Presented to the governor May 21, 2018

Signed by the governor May 30, 2018, 10:32 a.m.


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