Minn. Limits Insurer Liability Under Standard Fire Policy

April 9, 2003

Republican Minnesota Gov. Tim Pawlenty has made his state the third in the nation to enact a law that will go a long way toward stabilizing the commercial insurance market, according to a statement released by property/casualty trade group Alliance for American Insurers.

House File 267, signed into law earlier today, would not require Standard Fire Policy insurance contracts to cover a fire loss that ensues from a certified act of terrorism if the insured has refused coverage offered as mandated by the federal Terrorism Risk Insurance Act (TRIA).

Minnesota become the third state in three weeks to take action to change the Standard Fire Policy Act related to commercial insurance policies following similar action by Virginia and Nebraska.

The New York Standard Fire Policy, as it is commonly referred to, was passed in the 1940s to set a floor of basic fire coverage, said John Lobert, senior vice president of state government affairs for the Alliance.

“This is an antiquated concept that no longer serves a useful purpose because competition ensures that insurers offer much more than basic coverage. Instead, it creates a conflict with the federal TRIA that is potentially dangerous for the financial health of insurers. The Alliance thanks Gov. Pawlenty and Minnesota’s legislators for moving quickly to enact this bill, which should stabilize the state’s commercial insurance market.”

Similar bills have been introduced in Connecticut, Louisiana, Massachusetts, Michigan, New Hampshire and Oklahoma. In addition, industry efforts to change the law are underway in Illinois, New Jersey, Pennsylvania and Washington as well as the other 15 states that require the New York Standard Fire Policy.

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