Property Insurance Chapter 10
Fees
$50 application fee for an insurance producer license or limited lines producer $60 fee for an insurance producer license renewal $30 fee for a limited lines producer license renewal $15 fee for the appointment or termination of an appointment for an insurance producer or a limited lines producer
Other Topics
-Misrepresentation- It is an illegal practice to misrepresent any fact about an insurance policy, such as policy terms, benefits, value, cost, effective date, or existence of a contract of insurance. -False Financial Statements- It is illegal to publish any false financial statement regarding a person or entity. -Referral Fees- The Commissioner may establish by rule a maximum amount for each referral The person making the referral may not discuss the specific policy terms and conditions Referral fees may not be tied to the purchase of a policy
Business Entity
A business entity is a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.
Producer appointments
A producer cannot act as an agent for an insurer unless he or she is appointed to work for that insurer. Insurers are responsible for submitting an appointment notice to the Commissioner within 15 days of an agent's appointment or submission of first insurance application. The insurer is also responsible for paying the agent's appointment renewal fee.
Reinstatement and Renewal
A producer who allows his or her license to lapse may, within 12 months from the renewal date, reinstate the license without retaking the state licensing exam. However, a penalty of double the unpaid renewal fee will be required.
Reinstatement and renewal
A producer who allows his or her license to lapse may, within 12 months from the renewal date, reinstate the license without retaking the state licensing exam. However, a penalty of double the unpaid renewal fee will be required.
ANSI
American National Standards Institute
Adverse Action
An "Adverse action" is a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of personal insurance.
Definitions, Ref. 56-5-201
An "Adverse action" is a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of personal insurance.
Unauthorized insurer
An insurance company that has been denied or not yet applied for a Certificate of Authority and may not sell insurance in this state. Any producer that sells an insurance policy for an unauthorized insurer runs the risk of being responsible for unpaid claims.
Indemnification, Ref. 56-5-204
An insurer will defend and hold an insurance producer harmless from and against all liability, fees and costs arising out of or relating to the actions, errors or omissions of an insurance producer who obtains or uses credit history or insurance scores, on behalf of an insurer, provided the producer has followed the proper procedures established by the insurer.
Nonduplication of recovery; Exhaustion of other remedies, Ref. 56-12-111
Any person having a claim against an insurer, other than the insolvent insurer, is required to exhaust their rights under that policy first. Any amount received from the other insurer will reduce the amount to which entitled from the insolvent insurer.
Application and Examination Requirements
Be at least 18 years of age Not have committed any act that is grounds for denial, suspension, or revocation Completed a prelicensing course and pass the state exam for the lines of authority in which licensure is sought Submit the application with fees Not intend to use the license primarily to write controlled business
Rates
Every insurer of personal risk insurance must file with the Commissioner, at least 30 days before the proposed effective date, all rates, rate information, supporting information, policy forms and endorsements.
Nonrenewal
If an insurer intends to non-renew a contract of personal risk insurance, the insurer will deliver or mail to the named insured, at the address of record on the policy, a notice of its nonrenewal intention at least 30 days prior to the policy expiration.
Notice of intention not to renew, Ref. 56-7-1901
If an insurer intends to non-renew a contract of personal risk insurance, the insurer will deliver or mail to the named insured, at the address of record on the policy, a notice of its nonrenewal intention at least 30 days prior to the policy expiration.
Notice to a consumer of adverse action, Ref. 56-5-203
If an insurer takes an adverse action based partly on credit information, the insurer must provide notice to the consumer of such work. The use of general terms such as "poor credit history," "poor credit rating," or "poor insurance score" does not meet the explanation requirements.
Unfair discrimination
It is an illegal practice to unfairly discriminate against a person in any way on an insurance-related matter. An example would be charging a different rate for someone in the same actuarial class. Fair discrimination is necessary for the issuance of life insurance policies, which is based on mortality.
Rebating
It is illegal to offer a prospective client something of value that is not specified in a contract to induce the purchase of an insurance policy.
Commissions
No person shall pay or accept commissions to/from an unlicensed individual for the purpose of selling or negotiating insurance business.
Commissioner Hearings may be held for these reasons
Person engaging in unfair competition, or any unfair or deceptive act Person engaging in business of insurance without a license The best interest of the public would be served Any other reasons that fall under the scope of the insurance code.
Fiduciary Responsibility
Producers have a fiduciary responsibility for all funds collected from clients. Producers must not mingle these funds with their own personal funds.
Address/Name Change
Producers must report a change in address or name to the Insurance Commissioner within 30 days of the change.
Continuing education
Resident producers must complete 24 hours of continuing education every 2 years to keep their license active. 3 of those hours must be in ethics.
Insurance Transactions
Solicitation or inducement to purchase insurance and negotiations toward the sale of insurance Executing a contract of insurance and advising on coverages and claims
Examination of the association; Annual financial report, Ref. 56-12-113
The Association is subject to review and regulation by the Commissioner. A financial statement must be submitted no later than March 30 of each year.
Commissioner of Commerce and Insurance
The Department of Commerce and Insurance and the Commissioner of Commerce and Insurance are responsible for administering Tennessee's insurance laws. The Commissioner of Commerce and Insurance, the chief officer of the Tennessee Department of Commerce and Insurance, is appointed by the Governor (Gubernatorial appointment).
An insurer may not take adverse action against a consumer because they do not have a credit account. The insurer may not consider the absence of credit in underwriting or rating personal insurance.
The insurer may not use an insurance score calculated using income, gender, address, ethnic group, religion, marital status, nationality, education or occupation of the consumer.
Covered structure
any structure, including the personal property contained within the structure, to the extent covered under the terms of the policy.
Commercial risk insurance
any type of property insurance that is not personal risk insurance.
Sinkhole activity
settlement or systematic weakening of the earth supporting a covered structure, only if the settlement or systematic weakening results from contemporaneous movement or raveling of soils, sediments, or rock materials into subterranean voids created by the effect of groundwater erosion on a limestone or similar rock formation.
Building stabilization or foundation repairs
techniques performed at, to, or attached to the existing foundation of a building with the intention to repair, re-level, or stabilize the building or foundation of a covered structure.
A 60-day notice is not required if(Ref. 56-7-1805):
• The insurer offers to renew the policy.• The named insured has obtained replacement coverage.
The Association is separated into two accounts:
• The workers' compensation insurance account • The account for all other insurance applicable.
The Association shall in no event be liable for more per person than the following:
(1) $300,000 in life insurance death benefits for any one life but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance; (2) $250,000 in present value annuity benefits including net cash surrender or withdrawal values (3) $500,000 in basic hospital, medical or surgical insurance benefits; (4) $300,000 in disability income benefits; (5) $300,000 in long-term care benefits; (6) $100,000 for health insurance plans other than medical, disability or long-term care insurance.
Producer Appointments
A producer cannot act as an agent for an insurer unless he or she is appointed to work for that insurer. Insurers are responsible for submitting an appointment notice to the Commissioner within 15 days of an agent's appointment or submission of first insurance application. The insurer is also responsible for paying the agent's appointment renewal fee. Upon receipt of the notice of appointment, the Commissioner will verify within a reasonable time not to exceed 30 days that the insurance producer is eligible for appointment. If the producer is determined to be ineligible for appointment, the Commissioner notifies the insurer within 5 days of the determination.
Continuing Education
An agent needs to abide by the following guidelines every two years to maintain their license: 24 hours of continuing education every two years Any continuing education must include 3 hours in law and ethics Pay license fees, appointment and renewal fees Continue to be appointed with an insurance company
Measure of damages in case of agent's failure to inspect property, Ref. 56-7-803
If an insurer, its designee or agent fails to determine a reasonable value on any insured property within the 90-day period and obtains the insured's agreement, and, if a loss occurs, then the value shown on the policy or application will be presumed to be reasonable, and settlement of the claim will be made on that basis.
Loss By Fire
If buildings, insured for loss by fire, are totally destroyed by fire, the insurer will not be liable for more than the actual value of the insured property at the time of loss. If the insured has paid premiums on an amount of insurance in excess of the actual value, the insurer will refund the proportionate excess premium, plus 6% per year interest, from the policy inception date.
Measure of damages for loss by fire; Insured reimbursed for excess premiums
If buildings, insured for loss by fire, are totally destroyed by fire, the insurer will not be liable for more than the actual value of the insured property at the time of loss. If the insured has paid premiums on an amount of insurance in excess of the actual value, the insurer will refund the proportionate excess premium, plus 6% per year interest, from the policy inception date.
False financial statements
It is illegal to publish any false financial statement regarding a person or entity.
The following acts, omissions, or practices are defined as unfair and deceptive and are prohibited:
Misrepresenting to insured's pertinent facts or policy provisions relating to coverage at issue Failing to acknowledge and act reasonably promptly upon communications with respect to an insurance claim Failing to adopt and implement reasonable standards for prompt investigation and processing of insured's claims Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements are completed and submitted by insured's Not attempting in good faith to effect prompt, fair and equitable settlements of claims on which liability has become reasonably clear; Refusing or delaying a settlement solely because there is other insurance available to partially or entirely satisfy the claim loss; the claimant who has a right to recover from more than one insurer has the right to choose the coverage from which to recover and the order in which payment is to be made Compelling insured's to initiate suits to recover amounts due under an insurance policy by offering substantially less than the amount ultimately recovered in those suits Engages in activity which results in a disproportionate number of valid complaints to the Department of Insurance or a disproportionate number of lawsuits filed by insureds or claimants;
An insolvent insurer, Ref. 56-12-121
No covered loss will include a claim filed with the association after either: • 18 months after the date of the order of liquidation, or • The final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer.
Failure to comply with notice requirements; Policy extension; When notice of nonrenewal not required, Ref. 56-7-1805
On a commercial risk policy, if the insurer has not mailed or delivered a nonrenewal notice, a condition to a reduction of limits or elimination of coverages, at least 60 days in advance of the policy expiration, then, the insurer is required to extend the existing policy, at its pro-rated current premium, for 60 days from the date the notice is provided.
Address/name change
Producers must report a change in address or name to the Insurance Commissioner within 30 days of the change.
Reporting of actions
Producers must report any bankruptcy, felony conviction, or any other administrative action that occurs in Tennessee or another jurisdiction to the Insurance Department within 30 days after the final deposition.
Temporary License
The Commissioner may issue a temporary insurance producer license for a maximum period of 180 days (or longer for good cause) without requiring an examination if the Commissioner deems that the temporary license is necessary for the servicing of an insurance business.
Investigations
The Commissioner may subpoena witnesses and examine them under oath. The Department will provide the person with a copy of the complaint within 30 days of issuance of the receipt of the complaint.
Scope, Ref. 56-12-103
The Guaranty Association applies to all types of direct insurance; however, in property and casualty, it does not apply to the following: • Fidelity or surety bonds • Title insurance• Ocean marine insurance • Excess insurance
Creation of association, Ref. 56-12-105
The Guaranty Association is a nonprofit association. Its official title is Tennessee Insurance Guaranty Association, hereafter, known as "the Association." The Association administers its responsibility through a board of five directors. All member insurers are and remain members of the Association as a condition of their authority to conduct business within the state.
Guaranty Association
The purpose of the Guaranty Association is to avoid excessive delay in payment and to avoid loss to policyholders and claimants due to the insolvency of an insurer. The Association is also charged to distribute the costs of protection to all insurers.
Purpose, Ref. 56-12-102
The use of the Guaranty Association is to avoid excessive delay in payment and to avoid a loss to policyholders and claimants due to the insolvency of an insurer. The Association is also charged to distribute the costs of protection to all insurers.
Immunity, Ref. 56-12-116
There will be no liability against the association, the board of directors, any member insurer, association agents or employees, the commissioner or commissioner's representatives for any action taken by them in the performance of their duties.
Disclosure of intention to use credit information, Ref. 56-5-207
When using credit information in underwriting or rating a consumer, the insurer must disclose the fact that it may obtain and use credit information in its assessment of the risk. The notice can be on the application or disclosed by the agent at the time of application. This notice does not apply to a renewal if it was previously revealed.
Sinkhole loss
structural damage to a covered structure caused by the sudden collapse of the earth supporting the covered structure as the result of sinkhole activity. It does not include: o Land stabilization or costs associated with it. o Without structural damages, cracking, shrinking, expansion, deterioration or similar damages.
After a commercial risk insurance policy has been in effect for 60 days, or if the policy is a renewal, no notice of cancellation will be effective unless it is one or more of the following:
• Nonpayment of premium.• Conviction of the named insured of a crime having the effect of increasing any hazard insured against.• Fraud or material misrepresentation.• Failure to comply with written loss control recommendations.• A material change in the risk that increases the chance of loss.• Determination by the Commissioner that continuation of the policy would jeopardize an insurer's solvency or would place the insurer in violation of insurance laws.• Violation or breach by the insured of any policy terms or conditions.• Other reasons approved by the Commissioner.
Mutual life insurance companies
An insurance company owned and controlled by its policyowners. These policyholders elect a board of trustees or governing body to manage the firm. The profits of a mutual insurance company are returned to the policyowners in the form of dividends or retained as surplus to meet future obligations.
Authorized insurer
An insurance company that has qualified and received a Certificate of Authority from the Insurance Department to sell insurance in this state.
Termination of producer appointment
An insurer that terminates an agent appointment must notify the Commissioner within 30 days of the date of termination.
Termination of Producer Appointment
An insurer that terminates an agent appointment must notify the Commissioner within 30 days of the date of termination. Within 15 days of such notice, the insurer must mail a copy of the notice to the terminated agent, after which the agent will have 30 days to submit written comments to the Commissioner.
Indemnification
An insurer will defend and hold an insurance producer harmless from and against all liability, fees and costs arising out of or relating to the actions, errors or omissions of an insurance producer who obtains or uses credit history or insurance scores, on behalf of an insurer, provided the producer has followed the proper procedures established by the insurer.
Unfair Trade Practices
-False Advertising- It is an illegal practice to falsely advertise insurance products or publish misleading information about its insurance coverage. This includes making false statements about the financial condition of an insurer. -Defamation- It is an illegal practice to make any public statement or advertisement that contains false information or unsubstantiated criticisms about an insurance company intended to harm or malign. -Boycott, Coercion, and Intimidation- It is an illegal practice to commit or coordinate any act or boycott, coercion, or intimidation in order to restrain or monopolize the business of insurance. -Unfair Discrimination- It is an illegal practice to unfairly discriminate against a person in any way on an insurance-related matter. An example would be charging a different rate for someone in the same actuarial class. Fair discrimination is necessary for the issuance of life insurance policies, which is based on mortality. -Rebating- It is illegal to offer a prospective client something of value that is not specified in a contract to induce the purchase of an insurance policy.
Exemption from Examination
1. any officer or employee of an insurer who is on salary; 2. an individual who administers group insurance plans, annuities or health insurance plans where no commission is received; 3. any officer, director or employee who assists an insurance producer by providing technical advice or assistance not including the sale, solicitation or negotiation of insurance policies; 4. salaried employees of a creditor who enroll debtors under a group credit life or group credit health policy; 5. members of a fraternal benefit society who provide benefits in the case of death or disability resulting from accidents without receiving compensation for enrolling those members; or 6. employees of auto rental companies who sell, solicit or negotiate optional insurance such as personal accident coverage, personal liability insurance or roadside assistance coverage for a term of up to ninety days in connection with an auto rental agreement.
Stock Insurance Company
An insurance company that is owned and controlled by stockholders (shareholders). The stockholders provide the capital and share in profits or losses.
Incorrect or incomplete credit information, Ref. 56-5-206
If it is determined that credit information gathered was incurred or incomplete, the insurer, upon notification, will re-underwrite and re-rate the consumer within 30 days of receiving the notice. After re-underwriting or re-rating, the insurer will may adjustments as necessary. If it determines the insured has overpaid the premium; the insurer will refund the overpayment.
Restrictions on use of credit scores, Ref. 56-5-202
If the insurer uses insurance score they must file their scoring models and credit information to the department of commerce and insurance.Any authorized insurer that uses credit information in underwriting or rating personal insurance risks will not take adverse action against a consumer based on credit information unless they obtain and use a credit report or insurance score calculated within 90 days from the date the personal insurance is first written or renewal is issued.When using credit information, the insurer must recalculate the insurance score no later than 36 months from the previous calculation, unless the insured is in the most favorably-priced tier or if the insurer decides not to use credit information in its re-evaluation. An insurer may not deny, cancel, or non-renew a policy solely based on credit information, nor may they base renewal rates exclusively on credit information.
Statement of reasons for nonrenewal; Liability of information providers, Ref. 56-7-1902
If the nonrenewal notice does not contain the reason for the nonrenewal, the notice will advise the insured that upon a written request by the name insured, no later than 15 days after the effective date of the nonrenewal, the insurer will mail, within 20 days, a statement stating the specific reason for the nonrenewal. There is no liability on the part of the insurer for the reason for the nonrenewal.
Powers and duties of the association, Ref. 56-12-107
One of the primary obligations of the Association is to cover claims that exist before a determination of an insurer's insolvency and to cover claims occurring within 30 days after the insolvency determination.Only claims in the amount of over $100 are paid. The maximum amount paid is $100,000. Workers' compensation claims, however, will be paid fully. In any event, the association will not pay more the total amount of the claim owed by the insolvent insurer.
The Commissioner must give written notice to the producer before holding a hearing that may lead to the suspension or revocation of the producer's license to hold this hearing one of these conditions needs to be true.
Provided incorrect, misleading, incomplete or untrue information in the license application Violating any insurance laws, regulations, subpoena, or orders from the Insurance Commissioner Obtaining to obtain a license through fraud or misrepresentation Intentionally misrepresent the terms of an insurance contract Been convicted of a felony Committed any insurance unfair trade practice Using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in this or any other state. Having an insurance license denied, suspended, or revoked by another state Forging a name to an insurance document or application Cheating on an insurance license examination Knowingly accepting insurance business from an unlicensed individual Failing to comply with a court order imposing child support Failing to pay state income tax Selling, negotiating, and soliciting insurance for an unauthorized insurance company Knowingly allowing a person covered under a group policy to submit an application for health care benefits through the TennCare program
Fair Value
Whenever a contract of fire insurance is written or made, the insurer has 90 days to have the structure(s) inspected. The inspection can be performed by the insurer, the agent or an insurer's designee. They have within that 90-day timeframe to adjust the amount of insurance coverage written, so that the face amount of the policy will not exceed the fair value of the property.
Inspection of property insured against fire; No insurance exceeding fair value of property, Ref. 56-7-801
Whenever a contract of fire insurance is written or made, the insurer has 90 days to have the structure(s) inspected. The inspection can be performed by the insurer, the agent or an insurer's designee. They have within that 90-day timeframe to adjust the amount of insurance coverage written, so that the face amount of the policy will not exceed the fair value of the property.
Property Inspection
Whenever a contract of fire insurance is written or made, the insurer has 90 days to have the structure(s) inspected. The inspection can be performed by the insurer, the agent or an insurer's designee. They have within that 90-day timeframe to adjust the amount of insurance coverage written, so that the face amount of the policy will not exceed the fair value of the property.
MANDATED OFFER OF COVERAGE
o Land stabilization or costs associated with it.o Without structural damages, cracking, shrinking, expansion, deterioration or similar damages.Every insurer offering homeowner property insurance in this state will make available coverage for sinkhole losses, including contents of personal property contained within the dwelling.Nothing in this law mandates that sinkhole coverage be included, only, that the coverage be offered as an optional purchase to policyholders.The insurer may make sinkhole coverage available within the homeowner policy itself, by endorsement, or through other coverages the insurer may arrange. The insurer may charge additionally for the coverage. Upon receipt of a claim, the insurer must meet the following standards in its investigation:• Make an inspection of the insured's premises.• Deny the claim, if it determines there was no sinkhole loss.• Prior to denying any sinkhole claim, the insurer will obtain a written certification from an engineer, a professional geologist or other qualified individual, stating that sinkhole activity did not cause the structural damage.Without prior consent from the insurer, a policyholder may not accept anything of value from any person proposing to perform repairs, as an inducement to contract with such person for the repairs.The stabilization and all other repairs to the structure and contents must be completed within 12 months after entering into a contract for repairs. This is not applicable if the claim is in litigation.Nothing under this law prevents an insurer from inspecting property or conducting other underwriting practices when making coverage available for sinkhole losses.Nothing prohibits an insurer from offering broader coverage than what is required by this law.