Section 5: Unfair Claim Settlement
The NAIC Unfair Claim Settlement Practices Model Legislation The purpose of the NAIC Unfair Claim Settlement Practices Model Legislation is to...
"set forth standards for the investigation and disposition of claims arising under policies or certificates of insurance."
Violations of the Unfair Claim Settlement Practices Each state's statutes determine the length of time each insurer has to:
Acknowledge receipt of a claim Accept or deny a claim based on whether or not the claim is actually covered under the policy (issue as disclaimer of coverage) Issue a reservation of rights explaining to the claimant that the insurer is investigating coverage issues surrounding a particular coverage or policy provision and reserves the right to deny coverage based on the findings of the investigation. These time frames can vary widely from state to state
The NAIC Unfair Claim Settlement Practices Model Legislation The Unfair Claims Settlement Practice Act does not apply to:
Workers compensation fidelity bonding suretyship Boiler and machinery (equipment breakdown) insurance
Settling Insurance Claims Insurance companies, agents, producers, and adjusters...
all play a role in settling the claims of their clients.
The NAIC Unfair Claim Settlement Practices Model Legislation Almost every state has adopted the Unfair Claim Settlement Practices Act, and most have also...
amended the model law to bring in compliance with state statutes
Settling Insurance Claims Unfair settlement practices: attempting to settle claims or settling claims on the basis of...
an application that was materially altered without notice and consent of insured.
Settling Insurance Claims Unfair settlement practices: Failing to adopt and implement reasonable standards to...
assure that repairs made by a repair shop owned by or required to be used by insurer are performed in a workmanlike manner.
Settling Insurance Claims An insurance company, agent, producer, or adjuster is engaging in an unfair settlement practice if they...
commit or perform, with such frequency as to indicate a general business practice.
Settling Insurance Claims Unfair settlement practices: Refusing to pay claims without....
conducting a reasonable investigation
Settling Insurance Claims Unfair settlement practices: Not attempting in good faith to...
effectuate prompt fair and equitable settlement of claims.
Violations of the Unfair Claim Settlement Practices Step 1: providing the violator with notice that a hearing will be...
held not less than 30 days from the date of notice.
Settling Insurance Claims Unfair settlement practices: Making claims payments to an insured or beneficiary without....
indicating the coverage under which each payment is made.
Violations of the Unfair Claim Settlement Practices Step 2: After the hearing, if it is determined that there was a violation, the findings will be...
issued in writing and sent to the violator along with a cease and desist order;
Settling Insurance Claims All states have prohibited the unfair practices, but...
many states have expanded on them.
Settling Insurance Claims Unfair settlement practices: Failing in the case of claims denials or....
offers of compromise settlement, to promptly provide a reasonable and accurate explanation of the basis of such action, (Explanation of Benefits).
Settling Insurance Claims All parties must act in good faith and promptly...
pay the claim in the event of a covered loss.
Settling Insurance Claims Unfair settlement practices: Failing to acknowledge with reasonable promptness...
pertinent communications with respect to claims; arising under its policies.
Settling Insurance Claims Unfair settlement practices: Misrepresenting....
pertinent facts or insurance policy provisions relating to coverages at issue.
Settling Insurance Claims Unfair settlement practices: failing to provide the forms necessary to...
present claims with in 15 days of a request, with reasonable explanations regarding their use.
Violations of the Unfair Claim Settlement Practices The Model Act
provides for monetary penalties to be applied for each violation and for a license suspension or revocation. The NAIC Model specifies a $1,000 fine for each violation but most states set their own penalties.
Settling Insurance Claims Unfair settlement practices: Unreasonably delaying the investigation or payment of claims by...
requiring both a formal proof of loss form and subsequent verification that would result in the duplication of information verification in appearing in the formal proof of loss.
Settling Insurance Claims The penalties imposed for violations of these practices are also set by ...
state statutes and state insurance departments
Settling Insurance Claims Unfair settlement practices: Compelling insureds to institute...
suits to recover amounts due under an insurance company by offering substantially less than the amounts ultimately; recovered in suits brought by them.
Settling Insurance Claims Unfair settlement practices: Attempting to settle a claim for less than the amount that a reasonable person would believe the insured or beneficiary...
was entitled to receive by referring to written or printed advertising material accompanying or made part of the insurance application.
Settling Insurance Claims Unfair settlement practices: Failing to affirm or deny coverage of claims...
within a reasonable time after completing its investigation