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Unfair Claims Settlement Practices Model Act—Archived Article
Summarizes the provisions of the Unfair Claims Settlement Practices Act created by the National Association of Insurance Commissioners.
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A Discussion
Summary: The National Association of Insurance Commissioners (NAIC) created the Unfair Claims Settlement Practices Act to set forth standards for the investigation and disposition of claims arising under policies or certificates. The act had previously been part of the Unfair Trade Practices Act until it was removed and made a freestanding act in 1989.
This article summarizes the provisions of the act and presents a state-by-state list of statutory or regulatory references on the subject of unfair claims settlement practices.
Topics covered:Introduction Statutory and regulatory references to states unfair claims settlement practices
Introduction
The act lists fourteen unfair claims practices that are prohibited:
A. Knowingly misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue;
B. Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies;
C. Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims arising under its policies;
D. Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear;
E. Compelling insureds or beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them;
F. Refusing to pay claims without conducting a reasonable investigation;
G. Failing to affirm or deny coverage of claims within a reasonable time after having completed its investigation related to such claim or claims;
H. Attempting to settle or settling claims for less than the amount that a reasonable person would believe the insured or beneficiary was entitled by reference to written or printed advertising material accompanying or made part of an application;
I. Attempting to settle or settling claims on the basis of an application that was materially altered without notice to, or knowledge or consent of, the insured;
J. Making claims payments to an insured or beneficiary without indicating the coverage under which each payment is being made;
K. Unreasonably delaying the investigation or payment of claims by requiring both a formal proof of loss form and subsequent verification that would result in duplication of information and verification appearing in the formal proof of loss form;
L. Failing in the case of claims denials or offers of compromise settlement to promptly provide a reasonable and accurate explanation of the basis for such actions;
M. Failing to provide forms necessary to present claim within fifteen (15) calendar days of a request with reasonable explanations regarding their use;
N. Failing to adopt and implement reasonable standards to assure that the repairs of a repairer owned by or required to be used by the insurer are performed in a workmanlike manner.
Statutory and Regulatory References to States Unfair Claims Settlement Practices Laws
Most states have adopted statutes or regulations that are similar to the act. Many states have adopted additional statutes that refine the act and provide even more protection to the insured or claimant. None of the fourteen listed practices have been adopted by all states. The following identifies which states have adopted which of the fourteen practices; since more states have adopted them than not, the states NOT adopting the practice are listed.
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