Business Assistant/Business Assistant.iso/legal/gde757_3/lharc3.exe/UNFAIR.STA

Text File | 1993-01-06 | 5.5 KB | 125 lines

/* Here is the full text of the California Unfair Insurance
Practices Act (Insurance Code, Division 1, Article 6.5 Unfair
Practices) concerning "bad faith", the failure to properly handle
claims. Many states including Colorado, Florida, Idaho, Indiana,
Maryland, New Jersey, Oklahoma, Tennessee as examples, follow
this basic model. These statutes provide a weapon for the policy
holder against a company not properly handling claims. The exact
way that these rights are enforced changes from state to state.
In general, the statute will allow the insurance department and
in some case, the policyholder the right to call the bad faith to
the attention of the insurance company, and then to
administratively proceed or proceed in court. */


Section 790.03 Prohibited acts


The following are hereby defined as unfair methods of competition
and unfair and deceptive acts or practices in the business of
insurance.....

(h) Knowingly committing or performing with such frequency as to
indicate a general business practice any of the following unfair
claims settlement practices:

/* Most states' bad faith laws require that the company have
committed the wrong several times. However, many state laws also
provide that if the standards which are listed are not followed
in even on case, the policy holder may have special remedies.*/

     (1) Misrepresenting to claimants pertinent facts or
insurance policy provisions relating to any coverages at issue.

     (2) Failing to acknowledge and act reasonably promptly upon
communications with respect to claims arising under insurance
policies.

     (3) Failing to adopt and implement reasonable standards for
the prompt investigation and processing of claims arising out of
insurance policies.

/* This is the key to most cases. The insuror is too slow in
paying clearly held claims. It requires first that the insuror
set a standard and then that the insuror follow through on it. */

     (4) Failing to affirm or deny coverage of claims within a
reasonable time after proof of loss requirements have been
completed and submitted by the insured.

     (5) Not attempting in good faith to effectuate prompt, fair,
and equitable settlements of claims in which liability has become
reasonably clear.

/* Many of the statutes also provide that the insuror must pay
the claims as if it were only concerned for the rights of the
insured, not it own pocket book. */

     (6) Compelling insureds to institute litigation to recover
amounts dues under an insurance policy by offering substantially
less than the amounts ultimately recovered in actions brought by
the insureds, when the insureds have made claims for amounts
reasonably similar to the amounts ultimately recovered.

     (7) Attempting to settle a claim by an insured for less than
the amount which a reasonable man would have believed he was
entitled by reference to written or printed advertising material

accompanying or made part of an application.

     (8) Attempting to settle claims on the basis of an
application which was altered without notice to, or knowledge or
consent of, the insured his or her representative, agent or
broker.

     (9) Failing, after payment of a claim, to inform insureds or
beneficiaries, upon request by them, of the coverage under which
payment has been made.

     (10) Making known to insureds or claimants a practice of the
insurer of appealing from arbitration awards in favor of insureds
or claimants for the purpose of compelling them to accept
settlements or compromises less than the amount awarded in
arbitration.

     (11) Delaying the investigation or payment of claims by
requiring an insured, claimant, or the physician of either, to
submit a preliminary claim report, and then requiring the
subsequent submission of formal proof of loss forms, both of
which submissions contain substantially the same information.

     (12) Failing to settle claims promptly, where liability has
become apparent, under one portion of the insurance policy
coverage in order to influence settlements, under other portions
of the insurance policy coverage.

/* This can come into play in automobile accidents. The typical
automobile insurance policy insures for medical payments, bodily
injury and comprehensive (collision) coverage. Therefore the
company must for example, pay for the collision damage even
though the medical payments liability is in dispute.*/

     (13) Failing to provide promptly a reasonable explanation of
the basis relied on in the insurance policy, in relation to facts
or applicable law, for the denial of a claim or for the offer of
a compromise settlement.

/* Therefore, this gives the insured the right to demand that the
company explain why it is offering a specific amount.*/

     (14) Directly advising a claimant not to obtain the services
of an attorney.

     (15) Misleading a claimant as to the applicable statute of
limitations.

     (16) Delaying the payment of provision of hospital, medical,
or surgical benefits for services provides with respect to
acquire immune deficiency syndrome or AIDS-related complex for
more than 60 days after the insurer has received a claim for
those benefits, where the delay in claim payment is for the
purpose of investigation whether the condition preexisted the
coverage. However, this 60-day period shall not include any time
during which the insurer is awaiting a response for relevant
medical information from a health care provider.