1998 Legislation
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SENATE BILL NO. 1392 – Insurer, unfair claims practice

SENATE BILL NO. 1392

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S1392.......................................by COMMERCE AND HUMAN RESOURCES
INSURERS - UNFAIR CLAIMS PRACTICE - Amends existing law to define an unfair
claims practice for an insurer to increase premiums or refuse to renew a
policy for a claim which resulted from an action where the insured was not
at fault and to provide a penalty.

02/04    Senate intro - 1st rdg - to printing
02/05    Rpt prt - to Com/HuRes

Bill Text


S1392


                                                                        
 ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-fourth Legislature                 Second Regular Session - 1998
                                                                        

                                      IN THE SENATE

                                   SENATE BILL NO. 1392

                        BY COMMERCE AND HUMAN RESOURCES COMMITTEE

 1                                        AN ACT
 2    RELATING TO INSURANCE PRACTICES; AMENDING  SECTION  41-1329,  IDAHO  CODE,  TO
 3        DEFINE  AN  UNFAIR  CLAIM PRACTICE CONCERNING A CLAIM WHEN THE INSURED WAS
 4        FAULTLESS; AND AMENDING SECTION  41-1329A, IDAHO CODE, TO PROVIDE  A  PRI-
 5        VATE RIGHT OF ACTION FOR DAMAGES FOR INSURED FOR UNFAIR CLAIMS PRACTICES.

 6    Be It Enacted by the Legislature of the State of Idaho:

 7        SECTION  1.  That  Section 41-1329, Idaho Code, be, and the same is hereby
 8    amended to read as follows:

 9        41-1329.  UNFAIR CLAIM SETTLEMENT PRACTICES. Pursuant to section  41-1302,
10    Idaho  Code,  committing  or performing any of the following acts or omissions
11    intentionally, or with such frequency as to indicate a general business  prac-
12    tice  shall  be  deemed  to be an unfair method of competition or an unfair or
13    deceptive act or practice in the business of insurance:
14        (1)  Misrepresenting pertinent facts or insurance policy provisions relat-
15    ing to coverages at issue;
16        (2)  Failing to acknowledge and act reasonably  promptly  upon  communica-
17    tions with respect to claims arising under insurance policies;
18        (3)  Failing  to  adopt  and implement reasonable standards for the prompt
19    investigation of claims arising under insurance policies;
20        (4)  Refusing to pay claims without conducting a reasonable  investigation
21    based upon all available information;
22        (5)  Failing to affirm or deny coverage of claims within a reasonable time
23    after proof of loss statements have been completed;
24        (6)  Not attempting in good faith to effectuate prompt, fair and equitable
25    settlements of claims in which liability has become reasonably clear;
26        (7)  Compelling  insureds  to  institute litigation to recover amounts due
27    under an insurance policy by offering  substantially  less  than  the  amounts
28    ultimately recovered in actions brought by such insureds;
29        (8)  Attempting to settle a claim for less than the amount to which a rea-
30    sonable  man  would  have  believed he was entitled by reference to written or
31    printed advertising material accompanying or made part of an application;
32        (9)  Attempting to settle claims on the basis of an application which  was
33    altered without notice to, or knowledge or consent of the insured;
34        (10) Making  claims  payments to insureds or beneficiaries not accompanied
35    by a statement setting forth the coverage under which the payments  are  being
36    made;
37        (11) Making  known  to  insureds  or  claimants a policy of appealing from
38    arbitration awards in favor of insureds or claimants for the purpose  of  com-
39    pelling them to accept settlements or compromises less than the amount awarded
40    in arbitration;
41        (12) Delaying  the  investigation  or  payment  of  claims by requiring an
42    insured, claimant, or the physician of either to submit  a  preliminary  claim
43    report  and  then  requiring the subsequent submission of formal proof of loss


                                          2

 1    forms, both of which submissions contain substantially the same information;
 2        (13) Failing to promptly settle claims, where liability has become reason-
 3    ably clear, under one portion of the insurance policy  coverage  in  order  to
 4    influence  settlements  under other portions of the insurance policy coverage;
 5    or
 6        (14) Failing to promptly provide a reasonable explanation of the basis  in
 7    the  insurance policy in relation to the facts or applicable law for denial of
 8    a claim or for the offer of a compromise settlement.
 9         (15) An insurer shall not cancel, refuse to renew  or  increase  the
10    premium  for renewal of an individual policy of casualty or property insurance
11    as a result of any claims made under the policy  with  respect  to  which  the
12    insured was entirely faultless. 

13        SECTION  2.  That Section 41-1329A, Idaho Code, be, and the same is hereby
14    amended to read as follows:

15        41-1329A.  UNFAIR  CLAIMS  SETTLEMENT  PRACTICES  --  PENALTY.    (1)
16      The director, if he finds after a hearing, that an  insurer  has  vio-
17    lated  the  provisions of section 41-1329, Idaho Code, may, in his discretion,
18    impose an administrative penalty not to exceed ten thousand dollars  ($10,000)
19    to be deposited by the director as provided in section 41-406, Idaho Code, and
20    may,  in  addition  to  the fine, or in the alternative to the fine, refuse to
21    continue or suspend or revoke an insurer's certificate of authority.
22         (2)  An insured shall have a private right of action for damages for
23    violation of the provisions of section 41-1329, Idaho Code. 

Statement of Purpose / Fiscal Impact


                            STATEMENT OF PURPOSE
    
                                  RS 07803
    
    This legislation makes it an unfair claims practice to cancel 
    or raise premiums because of claims for which the insured is not at 
    fault. The concept of insurance is that it spreads risk. There is no 
    justification for an insurance company canceling or increasing rates 
    due to claims made when its customer was not at fault.
    
    The legislation also allows for individuals to file suit for 
    unfair claims practices as defined by ยง41-1329, Idaho Code. The Idaho 
    Supreme Court has held in White v.  112 Idaho 94, 730  1014 (1986), 
    that there is no private right of action for unfair claims practices. 
    This legislation would override that decision.
    
                                FISCAL NOTE
    
    None.
    
    CONTACT: Kay Shields, Executive Director
             David E. Kerrick, Legislative Affairs Counsel
             Idaho Trial Lawyers Association
             P. O. Box 1777
             Boise, ID 83707
    
    iita@primenet.com
    (208) 345-1890
    (208) 345-1894 (fax)
    
    
    STATEMENT OF PURPOSE,/FISCAL NOTE                 Bill No S1392