Insurance Claim Rights – Consumer Protection Against Unfair Claim Practices

What are my insurance claim rights? Is there any consumer protection against companies that abuse the consumer? The answer is yes! Every State has administrative entity that regulates insurance companies.

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The 1945 Federal McCarran-Ferguson Act codified in U.S. Code Title 15, Chapter 20 gives the states the power to regulate the business of insurance as they see fit. This is the reason why all policies and regulations are different in each state. All states have enacted statutes that apply to insurance companies, agents, brokers, adjusters, and just everyone else that has to do anything with the business.

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These statutes give power to the states to create the “Department of Insurance.” They also codify the claim rights a consumer has against an insurance company. For example, the Revised Code of Washington (RCW) 48.01.030 states “The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters. Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.” This language is common to all states with very little modification.

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This language is very specific and sets forth the requirement of good faith and fair dealing. Most states define exactly what your consumer rights are or what claim practices are forbidden.

Misrepresenting pertinent facts or insurance policy provisions;
Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
Refusing to pay claims without conducting a reasonable investigation;
Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. In particular, this includes an obligation to effectuate prompt payment of property damage claims to innocent third parties in clear liability situations. If two or more insurers are involved, they should arrange to make such payment, leaving to themselves the burden of apportioning it;
Compelling insureds to institute or submit to litigation, arbitration, or appraisal to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions or proceedings;
Attempting to settle a claim for less than the amount to 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;
Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made;
Asserting to insureds or claimants a policy 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;
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 subsequent submissions which contain substantially the same information;
Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage;
Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement;
Unfairly discriminating against claimants because they are represented by a public adjuster;
Failure to expeditiously honor drafts given in settlement of claims. A failure to honor a draft within three working days of notice of receipt by the payor bank will constitute a violation of this provision. Dishonor of any such draft for valid reasons related to the settlement of the claim will not constitute a violation of this provision;
Failure to adopt and implement reasonable standards for the processing and payment of claims once the obligation to pay has been established. Except as to those instances where the time for payment is governed by statute or rule or is set forth in an applicable contract, procedures which are not designed to deliver a check or draft to the payee in payment of a settled claim within fifteen business days after receipt by the insurer or its attorney of properly executed releases or other settlement documents are not acceptable. Where the insurer is obligated to furnish an appropriate release or settlement document to an insured or claimant, it shall do so within twenty working days after a settlement has been reached;
Delaying appraisals or adding to their cost under insurance policy appraisal provisions through the use of appraisers from outside of the loss area. The use of appraisers from outside the loss area is appropriate only where the unique nature of the loss or a lack of competent local appraisers make the use of out-of-area appraisers necessary.