Unfair Claims Practice – Part 1

Requesting payment for a loss under your home, auto, boat or other policy is the major reason for having insurance. You've paid your premium with the assurance that, should an eligible loss occur, you or your property will be protected. Faithfully handling your premium payments gives you the expectation that your insurance company will perform. "Performance" of the insurance contract refers to the insurance company's obligation to investigate and, if applicable, pay for a loss. Loss payment includes taking care of expenses associated with settling a loss or handling the defense costs of a lawsuit.

In most instances, disputes with an insurance company are legitimate disagreements. Parties may, justifiably, hold different positions on whether a certain loss is covered or, if covered, the amount of the loss. It is unfortunate, but sometimes an insurance company may have an attitude toward paying claims that fails to meet your expectations. In fact, a company may actually deal with you unfairly. Your right to fair treatment is, generally, protected under state law. States agencies, typically via a special insurance or commerce division, are responsible for seeing that insurance companies and agents are true to the commitment represented by the insurance policy.

Most states actively enforce the requirement that insurers fairly settle valid claims against their policies. Insurance companies and agents operating within a state are also provided with complete information regarding unacceptable claims practices. A state's rules on settling claims are based on the National Association of Insurance Commissioners (NAIC) Unfair Trade Practices Model Act. The guidelines, developed from the original act and other regulations (which vary by state) are meant to shield you from practices that are misleading, unfair or deceptive.

For more information on such practices, please see part two of this article.

COPYRIGHT: Insurance Publishing Plus, Inc. 2001, 2004, 2009

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Unfair Claims Practice – Part 2

In part one of this article, we explained that policyholders have the right to expect their insurers to handle valid claims in a fair manner. We also mentioned that most states have rules that prohibit unfair claim practices. Here are some examples of such practices:

• Attempting to settle a claim based on an application which the company has changed without the insured's knowledge or permission
• Delaying a claim investigation by requiring unnecessary reports or documents
• Failing to act promptly after receiving information concerning an insurance claim
• Failing to comply with prompt claims investigation standards
• When applicable, failing to pay a claim quickly, fairly and equitably
• Failing to promptly settle claims where liability is reasonably clear under one portion of the policy to influence settlement under any other portion of the insurance policy coverage
• Make it a standard practice to file judicial appeals on trial judgments
• Failing to promptly and clearly explain the basis in the policy or the law for either denying a claim or offering a compromise settlement
• Require policyholders to travel unreasonable distances to use specific repair shops (for estimates and/or repairs)
• Discouraging a policyholder from using arbitration
• Misrepresenting significant facts or insurance policy provisions
• Refusing to keep an insured informed of claim developments within a reasonable time after receiving a completed proof of loss statement
• Denying claims without a reasonable loss investigation
• Offering very low settlements to encourage policyholder to sue
• Settling claims for amounts that are lower than a reasonable person would expect

The best way to avoid problems is to deal with reputable agents and companies who are committed to properly serving their customers. Your insurance agent would be happy to discuss your concerns and/or expectations about making an insurance claim. Take advantage of his or her expertise.

For more information on claims practices, please see part one of this article.

COPYRIGHT: Insurance Publishing Plus, Inc. 2001, 2009

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.