New Hampshire Statutes Governing Insurance Claim Practices Presented by: Michael W. Wallenius Getman, Schulthess & Steere, PA Three Executive Park Drive Ste 9 Bedford, NH 03110 603-634-4300
Insurance Claim Practices StatutesOverview • RSA 417 – Unfair Insurance & Claims Settlement Practices • RSA 400-A – Insurance Department Powers • RSA 358-A – N.H. Consumer Protection Act • The Dumas line of Cases
RSA 417 Prohibits Unfair Practices (RSA 417:3) • Lists Specific Practices that are Unfair • Penalty Imposed • Procedure for Identifying Unenumerated Unfair Practices • Cease & Desist Order RSA 417:4
RSA 417 specifically includes Adjusters as those governed by its provisions
RSA 417Enumerates Both: • Unfair Insurance Practices; and • Unfair ClaimsSettlement Practices
Enumerated Unfair Insurance Practices Examples: • Misrepresentation in Sale of Coverage • False Information in Advertising • Falsifying Information about Insurer’s Financial Condition • Unfair Discrimination Offering Policies • Prohibition on Political Contributions RSA 417:14
Enumerated Unfair ClaimsSettlement Practices Must be “committed without just cause and not merely inadvertently or accidently.”
RSA 417:4, XV (a) (1) – (14) 14 Enumerated Unfair Claims Settlement Practices 2 of them really are aimed at the company as not the adjuster
Enumerated Unfair Claims Settlement Practices • Knowingly misrepresenting pertinent facts or policy provisions relating to coverage at issue to a claimant or an insured; RSA 417:4, XV (a) (1)
Enumerated Unfair Claims Settlement Practices • Failing to acknowledge and act promptly upon communications with respect to claims arising under insurance policies RSA 417:4, XV (a) (2)
Enumerated Unfair Claims Settlement Practices • Not attempting in good faith to effectuate prompt, fair and equitable settlements or compromises of claims in which liability has become reasonably clear RSA 417:4, XV (a) (4)
Enumerated Unfair Claims Settlement Practices • Compelling claimants to institute litigation to recover amounts due under insurance policies by offering substantially less than the amounts ultimately recovered in actions brought by them RSA 417:4, XV (a) (5)
Enumerated Unfair Claims Settlement Practices • Adopting or making known 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 RSA 417:4, XV (a) (6)
Enumerated Unfair Claims Settlement Practices • Attempting settlement or compromise of a claim on the basis of an application which was altered without notice to, or knowledge or consent of the insured RSA 417:4, XV (a) (7)
Enumerated Unfair Claims Settlement Practices • Attempting to settle or compromise a claim for less than the amount which the insured had been led to believe the insured was entitled to by written or printed advertising material accompanying or made part of an application RSA 417:4, XV (a) (8)
Enumerated Unfair Claims Settlement Practices • Attempting to delay the investigation or payment of claims by requiring an insured and the insured's physician 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 RSA 417:4, XV (a) (9)
Enumerated Unfair Claims Settlement Practices • Making any claim payment not accompanied by a statement setting forth the benefits included within the claim payment RSA 417:4, XV (a) (10)
Enumerated Unfair Claims Settlement Practices • Failing to affirm or deny coverage of claims within a reasonable time after proof of loss forms have been submitted RSA 417:4, XV (a) (11)
Enumerated Unfair Claims Settlement Practices • Refusing payment of a claim solely on the basis of an insured's request to do so without making an independent evaluation of the insured's liability based upon all available information RSA 417:4, XV (a) (12)
Enumerated Unfair Claims Settlement Practices • Knowingly underestimating the value of any claim by an insurer or by an adjuster representing the insurer RSA 417:4, XV (a) (14)
Prohibited Practices for Auto Glass Repairs – RSA 417:4, XX • Substantially the Same as Reg. 1002 • Can’t steer business • Cannot coerce claimant to use a specific repairer • Claimant allowed to use own repair shop but must pay increased cost • Where there is a dispute with the shop as to cost of repair, Insurance must provide name of a ready and willing repairer
Enumerated PracticesPenalty • Loss of license • $2,500 fine per violation; OR • Pay consumer actual economic loss up to $2,500 per violation →Consumer must waive right to sue.
UNDEFINED UNFAIR PRACTICES RSA 417:12, I • Insurance Department • Has reason to believe • A practice is unfair and deceptive
UNDEFINED UNFAIR PRACTICES RSA 417:12, I – Procedure: • Show cause hearing scheduled • Which includes Insurance Departments plan of action • To be resulted by the insurer
UNDEFINED UNFAIR PRACTICES RSA 417:12, II - Department determines the practice is unfair or deceptive then: • Issues a cease and desist order • Subject to appeal to N.H. Supreme Court
UNDEFINED UNFAIR PRACTICES • Violation of Cease & Desist Order – RSA 417:13. • Loss of license • $2,500 fine per violation
Private Right of Action RSA 417:19 Insurance Department as Gatekeeper (1) • If Insurance Department finds no violation • No suit may be filed • If Insurance Department takes no action or a complaint after 120 days • no suit may be filed
Private Right of Action RSA 417:21 Insurance Department as Gatekeeper (2) • Finding of violation by Insurance Department • Prima Facia evidence of a violation for civil suit • But not if finding is the result of a consent agreement judgment entered into by the Insurer.
Private Right of Action RSA 417:21 • Double Recovery Prohibited If same behavior constitutes a tort, breach of contract and a violation of RSA Chapter 417 a finding of a statutory violation does not permit additional damages on top of tort or contract damages
Private Right of Action RSA 417:20 • A Plaintiff who Prevails in Civil Suit for Violation of RSA Chapter 417, in Addition to Damages is Entitled to: • Reasonable Attorney Fees; and • Costs of Suit
STATUTORY AUTHORITY OF INSURANCE DEPARTMENT RSA 400-A • Broad Powers to Enforce Insurance Laws • Specifically granted • Reasonably implied
STATUTORY AUTHORITY OF INSURANCE DEPARTMENT RSA 400-A • Conduct hearings and issue orders to enforce laws • Issue regulations →violation = loss of license or $2,500 fine • Investigate to promote efficient administration of insurance laws →10 days to respond to Insurance Department request for information • Can file suits to enforce laws.
Privileges Under RSA 400-A:16 Documents Produced by Order of the Insurance Department cannot be subject to: • Subpoena • Civil Discovery • Admission in Evidence in a Civil Case • A Right-to-Know Statute Request
Privileges Under RSA 400-A:16 Additionally: • No Insurance Department Employee can be forced to testify in a civil matter about document contents; and • Production of documents does not result in a waiver of privilege or confidentiality
Exceptions to Privilege RuleRSA 400-A:16,10 • Insurance Department can use documents to enforce rules and take legal action • Provided confidentiality is protected the Department can share documents with: • State, Fed & International Regulatory Agencies • State, Fed and International Law Enforcement • National Association of Insurance Commissioners
Exceptions to Privilege RuleRSA 400-A:16,10 • Can disclose documents to complaining party • If it will help explain Departments response to a complaint • Provided disclosure does not interfere with civil , criminal or administrative proceedings • Can disclose statistics about number and nature of complaints filed with the Department
HEARINGS & APPEALRSA 400-a • Hearing may be held for any purpose within scope of insurance law • Mandatory when required by statute • Mandatory upon written request of a person aggrieved by an act or impending act • RequestDeadline: 30 days after person knew or should have known of the act in question
HEARINGS & APPEALRSA 400-a • Application for hearing must: • State why applicant is aggrieved • State the Basis for Requested Relief • Statute or regulation
HEARINGS & APPEALRSA 400-a • Hearing to be held in 30 days if Department finds application is • Timely • Made in Good Faith • Applicant would be aggrieved if his grounds are established • Failure to hold hearing in 30 days = denied of relief
HEARINGS & APPEALRSA 400-a Appeal to NH Supreme Court after Motion for Rehearing denied. RSA Chapter 541
Consumer Service Division • Established by Reg Ins 102.08 • Attempts to mediate disputes between insured and carriers • Before matter is in litigation
N.H. Consumer Protection Act Under Bell v. Liberty Mutual RSA Chapter 258-A does not apply to insurance carriers because already subject to extensive regulations. • No multiple damages • No shifting of costs or attorneys fees
Bad Faith Failure to Settle Within Policy Limits Dumas Line of Cases
Bad Faith Failure to Settle Within Policy Limits • Bad Faith Claims Based on Contract: Under New Hampshire law, every party to a contract has an implied obligation of good faith and fair dealing. If an insured believes that the insurance company has failed to settle or pay a claim covered under the insurance policy, that insured may bring a first-party claim against the insurance carrier for breach of the insurance contract. Bursey v. Clement, 118 N.H. 412(1979); Jarvis v. Prudential Ins. Co., 122 N.H. 648 (1982).
Bad Faith Failure to Settle Within Policy Limits An insurer's bad faith refusal to settle or pay a claim pursuant to its contractual obligations does not give rise to a tort action. Accordingly, if an insurer refused to settle or pay a claim, even if acting in bad faith, the plaintiff will not, for example, be able to recover for emotional distress. Recovery in such instances is limited to the policy limits, interest, and any unavoidable consequential damages the plaintiff can prove. A. B. C. Builders, Inc. v. American Mutual Ins. Co., 139 N.H. 745 (1995); Lawton v. Great Southwest Fire Ins. Co., 118 N.H. 607, 613-614 (1978).
Bad Faith Failure to Settle Within Policy Limits 1. In General: Under New Hampshire law, a party may sue an insurance carrier for failure to settle a claim against that party within the policy limits. New Hampshire has specifically adopted a negligence standard-defined as how a "reasonable person might act under the same circumstances." An insurance carrier, therefore, has a duty to exercise due care in ascertaining all of the facts of the case, both as to liability and damages and in appraising the risk to the insured of being obliged to pay any portion of a verdict in excess of policy limits. Gelinas v. Metropolitan Prop. & Liability Inc. Co., 131 N.H. 154, 161 (1988); Dumas v. Hartford Accident & Indemnity Co., 94 N.H. 484 (1947).
Bad Faith Failure to Settle Within Policy Limits 2. A Question of Fact: Whether an insurance company has acted in good faith is a question of fact. Gelinas v. Metro. Prop. & Liability Ins. Co., 131 N.H. 154, 160 (1988); Lawton v. Greatsouthwest Fire Ins. Co., 118, N.H. 607, 612-13 (1978).
Bad Faith Failure to Settle Within Policy Limits 3. Duty to Avoid Placing Insured Needlessly at Risk: An insurance company should not shy away from defending cases it believes it reasonably has a basis for defending. The insurer has a reasonable right to try its case in court. It cannot, however, be "unduly venturesome at the expense of the insured." The insurance company must exercise the same caution that the ordinary person of average prudence would employ under the circumstances. Stated otherwise, "the duty an insurance company owes to its insured is to use reasonable judgment in deciding whether to run the risk of an award in excess of [the policy limits.]“ Dumas v. Hartford Accident & Indemnity Co., 94 N.H. 484, 489 (1947); Dumas v. State Farm Mutual Automobile Ins. Co., 111 N. H. 43, 46-49 (1971).
Bad Faith Failure to Settle Within Policy Limits • No Strict Liability for Failure to Settle • The New Hampshire Supreme Court has expressly • rejected the idea of holding an insurance carrier • strictly liable for failing to settle within the policy • limits. • Dumas v. State Farm Mutual Automobile Ins. Co., 111 N.H. 43, 46-49 (1971).
Bad Faith Failure to Settle Within Policy Limits 5. The Insurance Company's Conflict When the settlement value of a case approaches the policy limits, the risk to the insurance company in taking the case to trial increases. Accordingly, insurance carriers must give more weight to the insured's interest as the settlement value of the claim approaches the policy limits. Dumas v. State Farm Mutual Automobile Ins. Co., 111 N.H. 43, 48 (1971).