§431:13-103 - Unfair methods of competition and unfair or deceptive acts or practices defined.

§431:13-103 Unfair methods of competition
and unfair or deceptive acts or practices defined. (a) The following are
defined as unfair methods of competition and unfair or deceptive acts or
practices in the business of insurance:

(1) Misrepresentations and false advertising of
insurance policies. Making, issuing, circulating, or causing to be made,
issued, or circulated, any estimate, illustration, circular, statement, sales
presentation, omission, or comparison which:

(A) Misrepresents the benefits, advantages,
conditions, or terms of any insurance policy;

(B) Misrepresents the dividends or share of
the surplus to be received on any insurance policy;

(C) Makes any false or misleading statement as
to the dividends or share of surplus previously paid on any insurance policy;

(D) Is misleading or is a misrepresentation as
to the financial condition of any insurer, or as to the legal reserve system
upon which any life insurer operates;

(E) Uses any name or title of any insurance
policy or class of insurance policies misrepresenting the true nature thereof;

(F) Is a misrepresentation for the purpose of
inducing or tending to induce the lapse, forfeiture, exchange, conversion, or
surrender of any insurance policy;

(G) Is a misrepresentation for the purpose of
effecting a pledge or assignment of or effecting a loan against any insurance
policy;

(H) Misrepresents any insurance policy as
being shares of stock;

(I) Publishes or advertises the assets of any
insurer without publishing or advertising with equal conspicuousness the
liabilities of the insurer, both as shown by its last annual statement; or

(J) Publishes or advertises the capital of any
insurer without stating specifically the amount of paid-in and subscribed
capital;

(2) False information and advertising generally.
Making, publishing, disseminating, circulating, or placing before the public,
or causing, directly or indirectly, to be made, published, disseminated,
circulated, or placed before the public, in a newspaper, magazine, or other
publication, or in the form of a notice, circular, pamphlet, letter, or poster,
or over any radio or television station, or in any other way, an advertisement,
announcement, or statement containing any assertion, representation, or
statement with respect to the business of insurance or with respect to any
person in the conduct of the person's insurance business, which is untrue,
deceptive, or misleading;

(3) Defamation. Making, publishing, disseminating,
or circulating, directly or indirectly, or aiding, abetting, or encouraging the
making, publishing, disseminating, or circulating of any oral or written
statement or any pamphlet, circular, article, or literature which is false, or
maliciously critical of or derogatory to the financial condition of an insurer,
and which is calculated to injure any person engaged in the business of
insurance;

(4) [Repeal and reenactment on June 30, 2011. L
2009, c 11, §22.] Boycott, coercion, and intimidation.

(A) Entering into any agreement to commit, or
by any action committing, any act of boycott, coercion, or intimidation
resulting in or tending to result in unreasonable restraint of, or monopoly in,
the business of insurance; or

(B) Entering into any agreement on the
condition, agreement, or understanding that a policy will not be issued or
renewed unless the prospective insured contracts for another class or an
additional policy of the same class of insurance with the same insurer;
provided that this subparagraph shall not apply to any insurer subject to chapter
432 with less than five per cent of the health insurance market share, offering
contracts for dental, vision, drug, and life insurance as a condition,
agreement, or understanding to a health insurance policy pursuant to chapter
432;

(5) False financial statements.

(A) Knowingly filing with any supervisory or
other public official, or knowingly making, publishing, disseminating,
circulating, or delivering to any person, or placing before the public, or
knowingly causing, directly or indirectly, to be made, published, disseminated,
circulated, delivered to any person, or placed before the public, any false
statement of a material fact as to the financial condition of an insurer; or

(B) Knowingly making any false entry of a
material fact in any book, report, or statement of any insurer with intent to
deceive any agent or examiner lawfully appointed to examine into its condition
or into any of its affairs, or any public official to whom the insurer is
required by law to report, or who has authority by law to examine into its
condition or into any of its affairs, or, with like intent, knowingly omitting
to make a true entry of any material fact pertaining to the business of the
insurer in any book, report, or statement of the insurer;

(6) Stock operations and advisory board contracts.
Issuing or delivering or permitting agents, officers, or employees to issue or
deliver, agency company stock or other capital stock, or benefit certificates
or shares in any common-law corporation, or securities or any special or
advisory board contracts or other contracts of any kind promising returns and
profits as an inducement to insurance;

(7) Unfair discrimination.

(A) Making or permitting any unfair
discrimination between individuals of the same class and equal expectation of
life in the rates charged for any policy of life insurance or annuity contract
or in the dividends or other benefits payable thereon, or in any other of the
terms and conditions of the contract;

(B) Making or permitting any unfair
discrimination in favor of particular individuals or persons, or between
insureds or subjects of insurance having substantially like insuring, risk, and
exposure factors, or expense elements, in the terms or conditions of any
insurance contract, or in the rate or amount of premium charge therefor, or in
the benefits payable or in any other rights or privilege accruing thereunder;

(C) Making or permitting any unfair
discrimination between individuals or risks of the same class and of
essentially the same hazards by refusing to issue, refusing to renew,
canceling, or limiting the amount of insurance coverage on a property or
casualty risk because of the geographic location of the risk, unless:

(i) The refusal, cancellation, or limitation is
for a business purpose which is not a mere pretext for unfair discrimination;
or

(ii) The refusal, cancellation, or limitation is
required by law or regulatory mandate;

(D) Making or permitting any unfair
discrimination between individuals or risks of the same class and of essentially
the same hazards by refusing to issue, refusing to renew, canceling, or
limiting the amount of insurance coverage on a residential property risk, or
the personal property contained therein, because of the age of the residential
property, unless:

(i) The refusal, cancellation, or limitation
is for a business purpose which is not a mere pretext for unfair
discrimination; or

(ii) The refusal, cancellation, or limitation is
required by law or regulatory mandate;

(E) Refusing to insure, refusing to continue
to insure, or limiting the amount of coverage available to an individual
because of the sex or marital status of the individual; however, nothing in
this subsection shall prohibit an insurer from taking marital status into
account for the purpose of defining persons eligible for dependent benefits;

(F) Terminating or modifying coverage, or
refusing to issue or renew any property or casualty policy or contract of
insurance solely because the applicant or insured or any employee of either is
mentally or physically impaired; provided that this subparagraph shall not
apply to accident and health or sickness insurance sold by a casualty insurer;
provided further that this subparagraph shall not be interpreted to modify any
other provision of law relating to the termination, modification, issuance, or
renewal of any insurance policy or contract;

(G) Refusing to insure, refusing to continue
to insure, or limiting the amount of coverage available to an individual based
solely upon the individual's having taken a human immunodeficiency virus (HIV)
test prior to applying for insurance; or

(H) Refusing to insure, refusing to continue
to insure, or limiting the amount of coverage available to an individual
because the individual refuses to consent to the release of information which
is confidential as provided in section 325-101; provided that nothing in this
subparagraph shall prohibit an insurer from obtaining and using the results of
a test satisfying the requirements of the commissioner, which was taken with
the consent of an applicant for insurance; provided further that any applicant
for insurance who is tested for HIV infection shall be afforded the opportunity
to obtain the test results, within a reasonable time after being tested, and
that the confidentiality of the test results shall be maintained as provided by
section 325-101;

(8) Rebates. Except as otherwise expressly provided
by law:

(A) Knowingly permitting or offering to make
or making any contract of insurance, or agreement as to the contract other than
as plainly expressed in the contract, or paying or allowing, or giving or
offering to pay, allow, or give, directly or indirectly, as inducement to the
insurance, any rebate of premiums payable on the contract, or any special favor
or advantage in the dividends or other benefits, or any valuable consideration
or inducement not specified in the contract; or

(B) Giving, selling, or purchasing, or
offering to give, sell, or purchase as inducement to the insurance or in
connection therewith, any stocks, bonds, or other securities of any insurance
company or other corporation, association, or partnership, or any dividends or
profits accrued thereon, or anything of value not specified in the contract;

(9) Nothing in paragraph (7) or (8) shall be
construed as including within the definition of discrimination or rebates any
of the following practices:

(A) In the case of any life insurance policy
or annuity contract, paying bonuses to policyholders or otherwise abating their
premiums in whole or in part out of surplus accumulated from nonparticipating
insurance; provided that any bonus or abatement of premiums shall be fair and
equitable to policyholders and in the best interests of the insurer and its
policyholders;

(B) In the case of life insurance policies
issued on the industrial debit plan, making allowance to policyholders who have
continuously for a specified period made premium payments directly to an office
of the insurer in an amount which fairly represents the saving in collection expense;

(C) Readjustment of the rate of premium for a
group insurance policy based on the loss or expense experience thereunder, at
the end of the first or any subsequent policy year of insurance thereunder,
which may be made retroactive only for the policy year; and

(D) In the case of any contract of insurance,
the distribution of savings, earnings, or surplus equitably among a class of
policyholders, all in accordance with this article;

(10) Refusing to provide or limiting coverage
available to an individual because the individual may have a third-party claim
for recovery of damages; provided that:

(A) Where damages are recovered by judgment or
settlement of a third-party claim, reimbursement of past benefits paid shall be
allowed pursuant to section 663-10;

(B) This paragraph shall not apply to entities
licensed under chapter 386 or 431:10C; and

(i) It shall not be a violation of this section
to refuse to provide or limit coverage available to an individual because the
entity determines that the individual reasonably appears to have coverage
available under chapter 386 or 431:10C; and

(ii) Payment of claims to an individual who may
have a third-party claim for recovery of damages may be conditioned upon the
individual first signing and submitting to the entity documents to secure the
lien and reimbursement rights of the entity and providing information
reasonably related to the entity's investigation of its liability for coverage.

Any individual who knows or reasonably
should know that the individual may have a third-party claim for recovery of
damages and who fails to provide timely notice of the potential claim to the
entity, shall be deemed to have waived the prohibition of this paragraph
against refusal or limitation of coverage. "Third-party claim" for
purposes of this paragraph means any tort claim for monetary recovery or
damages that the individual has against any person, entity, or insurer, other
than the entity licensed under chapter 432 or 432D;

(11) Unfair claim settlement practices. Committing or
performing with such frequency as to indicate a general business practice any
of the following:

(A) Misrepresenting pertinent facts or
insurance policy provisions relating to coverages at issue;

(B) With respect to claims arising under its
policies, failing to respond with reasonable promptness, in no case more than
fifteen working days, to communications received from:

(i) The insurer's policyholder;

(ii) Any other persons, including the
commissioner; or

(iii) The insurer of a person involved in an
incident in which the insurer's policyholder is also involved.

The response shall be more than an
acknowledgment that such person's communication has been received, and shall
adequately address the concerns stated in the communication;

(C) Failing to adopt and implement reasonable
standards for the prompt investigation of claims arising under insurance
policies;

(D) Refusing to pay claims without conducting
a reasonable investigation based upon all available information;

(E) Failing to affirm or deny coverage of
claims within a reasonable time after proof of loss statements have been
completed;

(F) Failing to offer payment within thirty
calendar days of affirmation of liability, if the amount of the claim has been
determined and is not in dispute;

(G) Failing to provide the insured, or when
applicable the insured's beneficiary, with a reasonable written explanation for
any delay, on every claim remaining unresolved for thirty calendar days from
the date it was reported;

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

(I) Compelling insureds to institute
litigation to recover amounts due under an insurance policy by offering
substantially less than the amounts ultimately recovered in actions brought by
the insureds;

(J) Attempting to settle a claim for less than
the amount to which a reasonable person would have believed the person was
entitled by reference to written or printed advertising material accompanying
or made part of an application;

(K) Attempting to settle claims on the basis
of an application which was altered without notice, knowledge, or consent of
the insured;

(L) Making claims payments to insureds or
beneficiaries not accompanied by a statement setting forth the coverage under
which the payments are being made;

(M) 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;

(N) 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;

(O) Failing to promptly settle claims, where
liability has become reasonably clear, under one portion of the insurance
policy coverage to influence settlements under other portions of the insurance
policy coverage;

(P) 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; and

(Q) Indicating to the insured on any payment
draft, check, or in any accompanying letter that the payment is
"final" or is "a release" of any claim if additional
benefits relating to the claim are probable under coverages afforded by the
policy; unless the policy limit has been paid or there is a bona fide dispute
over either the coverage or the amount payable under the policy;

(12) Failure to maintain complaint handling
procedures. Failure of any insurer to maintain a complete record of all the
complaints which it has received since the date of its last examination under
section 431:2-302. This record shall indicate the total number of complaints,
their classification by line of insurance, the nature of each complaint, the
disposition of these complaints, and the time it took to process each
complaint. For purposes of this section, "complaint" means any
written communication primarily expressing a grievance;

(13) Misrepresentation in insurance applications.
Making false or fraudulent statements or representations on or relative to an
application for an insurance policy, for the purpose of obtaining a fee,
commission, money, or other benefit from any insurer, producer, or individual;
and

(14) Failure to obtain information. Failure of any
insurance producer, or an insurer where no producer is involved, to comply with
section 431:10D-623(a), (b), or (c) by making reasonable efforts to obtain information
about a consumer before making a recommendation to the consumer to purchase or
exchange an annuity.

(b) The commissioner shall by certified mail
notify the insurer's agent, as designated pursuant to section 431:2-205, of
each complaint filed with the commissioner under this section.

(c) Three or more written complaints received
by the commissioner within any twelve-month period charging separate violations
of this section shall constitute a rebuttable presumption of a general business
practice.

(d) Evidence as to numbers and types of
complaints to the commissioner against an insurer, and the commissioner's
complaint experience with other insurers writing similar lines of insurance,
shall be admissible in an administrative or judicial proceeding brought under
this section. No insurer shall be deemed in violation of this section solely
by reason of the numbers and types of such complaints except if the presumption
under subsection (c) is not rebutted.

(e) If it is found, after notice and an opportunity
to be heard, that an insurer has violated this section, each instance of
noncompliance may be treated as a separate violation of this section for the
purposes of section 431:2-203.

(f) An insurer or licensee shall issue a
written response with reasonable promptness, in no case more than fifteen
working days, to any written inquiry made by the commissioner regarding a claim
or consumer complaint. The response shall be more than an acknowledgment that
the commissioner's communication has been received, and shall adequately
address the concerns stated in the communication. [L 1987, c 347, pt of §2; am
L 1988, c 330, §2; am L 1989, c 396, §1; am L 1997, c 83, §4; am L 2000, c 29,
§1; am L 2002, c 155, §81 and c 228, §1; am L 2003, c 212, §104; am L 2007, c
257, §3; am L 2008, c 227, §§2, 5]

Note

Report by auditor on effects of 2008 amendment (2010). L
2008, c 227, §3.

Case Notes

Violations of the unfair settlement provision, subsection
(a), may be used as evidence to indicate bad faith in accordance with the
guidelines of Best Place, Inc. v. Penn America Ins. Co. 27 F. Supp. 2d 1211.

An insurer that does not respond promptly to a party's
settlement demand and does not negotiate settlement in good faith may violate
subsection (a)(10). 73 H. 412, 835 P.2d 627.

Plaintiff may not maintain a private cause of action for an
alleged violation of this section. 28 F. Supp. 2d 588.

Mentioned: 795 F. Supp. 1036; 255 F. Supp. 2d 1149.

Evidence regarding workers' compensation insurer's failure to
specifically address questions posed in a letter from claimant's counsel was
insufficient to show that insurer failed to respond to communications
"with such frequency as to indicate a general business practice"
under subparagraph (a)(11)(B); insurer's failure thus did not violate this
section or establish a genuine issue of material fact regarding claimant's
allegation that insurer breached its duty to negotiate in good faith. 112 H.
195 (App.), 145 P.3d 738.