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

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

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

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

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

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

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

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

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

(H)  Misrepresents any insurance policy asbeing shares of stock;

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

(J)  Publishes or advertises the capital of anyinsurer without stating specifically the amount of paid-in and subscribedcapital;

(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 otherpublication, 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, orstatement with respect to the business of insurance or with respect to anyperson 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 themaking, publishing, disseminating, or circulating of any oral or writtenstatement or any pamphlet, circular, article, or literature which is false, ormaliciously critical of or derogatory to the financial condition of an insurer,and which is calculated to injure any person engaged in the business ofinsurance;

(4)  [Repeal and reenactment on June 30, 2011.  L2009, c 11, §22.]  Boycott, coercion, and intimidation.

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

(B)  Entering into any agreement on thecondition, agreement, or understanding that a policy will not be issued orrenewed unless the prospective insured contracts for another class or anadditional policy of the same class of insurance with the same insurer;provided that this subparagraph shall not apply to any insurer subject to chapter432 with less than five per cent of the health insurance market share, offeringcontracts for dental, vision, drug, and life insurance as a condition,agreement, or understanding to a health insurance policy pursuant to chapter432;

(5)  False financial statements.

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

(B)  Knowingly making any false entry of amaterial fact in any book, report, or statement of any insurer with intent todeceive any agent or examiner lawfully appointed to examine into its conditionor into any of its affairs, or any public official to whom the insurer isrequired by law to report, or who has authority by law to examine into itscondition or into any of its affairs, or, with like intent, knowingly omittingto make a true entry of any material fact pertaining to the business of theinsurer 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 ordeliver, agency company stock or other capital stock, or benefit certificatesor shares in any common-law corporation, or securities or any special oradvisory board contracts or other contracts of any kind promising returns andprofits as an inducement to insurance;

(7)  Unfair discrimination.

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

(B)  Making or permitting any unfairdiscrimination in favor of particular individuals or persons, or betweeninsureds or subjects of insurance having substantially like insuring, risk, andexposure factors, or expense elements, in the terms or conditions of anyinsurance contract, or in the rate or amount of premium charge therefor, or inthe benefits payable or in any other rights or privilege accruing thereunder;

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

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

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

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

(i)  The refusal, cancellation, or limitationis for a business purpose which is not a mere pretext for unfairdiscrimination; or

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

(E)  Refusing to insure, refusing to continueto insure, or limiting the amount of coverage available to an individualbecause of the sex or marital status of the individual; however, nothing inthis subsection shall prohibit an insurer from taking marital status intoaccount for the purpose of defining persons eligible for dependent benefits;

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

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

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

(8)  Rebates.  Except as otherwise expressly providedby law:

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

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

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

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

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

(C)  Readjustment of the rate of premium for agroup insurance policy based on the loss or expense experience thereunder, atthe 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 ofpolicyholders, all in accordance with this article;

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

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

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

(C)  For entities licensed under chapter 432 or432D:

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

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

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

(11)  Unfair claim settlement practices.  Committing orperforming with such frequency as to indicate a general business practice anyof the following:

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

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

(i)  The insurer's policyholder;

(ii)  Any other persons, including thecommissioner; or

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

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

(C)  Failing to adopt and implement reasonablestandards for the prompt investigation of claims arising under insurancepolicies;

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

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

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

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

(H)  Not attempting in good faith to effectuateprompt, fair, and equitable settlements of claims in which liability has becomereasonably clear;

(I)  Compelling insureds to institutelitigation to recover amounts due under an insurance policy by offeringsubstantially less than the amounts ultimately recovered in actions brought bythe insureds;

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

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

(L)  Making claims payments to insureds orbeneficiaries not accompanied by a statement setting forth the coverage underwhich the payments are being made;

(M)  Making known to insureds or claimants apolicy of appealing from arbitration awards in favor of insureds or claimantsfor the purpose of compelling them to accept settlements or compromises lessthan the amount awarded in arbitration;

(N)  Delaying the investigation or payment ofclaims by requiring an insured, claimant, or the physician of either to submita preliminary claim report and then requiring the subsequent submission offormal proof of loss forms, both of which submissions contain substantially thesame information;

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

(P)  Failing to promptly provide a reasonableexplanation of the basis in the insurance policy in relation to the facts orapplicable law for denial of a claim or for the offer of a compromisesettlement; and

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

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

(13)  Misrepresentation in insurance applications. Making false or fraudulent statements or representations on or relative to anapplication 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 anyinsurance producer, or an insurer where no producer is involved, to comply withsection 431:10D-623(a), (b), or (c) by making reasonable efforts to obtain informationabout a consumer before making a recommendation to the consumer to purchase orexchange an annuity.

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

(c)  Three or more written complaints receivedby the commissioner within any twelve-month period charging separate violationsof this section shall constitute a rebuttable presumption of a general businesspractice.

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

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

(f)  An insurer or licensee shall issue awritten response with reasonable promptness, in no case more than fifteenworking days, to any written inquiry made by the commissioner regarding a claimor consumer complaint.  The response shall be more than an acknowledgment thatthe commissioner's communication has been received, and shall adequatelyaddress the concerns stated in the communication. [L 1987, c 347, pt of §2; amL 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, c257, §3; am L 2008, c 227, §§2, 5]

 

Note

 

  Report by auditor on effects of 2008 amendment (2010).  L2008, 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 theguidelines of Best Place, Inc. v. Penn America Ins. Co.  27 F. Supp. 2d 1211.

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

  Plaintiff may not maintain a private cause of action for analleged 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 tospecifically address questions posed in a letter from claimant's counsel wasinsufficient 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 thissection or establish a genuine issue of material fact regarding claimant'sallegation that insurer breached its duty to negotiate in good faith.  112 H.195 (App.), 145 P.3d 738.