Insurance Claim Rights – Consumer Protection Against Unfair Claim Practices

What are my rights as an insurance claimant? What consumer protection is there against companies who abuse consumers? Yes! Each state has an administrative body that regulates insurance companies.

The 1945 Federal McCarran-Ferguson Act, which is codified in U.S. Code Title 15 Chapter 20, gives states the ability to regulate the insurance business as they wish. All policies and regulations in every state are therefore different. Each state has its own statutes, which apply to agents, brokers and adjusters as well as insurance companies.

These statutes empower the states to establish the “Department of Insurance.” These statutes codify the rights of a consumer against an insurance company. The Revised Code of Washington (RCW 48.01.030) states that “the business of insurance is one that affects the public interest.” It requires that all individuals act in good faith, refrain from deception and use honesty and fairness in all insurance matters. The duty to preserve the integrity of insurance rests upon the insurer, the insured, their provider and their representatives. This language is used in all states, with very few modifications.

This language is extremely specific and outlines the requirement for fair dealing and good faith. Many states have specific guidelines that define what consumer rights you have and what claims practices are prohibited.

  1. Incorrectly stating relevant facts or ignoring insurance policy provisions.
  2. Failure to promptly acknowledge and respond to communications regarding claims under insurance policies
  3. Failure to implement and adopt reasonable standards for prompt investigation of insurance claims.
  4. Refusing to pay claims, without conducting a reasonable investigation
  5. Failure to confirm or deny coverage within a reasonable amount of time after loss proof statements have been submitted;
  6. Not trying to settle claims promptly, fairly and fairly in cases where liability is reasonably clear. This includes the obligation to pay property damage claims to innocent third party in clear liability situations. If there are multiple insurers involved, they should make the payment and delegate the responsibility of distributing it.
  7. Indemning insureds to initiate or submit to arbitration, litigation, or appraisal in order to recover amounts due under an insurer policy. They offer substantially less than what is ultimately recovered through such actions or proceedings.
  8. A claim cannot be settled for less than what a reasonable man would believe he is entitled if it is supported by printed or written advertising material.
  9. Not accompanied by a statement describing the coverage for which the claims are made, making payments to beneficiaries or insureds.
  10. Insisting on claimants or insureds a policy of appeal from arbitration awards in favour of claimants or insureds for the purpose to force them to accept settlements and compromises that are less than the arbitration award;
  11. Requires an insured, claimant or physician to submit a preliminary report on a claim and then requires subsequent submissions that contain substantially the same information.
  12. Failure to settle claims promptly, when liability has become reasonable clear, under one part of the insurance coverage to influence settlements under the other parts of the policy coverage
  13. Failure to provide a reasonable explanation in writing of the basis of the insurance policy relative to the facts and applicable law to deny a claim or offer a compromise settlement.
  14. A public adjuster represents claimants and is unfairly discriminating against them
  15. Drafts received in settlement of claims are not always honored promptly. This provision will be violated if a draft is not honored within three days after receipt of notice by the bank. This provision does not apply to any draft that is returned unhonoured for legitimate reasons.
  16. After the obligation to pay is established, it is not possible to establish and implement reasonable standards to process and pay claims. Except in those cases where the payment deadline is established by statute, rule or contract, any procedures that are not designed to deliver a check/ draft to the payee to settle a settled claim in full payment within 15 business days of receipt by the insurer/its attorney of properly executed releases and other settlement documents is unacceptable. The insurer must provide a claimant or insured with a proper release or settlement document within twenty days of a settlement being reached.
  17. Using appraisers outside the area of loss can delay appraisals and increase their cost under insurance policy appraisal provisions. Only when the unique nature or lack of local appraisers makes it necessary to use outside-of-area appraisers is this possible.