new hampshire statutes governing insurance claim practices presented by: michael w. wallenius...

New Hampshire Statutes Governing

Insurance Claim Practices

Presented by:Michael W. Wallenius

Getman, Schulthess & Steere, PAThree Executive Park Drive Ste 9

Bedford, NH 03110603-634-4300

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 417

Enumerates Both:

Unfair Insurance Practices; and

Unfair Claims Settlement 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 Claims Settlement 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


Knowingly misrepresenting pertinent facts or policy provisions relating to coverage at issue to a claimant or an insured;

RSA 417:4, XV (a) (1)

Failing to acknowledge and act promptly upon communications with respect to claims arising under insurance policies

RSA 417:4, XV (a) (2)


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)


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)


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)


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)


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)


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)


Making any claim payment not accompanied by a statement setting forth the benefits included within the claim payment

RSA 417:4, XV (a) (10)


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)


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)


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


RSA 417:12, I – Procedure:

Show cause hearing scheduled Which includes Insurance

Departments plan of action To be resulted by the insurer


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


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


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.


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


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 theInsurance 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:16Additionally:

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

Request Deadline: 30 days after person knew or should have known of the act in question


Application for hearing must: State why applicant is aggrieved State the Basis for Requested Relief

Statute or regulation


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


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


A. 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).


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).


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).


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).


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).


4.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).


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).


6. Bad Faith Claims By Third Parties

A third-party has no direct cause of action against the insurance company for negligent failure to settle.Duncan v. Lumbermen’s Mutual Cas. Co. 91 N.H. 349, 349 (1941)

However, tort claims are freely assignable, so third parties can

take assignments of any cause of action the insured might

have against the insurer.

Dumas v. State Farm Mutual Automobile Ins. Co., 111 N.H. 43, 48 (1971).


7. Duty of Primary Carrier to Excess Carrier

A primary carrier owes no duty of care to and excess

carrier to settle a claim within the policy limits. However,

an excess carrier may pursue a Dumas claim against the

primary carrier based on an assignment clause in its policy.

A Dumas action based on such assignment is not barred

By the fact that the actual insured would suffer no financial

loss.

Allstate Ins. Co. v. Reserve Ins. Co., 116 N.H. 806, 808 (1977).

Malicious or “Bad Faith” Defense

New Hampshire recognizes the tort of malicious defense.

A defendant may be found liable for malicious defense if, in

defending a claim, he or she Acts without a credible basis in fact; Knowing the defense lacks merit; Primarily for a purpose other than securing the

proper adjudication of the claim; The previous proceeding terminated in favor of

the party bringing the malicious defense action; and

Injury or damages have been sustained.Aranson v. Schroeder, 140 N.H 359 (1995).

New Hampshire Statutes Governing Insurance Claim

Practices

The End

Getman, Schulthess & Steere, PAThree Executive Park Drive Ste 9

Bedford, NH 03110603-634-4300