law17197

Chapter 197

2017 -- H 5951 SUBSTITUTE A
Enacted 07/18/2017

A N A C T

RELATING TO INSURANCE - UNFAIR COMPETITION AND PRACTICES

Introduced By: Representatives Blazejewski, Shekarchi, Maldonado, Hearn, and Tanzi

Date Introduced: March 17, 2017

It is enacted by the General Assembly as follows:

SECTION 1. Sections 27-29-2 and 27-29-4 of the General Laws in Chapter 27-29

entitled "Unfair Competition and Practices" are hereby amended to read as follows:

27-29-2. Definitions.

When used in this chapter:

(1) "Commissioner" means director of the department of business regulation;

(2) "Consultant" means an individual, partnership, or corporation who, for a fee, holds

himself, herself, or itself out to the public as engaged in the business of offering any advice,

counsel, opinion, or service with respect to the benefits, advantages or disadvantages promised

under any policy of insurance that could be issued in this state;

(3) "Domestic partnership" means two (2) people who are in an exclusive, intimate, and

committed relationship with each other, and who certify by affidavit that their relationship meets

the following qualifications:

(i) Both persons are at least eighteen (18) years of age and are mentally competent to

contract;

(ii) Neither person is currently married to someone else;

(iii) The persons are not related by blood to a degree that would prohibit marriage in the

state of Rhode Island;

(iv) The persons reside together and have resided together for at least one year prior to

the date of the certified affidavit;

(v) The persons are financially interdependent as evidenced by two (2) of the following:

(A) A domestic partnership agreement or relationship contract;

(B) A joint mortgage or joint ownership of a primary residence;

(I) Joint ownership of a motor vehicle;

(II) A joint checking account;

(III) A joint credit account;

(IV) A joint lease; and/or

(D) One person has been designated as a beneficiary for the other person’s will,

retirement contract, or life insurance.;

(3)(4) "Insured" means the party named on a policy or certificate as the individuals with

legal rights to the benefits provided by the policy;

(4)(5) "Insurer" means any person, reciprocal exchange, interinsurer, Lloyds insurer,

fraternal benefit society, and any other legal entity engaged in the business of insurance,

including agents, brokers, insurance producers, adjusters, and third-party administrators.

Notwithstanding any other provision of law, insurer shall also mean a nonprofit hospital and/or

medical service corporation, a nonprofit dental service corporation, a nonprofit optometric service

corporation, a nonprofit legal service corporation, a health maintenance organization as defined in

the general laws, or any other entity providing a plan of health benefits. For the purposes of this

act, the entities in this subdivision shall be deemed to be engaged in the business of insurance and

subject to this chapter;

(5)(6) "License" means any license, certificate of authority, certificate of compliance, or

other formal approval or authorization granted by the department of business regulation, division

of insurance;

(6)(7) "Person" means any natural or artificial entity, including but not limited to,: an

individual, corporation, association, partnership, trust, or any other legal entity; and

(7)(8) "Policy" or "certificate" means any contract of insurance, indemnity, medical,

health, or hospital service, suretyship, or annuity issued, proposed for issuance, or intended for

issuance, by any insurer.

27-29-4. Unfair methods of competition and unfair or deceptive acts or practices

defined.

The following are defined as unfair methods of competition and unfair and deceptive acts

or practices in the business of insurance:

(1) Misrepresentations and false advertising of policies or contracts. Making, issuing,

circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, or

statement, sales presentation, omission, or comparison misrepresenting the terms of any policy

issued or to be issued or the benefits, conditions, or advantages promised by any policy or the

dividends or share of the surplus to be received on any policy, or making any false or misleading

statement as to the dividends or share of surplus previously paid on any policy, or making any

misleading representation or any misrepresentation as to the financial condition of any insurer, or

as to the legal reserve system upon which any life insurer operates, or using any name or title of

any policy or class of policies misrepresenting the true nature of that policy or class of policies, or

making any misrepresentation to any policyholder insured in any company including any

intentional misquote of a premium rate, for the purpose of inducing or tending to induce the

policyholder to lapse, forfeit, or surrender his or her insurance, or misrepresenting for the purpose

of effecting a pledge or assignment of or effecting a loan against any policy, or misrepresenting

any policy as being share or stock;

(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 his or her insurance business which that 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 of literature which that is false or

maliciously critical of or derogatory to the financial condition of an insurer, and which that is

calculated to injure any person engaged in the business of insurance;

(4) Boycott, coercion, and intimidation. Entering into any agreement to commit, or by

any concerted 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;

(5) (i) False financial statements. 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 causing directly or indirectly, to be made, published, disseminated,

circulated, delivered to any person, or placed before the public any false material statement of

financial condition of an insurer; or

(ii) Knowingly making any false entry of a material fact in any book, report, or statement

of any insurer or 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 of any special or

advisory board contracts or other contracts of any kind promising returns and profits as an

inducement to insurance;

(7) (i) Unfair discrimination. 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 of life annuity or in the dividends or other benefits payable on any such policy or

life annuity, or in any other of the terms and conditions of the policy; or

(ii) Making or permitting any unfair discrimination between individuals of the same class

and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any

policy or contract of accident or health insurance or in the benefits payable under any policy or

contract, or in any of the terms or conditions of that policy, or in any other manner;

(iii) 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:

(A) The refusal, cancellation, or limitation is for a business purpose that is not a pretext

for unfair discrimination; or

(B) The refusal, cancellation, or limitation is required by law or regulation;

(iv) 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 in the residential property risk, because of the age of the residential property,

unless:

(A) The refusal, cancellation, or limitation is for a business purpose that is not a pretext

for unfair discrimination; or

(B) The refusal, cancellation, or limitation is required by law or regulation;

(v) 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; nothing in this

subsection shall prohibit an insurer from taking marital status into account for the purpose of

defining persons eligible for dependent benefits; or

(vi) To terminate, or to modify coverage, or to refuse to issue or refuse to renew any

property or casualty policy solely because the applicant or insured or any employee of either is

mentally or physically impaired; provided, that this subsection shall not apply to accident and

health insurance sold by a casualty insurer and, provided that this subsection 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; or

(vii) Making or permitting any unfair discrimination by treating persons in a domestic

partnership as defined in §27-29-2, differently than persons in a marriage for the purposes of

premiums, policy fees, or rates charged for policies of casualty, fire, homeowners, accident and

sickness, marine, or automobile insurance;

(8) (i) Rebates. Except as otherwise expressly provided by law, knowingly permitting or

offering to make or making any policy or agreement as to the policy other than as plainly

expressed in the policy issued on it, or paying or allowing or giving or offering to pay, allow, or

give, directly or indirectly, as inducement to the policy, any rebate of premiums payable on the

policy, or any special favor or advantage in the dividends or other benefits on the policy, or any

valuable consideration or inducement not specified in the policy, or giving, selling, or purchasing

or offering to give, sell, or purchase as inducement to the policy, or in connection with the policy,

any stocks, bonds, or other securities of any insurance company or other corporation, association,

or partnership, or any dividends or profits accrued on the security, or anything of value not

specified in the policy;

(ii) Nothing in subdivision (7) of this section or paragraph (i) of this subdivision shall be

construed as including within the definition of discrimination or rebates any of the following

practices:

(A) In the case of any contract of life insurance policies or life annuity, annuities paying

bonuses to policyholders or abating their premiums in whole or in part out of surplus accumulated

from nonparticipating insurance; provided, that any bonuses or abatement of premiums shall be

fair and equitable to policyholders and for the best interests of the company 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 that fairly represents the saving

in collection expenses; and

expense experience under it, at the end of the first or any subsequent policy year of insurance

under the policy, which may be made retroactive only for the policy year;

(9) (i) Free choice of insurance producer or insurer. When any person, firm, or

corporation engaged in the business of lending money on the security of real or personal property,

or in the business of negotiating, purchasing, selling, or holding loans on the security of real

property, or in the business of building, selling, or financing the sale or purchase of real property,

or any trustee, director, officer, agent, or other employee of that person, firm, or corporation,

requires that property insurance be procured for the property, the borrower, debtor, or purchaser

shall have free choice of insurance producer and insurer through or by which the insurance is to

be placed or written, subject only to the right of the builder, creditor, lender, or seller:

(A) To require evidence, to be produced at a reasonable time prior to commencement or

renewal of risk, that the insurance providing reasonable coverage has been obtained in an amount

equal to the amount required by the builder, creditor, lender, or seller;

(B) To require insurance in an insurer authorized to do business and having a licensed

resident insurance producer agent in this state; and

solvency;

(ii) When any contractor or subcontractor is required to procure a surety bond or policy

of insurance with respect to any building or construction contract which that is about to be, or

which that has been bid or entered into, the contractor or subcontractor shall have free choice of

insurance producer and insurer through or by which the surety bond or insurance is to be written;

provided, that the owner or contractor shall have the right: (A) tTo require evidence, to be

produced at a reasonable time prior to commencement or renewal of risk, that the insurance

providing reasonable coverage has been obtained in an amount equal to the amount required by

the builder, creditor, lender, or seller; (B) tTo require insurance in an insurer authorized to do

business and having a licensed resident insurance producer in this state; and (C) tTo refuse to

accept insurance in a particular insurer on reasonable grounds related to solvency; provided, that

the owner or contractor shall have the right to approve the form, sufficiency, or manner of

execution of the surety bond or policy or insurance furnished by the insurance company or

insurance producer selected by the contractor or subcontractor;

(iii) No person who lends money or extends credit may:

(A) Solicit insurance for the protection of real property after a person indicates interest in

securing a first mortgage credit extension until that person has received a commitment in writing

from the lender as to a loan or credit extension;

(B) Unreasonably reject a policy furnished by the borrower for the protection of the

property securing the creditor lien. A rejection shall not be deemed unreasonable if it is based on

reasonable standards, uniformly applied, relating to the extent of coverage required and the

financial soundness and the services of an insurer. The standards shall not discriminate against

any particular type of insurer, nor shall the standards call for rejection of a policy because it

contains coverage in addition to that required in the credit transaction;

a separate charge, in connection with the handling of any policy required as security for a loan on

real estate, or pay a separate charge to substitute the policy of one insurer for that of another. This

subsection does not include the interest that may be charged on premium loans or premium

advancements in accordance with the terms of the loan or credit document;

(D) Use or disclose, without the prior written consent of the borrower, mortgagor, or

purchaser taken at a time other than the making of the loan or extension of credit, information

relative to a policy which that is required by the credit transaction, for the purpose of replacing

the insurance; or

(E) Require any procedures or conditions of duly licensed insurance producers or insurers

not customarily required of those insurance producers or insurers affiliated or in any way

connected with the person who lends money or extends credit;

(iv) Every person who lends money or extends credit and who solicits insurance on real

and personal property subject to paragraph (iii) of this subdivision shall explain to the borrower in

writing that the insurance related to the credit extension may be purchased from an insurer or

insurance producer of the borrower's choice, subject only to the lender's right to reject a given

insurer or insurance producer as provided in paragraph (iii)(B) of this subdivision. Compliance

with disclosures as to insurance required by truth-in-lending laws or comparable state laws shall

be compliance with this subsection;

(v) This requirement for a commitment shall not apply in cases where the premium for

the required insurance is to be financed as part of the loan or extension of credit involving

personal property transactions;

(vi) The commissioner shall have the power to examine and investigate those insurance-

related activities of any person or insurer that the commissioner believes may be in violation of

this section. Any affected person may submit to the commissioner a complaint or material

pertinent to the enforcement of this section;

(vii) Nothing in this section shall prevent a person who lends money or extends credit

from placing insurance on real or personal property in the event the mortgagor, borrower, or

purchaser has failed to provide required insurance in accordance with the terms of the loan or

credit document;

(viii) Nothing contained in this section shall apply to credit life or credit accident and

health insurance.

(10) Notice of free choice of insurance producer or insurer. Every debtor, borrower, or

purchaser of property with respect to which insurance of any kind on the property is required in

connection with a debt or loan secured by the property or in connection with the sale of the

property, shall be informed in writing by the builder, creditor, lender, or seller, of his or her right

of free choice in the selection of the insurance producer and insurer through or by which the

insurance is to be placed. There shall be no interference, either directly or indirectly, with the

borrower's, debtor's, or purchaser's free choice of an insurance procedure producer and of an

insurer which that complies with the requirements of this section, and the builder, creditor,

lender, seller, owner, or contractor shall not refuse the policy tendered by the borrower, debtor,

purchaser, contractor, or subcontractor. Upon notice of any refusal of the tendered policy, the

insurance commissioner shall order the builder, creditor, lender, seller, owner, or contractor to

accept the tendered policy, if the commissioner determines that the refusal is not in accordance

with the requirements of this section. Failure to comply with an order of the insurance

commissioner shall be deemed a violation of this section;

(11) Using insurance information to detriment of another. Whenever the instrument

requires that the purchaser, mortgagor, or borrower furnish insurance of any kind on real property

being conveyed or is collateral security to a loan, the mortgagee, vendor, or lender shall refrain

from disclosing or using any and all insurance information to his or her or its own advantage and

to the detriment of either the borrower, purchaser, mortgagor, insurance company, or agency

complying with the requirements relating to insurance;

(12) Prohibited group enrollments. No insurer shall offer more than one group policy of

insurance through any person unless that person is licensed, at a minimum, as an insurance

producer. This prohibition shall not apply to employer-employee relationships, or to any of these

enrollments;

(13) Failure to maintain complaint handling procedures. No insurer shall fail to maintain

a complete record of all the complaints it received since the date of its last examination pursuant

to the general laws providing for examination of insurers. This record shall indicate the total

number of complaints, their classification by line of insurance, the nature of each complaint, the

disposition of each complaint, and the time it took to process each complaint. For the purposes of

this subsection, "complaint" means any written communication primarily expressing a grievance;

(14) Misrepresentation in insurance applications. Making false or fraudulent statements

or representations on or relative to an application for a policy, for the purpose of obtaining a fee,

commission, money, or other benefit from any insurers, insurance producer, or individual person;

(15) Requiring that repairs be made to an automobile at a specified auto body repair shop

or interfering with the insured's or claimant's free choice of repair facility. The insured or

claimant shall be promptly informed by the insurer of his or her free choice in the selection of an

auto body repair shop. Once the insured or claimant has advised the insurer that an auto body

repair shop has been selected, the insurer may not recommend that a different auto body repair

shop be selected to repair the automobile. An auto body repair shop may file a complaint with the

department of business regulation alleging a violation of this subdivision subsection (15).

Whenever the department of business regulation has reason to believe that an insurer has violated

this subdivision subsection (15), the department shall conduct an investigation and may convene

a hearing. A complaint filed by an auto body repair shop must be accompanied by a statement

written and signed by the insured or claimant setting forth the factual basis of the complaint, and

the insured or claimant must voluntarily appear and testify at any administrative proceedings on

the complaint; and

(16) Requiring that motor vehicle glass repair be made at a specified motor vehicle glass

repair shop or interfering with the insured's or claimant's free choice of a licensed repair facility.

The insured or claimant shall be promptly informed by the insurer of his or her free choice in the

selection of a licensed motor vehicle glass repair shop. The insurer shall not require a person to

use or employ unfair or deceptive acts or practices, threaten, coerce, or intimidate to induce a

person to use or select a particular licensed motor vehicle glass repair shop to provide motor

vehicle glass repair services. An insurer shall not knowingly contract with, refer motor vehicle

glass repair services to, or otherwise negotiate with an unlicensed motor vehicle glass repair shop,

as defined in chapter 38.5 of title 5. Once the insured or claimant has advised the insurer that a

motor vehicle glass repair shop has been selected, the insurer may not recommend that a different

motor vehicle glass repair shop be selected to repair the motor vehicle glass, and an insurer shall

not assign or dispatch the repair work or forward a related policy or policyholder's contact or

repair scheduling information to a different licensed motor vehicle glass repair shop without the

knowledge and consent of the insured. An insured may at any point in time elect to change the

insured's choice of licensed motor vehicle glass repair shop. However, an insurer authorized to

conduct business in the state may provide directly, or through other means, including electronic

transmissions, specific, truthful, and non-deceptive information regarding the features and

benefits available to the insured under the policy to assist the insured in selecting a licensed motor

vehicle glass repair shop or scheduling a licensed motor vehicle glass repair shop to perform

motor vehicle glass repair, or enter into any preferred provider agreements and/or participate in

direct repair programs or direct repair networks with licensed motor vehicle glass repair shops. A

motor vehicle glass repair shop may file a complaint with the department of business regulation

alleging a violation of this subsection (16) of this section. Whenever the department of business

regulation has reason to believe that an insurer has violated this subsection (16) of this section,

the department shall conduct an investigation and may convene a hearing. A complaint filed by a

motor vehicle glass repair shop must be accompanied by a statement written and signed by the

insured or claimant setting forth the factual basis of the complaint, and the insured or claimant

must voluntarily appear and testify at any administrative proceedings on the complaint.

SECTION 2. This act shall take effect upon passage and apply to all policies issued or

renewed on or after January 1, 2018.

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LC002037/SUB A

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