2004 -- H 8166

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LC02473

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2004

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A N A C T

RELATING TO INSURANCE -- UNFAIR CLAIMS SETTLEMENT PRACTICES

     Introduced By: Representative Susan A. Story

     Date Introduced: February 25, 2004

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 27-9.1-1 and 27-9.1-2 of the General Laws in Chapter 27-9.1

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entitled "Unfair Claims Settlement Practices Act" are hereby amended to read as follows:

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     27-9.1-1. Purpose. -- The purpose of this chapter is to set forth standards for the

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investigation and disposition of claims involving Rhode Island residents or claims arising under

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policies or certificates of insurance issued to residents of Rhode Island. It is not intended to cover

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claims involving workers' compensation, fidelity, suretyship or boiler and machinery insurance.

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Nothing contained in this chapter shall be construed to create or imply a private cause of action

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for violation of this chapter.

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     27-9.1-2. Definitions. -- When used in this chapter:

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      (1) "Director" means the director of business regulation;

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      (2) "Insured" means the party named on a policy or certificate as the individual with

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legal rights to the benefits provided by the policy;

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      (3) "Insurer" means any person, reciprocal exchange, inter-insurer, approved surplus

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lines insurers, including, but not limited to, a Lloyds insurer, fraternal benefit society, and any

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other legal entity engaged in the business of insurance, including insurance producers, adjusters

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and third party administrators. Insurer shall also mean a nonprofit hospital and/or medical service

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

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nonprofit legal service corporation, a health maintenance organization as defined in chapter 41 of

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this title or as defined in chapter 62 of title 42, or any other entity providing a plan of health

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benefits subject to state insurance regulation. Notwithstanding sections 27-19-2, 27-20-2, 27-

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20.1-2, 27-20.2-2, 27-20.3-2, and 27-41-22, for purposes of this chapter, these entities shall be

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deemed to be engaged in the business of insurance;

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      (4) "Person" means any natural or artificial entity, including, but not limited to,

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individuals, partnerships, associations, trusts, or corporations; and

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      (5) "Policy" or "certificate" means any contract of insurance, indemnity, medical, health

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or hospital service, or annuity issued. "Policy" or "certificate" for the purposes of this chapter

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shall not mean contracts or workers' compensation, fidelity, suretyship or boiler and machinery

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insurance.

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     SECTION 2. Chapter 27-9.1 of the General Laws entitled "Unfair Claims Settlement

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Practices Act" is hereby amended by adding thereto the following section:

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     27-9.1-10. Amounts received in settlement of claims retained for unpaid premiums.

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– (a) Any insurance company or insurance producer may retain an amount equal to any unpaid

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premiums due on the policy under which a claim is being presented when settling any presented

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claim for an insured; provided that:

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     (1) The unpaid premium remains unpaid sixty (60) days after the effective day of the

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policy or the date of the original billing of the premium, whichever occurs later;

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     (2) The insurance company shall pay to the insurance producer, upon written

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documentation submitted by the insurance agent or broker of the unpaid premium due, the

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amount equal to the unpaid premium due the insurance producer from the amount of the claim

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being presented and the balance of the claim be paid to the insured and/or loss payee or

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mortgagee named in the policy.

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     (b) This section shall not apply to any health insurance policy within the state.

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     SECTION 3. Section 27-10-15 of the General Laws in Chapter 27-10 entitled "Claim

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Adjusters" is hereby repealed.

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     27-10-15. Amounts received in settlement of claims retained for unpaid premiums. --

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(a) Any insurance company or insurance producer may retain an amount equal to any unpaid

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premiums due on the policy under which a claim is being presented when settling any presented

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claim for an insured; provided, that:

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      (1) The unpaid premium remains unpaid sixty (60) days after the effective day of the

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policy or the date of the original billing of the premium, whichever occurs later;

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      (2) The insurance company shall pay to the insurance producer, upon written

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documentation submitted by the insurance agent or broker of the unpaid premium due, the

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amount equal to the unpaid premium due the insurance producer from the amount of the claim

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being presented and the balance of the claim be paid to the insured and/or loss payee or

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mortgagee named in the policy.

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      (b) This section shall not apply to any health insurance policy within the state.

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     SECTION 4. This act shall take effect on January 1, 2005.

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LC02473

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE -- UNFAIR CLAIMS SETTLEMENT PRACTICES

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     This act would subject all insurers conducting business in this state to the claims handling

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practices in this chapter when said claim involves Rhode Island residents, and would expand the

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definition of insurer as well as allow insurance companies to retain settlement proceeds to satisfy

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any unpaid premiums.

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     This act would take effect upon passage.

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LC02473

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