2024 -- H 7974

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LC005389

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2024

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A N   A C T

RELATING TO INSURANCE -- UNFAIR CLAIMS SETTLEMENT PRACTICES ACT

     Introduced By: Representatives J. Brien, Solomon, and Baginski

     Date Introduced: March 05, 2024

     Referred To: House Judiciary

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 27-9.1-1 and 27-9.1-4 of the General Laws in Chapter 27-9.1 entitled

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

     27-9.1-1. Purpose.

     The purpose of this chapter is to set forth standards for the investigation and disposition of

claims arising under policies or certificates of insurance issued to residents of Rhode Island. It is

not intended to cover claims involving workers’ compensation, fidelity, suretyship or boiler and

machinery insurance. Nothing contained in this chapter shall be construed to create or imply a

private cause of action for violation of this chapter.

     27-9.1-4. “Unfair claims practices” defined.

     (a) An "unfair claims practice" is an improper action by an insurer intended to reduce a

payout on a claim or settlement made under an insurance policy. Any of the following acts by an

insurer, if committed in violation of § 27-9.1-3, constitutes an unfair claims practice:

     (1) Misrepresenting to claimants and insured relevant facts or policy provisions relating to

coverage at issue;

     (2) Failing to acknowledge and act with reasonable promptness upon pertinent

communications with respect to claims arising under its policies;

     (3) Failing to adopt and implement reasonable standards for the prompt investigation and

settlement of claims arising under its policies;

     (4) Not attempting in good faith to effectuate prompt, fair, and equitable settlement of

claims submitted in which liability has become reasonably clear;

     (5) Compelling insured, beneficiaries, or claimants to institute suits to recover amounts due

under its policies by offering substantially less than the amounts ultimately recovered in suits

brought by them;

     (6) Refusing to pay claims without conducting a reasonable investigation;

     (7) Failing to affirm or deny coverage of claims within a reasonable time after having

completed its investigation related to the claim or claims;

     (8) Attempting to settle or settling claims for less than the amount that a reasonable person

would believe the insured or beneficiary was entitled by reference to written or printed advertising

material accompanying or made part of an application;

     (9) Attempting to settle or settling claims on the basis of an application that was materially

altered without notice to, or knowledge or consent of, the insured;

     (10) Making claims payments to an insured or beneficiary without indicating the coverage

under which each payment is being made;

     (11) Unreasonably delaying the investigation or payment of claims by requiring both a

formal proof of loss form and subsequent verification that would result in duplication of

information and verification appearing in the formal proof of loss form;

     (12) Failing in the case of claims denials or offers of compromise settlement to promptly

provide a reasonable and accurate explanation of the basis of those actions;

     (13) Failing to provide forms necessary to present claims within ten (10) calendar days of

a request with reasonable explanations regarding their use;

     (14) Failing to adopt and implement reasonable standards to assure that the repairs of a

repairer owned by or required to be used by the insurer are performed in a workmanlike manner;

     (15) Misleading a claimant as to the applicable statute of limitations;

     (16) Failing to respond to a claim within thirty (30) days, unless the insured shall agree to

a longer period;

     (17) Engaging in any act or practice of intimidation, coercion, threat, or misrepresentation

of consumers rights, for or against any insured person, claimant, or entity to use a particular rental

car company for motor vehicle replacement services or products; provided, however, nothing shall

prohibit any insurance company, agent, or adjuster from providing to such insured person, claimant,

or entity the names of a rental car company with which arrangements have been made with respect

to motor vehicle replacement services; provided, that the rental car company is licensed pursuant

to § 31-5-33;

     (18) Refusing to honor a “direction to pay” executed by an insured, claimant, indicating

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that the insured or claimant wishes to have the insurance company directly pay his or her motor

vehicle replacement vehicle rental benefit to the rental car company of the consumer’s choice;

provided, that the rental car company is licensed pursuant to § 31-5-33. Nothing in this section shall

be construed to prevent the insurance company’s ability to question or challenge the amount

charged, in accordance with its policy provisions, and the requirements of the department of

business regulation; provided that, the insurance company promptly notifies the rental car company

in writing of the reason. The written notification shall be made at or before the time that the

insurance company submits payment to the rental car company;

     (19) Modifying any published manual, i.e., Motor’s Auto Repair Manual, Mitchells, or any

automated appraisal system, relating to auto body repair without prior agreement between the

parties;

     (20) Failing to use a manual or system in its entirety in the appraisal of a motor vehicle;

     (21) Refusing to compensate an auto body shop for its documented charges as identified,

and based on, the most current version of automotive industry-recognized software programs or

systems for paint, body, and refinishing materials, utilized in auto body repair, including, but not

limited to, programs such as Mitchell’s RMC, PMC Logic, Paint, Micromix, or other paint

manufacturer’s programs. An insurer shall not discount documented charges by failing to use a

system in its entirety, including an automotive industry standard markup;

     (22) Refusing to acknowledge and compensate an auto body repairer for documented

procedures identified as necessary by the original equipment manufacturer, paint manufacturer,

when included in the repairer’s appraisal, or when requested by the repairer (i.e., components that

cannot be reused/reinstalled: requiring clips, retainers, and hardware);

     (23) Failing to comply with the requirements of § 31-47-12.1;

     (24) Failure to have an appraisal performed by a licensed appraiser where the motor vehicle

has sustained damage estimated to exceed two thousand five hundred dollars ($2,500). The licensed

appraiser referred to herein must be unaffiliated with the repair facility repairing the subject motor

vehicle; must perform a physical inspection of the damaged motor vehicle; and may not perform

an appraisal based upon pictures of the damaged motor vehicle;

     (25) Failure of an insurer’s assigned appraiser, or representative, to promptly schedule an

appointment for an appraisal of a damaged vehicle with the auto body repair shop, at an agreed

upon date and time, between normal business hours;

     (26) Failure to perform an initial appraisal within three (3) business days after a request is

received from an auto body repair shop, provided the damaged motor vehicle is on the premises of

the repair shop when the request is made, and failure to perform a supplemental appraisal inspection

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of a vehicle within four (4) business days after a request is received from an auto body repair shop.

If the insurer’s appraiser fails to inspect the damaged motor vehicle within the allotted number of

business days for an initial appraisal or a supplemental appraisal, the insurer shall forfeit its right

to inspect the damaged vehicle prior to repairs, and negotiations shall be limited to labor and the

price of parts and shall not, unless objective evidence to the contrary is provided by the insurer,

involve disputes as to the existence of damage or the chosen manner of repair. The time limitations

set forth in this subsection may be extended by mutual agreement between the auto body repair

shop and the insurer;

     (27) Refusing to extend the rental vehicle coverage requirements of an insured or claimant

proportionally to claim delays caused by the insurer.

     (28) Designating a motor vehicle a total loss if the cost to rebuild or reconstruct the motor

vehicle to its pre-accident condition is less than seventy-five percent (75%) of the “fair market

value” of the motor vehicle immediately preceding the time it was damaged:

     (i) For the purposes of this subdivision, “fair market value” means the retail value of a

motor vehicle as set forth in a current edition of a nationally recognized compilation of retail values

commonly used by the automotive industry to establish values of motor vehicles;

     (ii) Nothing herein shall be construed to require a vehicle be deemed a total loss if the total

cost to rebuild or reconstruct the motor vehicle to its pre-accident condition is greater than seventy-

five percent (75%) of the fair market value of the motor vehicle immediately preceding the time it

was damaged;

     (iii) Nothing herein shall prohibit an insurance company from agreeing to deem a vehicle

a total loss at the vehicle owner’s request and with the vehicle owner’s express written authorization

if the cost to rebuild or reconstruct the motor vehicle to its pre-accident condition is less than

seventy-five percent (75%) of the “fair market value” of the motor vehicle immediately preceding

the time it was damaged;

     (iv) If condition adjustments are made to the retail value of a motor vehicle designated a

total loss, all such adjustments must be in accordance with the standards set forth in the current

edition of a nationally recognized compilation of retail values, commonly used by the automotive

industry, used by the insurer to determine the retail value of the vehicle; and all such adjustments,

including prior damage deductions, must be itemized, fair, and reasonable; and

     (v) When a vehicle is deemed a total loss, if the insurer is not retaining the salvage, the

insurer must notify the owner of the vehicle in writing of the requirements of obtaining both a

salvage title and a reconstructed title from the department of motor vehicles pursuant to chapter 1

of title 31, and must obtain, in writing, the owner’s consent and acknowledgement that the insurer

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is not retaining the salvage and include a statement of the owner’s obligation and potential costs to

dispose of or otherwise retain the salvage;

     (29) Negotiating, or effecting the settlement of, a claim for loss or damage covered by an

insurance contract with an unlicensed public adjuster acting on behalf of an insured. Nothing

contained in this section shall be construed to preclude an insurer from dealing with any individual

or entity that is not required to be licensed under chapter 10 of title 27;

     (30) Refusing to pay an auto body repair shop for documented necessary sublet services

paid out to vendors or incurred by the auto body repair shop, for specialty or unique services

performed in the overall repair process, including costs and labor incurred to research, coordinate,

administrate, or facilitate the necessary sublet service, and an automotive industry standard markup.

Examples of sublet services include, but are not limited to, towing, transportation, suspension,

alignments, electronic calibrations, diagnostic work, mechanical work, and paid charges to release

a vehicle.

     (b)(1) Nothing contained in subsections (a)(19), (a)(20), and (a)(21) of this section shall be

construed to interfere with an auto body repair facility’s contract with an insurance company.

     (2) If an insurance company and auto body repair facility have contracted under a direct

repair program or any similar program thereto, the provisions of subsections (a)(19), (a)(20), and

(a)(21) of this section shall not apply.

     (3) If the insured or claimant elects to have the vehicle repaired at a shop of his or her

choice, the insurer shall not limit or discount the reasonable repair costs based upon the charges

that would have been incurred had the vehicle been repaired by the insurer’s chosen shop(s).

     (c) Any insured who is aggrieved or harmed by an action of an insurer that is an unfair

claims practice in violation of this chapter may bring a civil action in the appropriate district or

superior court having jurisdiction based on the amount in controversy.

     (1) As a prerequisite to filing a private cause of action, the aggrieved party shall first be

required to exhaust any administrative procedures established by the department of business

regulation and this chapter and seek to resolve the alleged unfair claims practice with the insurer.

     (2) If the aggrieved party has exhausted all such administrative actions and remains

unsatisfied, the aggrieve party may bring a civil action in the district or superior court having

jurisdiction, based on the amount in controversy, where the aggrieved party is a resident. Upon a

finding that the insurer has committed an unfair claims practice, the court may award appropriate

relief, including, but not limited to, injunctive relief and monetary damages. This relief shall

include, but not be limited to, any damages, civil penalties, injunctive relief, or penalties the director

of the department of business regulation may issue pursuant to this chapter, including the provisions

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of § 27-9.1-6.

     SECTION 2. This act shall take effect upon passage.

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LC005389

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO INSURANCE -- UNFAIR CLAIMS SETTLEMENT PRACTICES ACT

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     This act would provide insured individuals with a private cause of action under the unfair

claims settlement practices act.

     This act would take effect upon passage.

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LC005389

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