2024 -- S 2681 SUBSTITUTE A

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LC005342/SUB A

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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: Senators Burke, McKenney, Tikoian, and LaMountain

     Date Introduced: March 01, 2024

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 27-9.1-4 of the General Laws in Chapter 27-9.1 entitled "Unfair

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

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

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     (a) Any of the following acts by an insurer, if committed in violation of § 27-9.1-3,

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constitutes an unfair claims practice:

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

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coverage at issue;

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

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communications with respect to claims arising under its policies;

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

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settlement of claims arising under its policies;

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

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claims submitted in which liability has become reasonably clear;

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

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

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brought by them;

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

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

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completed its investigation related to the claim or claims;

 

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

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

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material accompanying or made part of an application;

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

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

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

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under which each payment is being made;

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

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

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

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

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

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

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a request with reasonable explanations regarding their use;

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

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

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

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

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a longer period;

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

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

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

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

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

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

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to § 31-5-33;

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     (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

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

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

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

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

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

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

 

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insurance company submits payment to the rental car company;

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     (19) 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 the insured's

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property damage benefit to the restoration company of the consumer's choice; provided, however,

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that the amount of the claim to be paid directly to the restoration company shall be no greater than

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five thousand dollars ($5,000), and that the restoration company is licensed pursuant to § 5-65-3.

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Nothing in this section shall be construed to:

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     (i) Prevent the insurance company's ability to question or challenge whether the services

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billed for are covered by the policy, related to an occurrence covered by the policy, or the amount

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

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business regulation; or

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     (ii) Adversely affect the right of any mortgagee or other person with an interest in the policy

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unless such mortgagee or other person has also executed the "direct to pay";

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

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

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the parties;

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

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

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

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programs or systems for paint, body, and refinishing materials, utilized in auto body repair,

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including, but not limited to, programs such as Mitchell’s RMC, PMC Logic, Paint, Micromix, or

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other paint manufacturer’s programs. An insurer shall not discount documented charges by failing

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

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

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

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

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

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

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

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

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

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subject motor vehicle; must perform a physical inspection of the damaged motor vehicle; and may

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not perform an appraisal based upon pictures of the damaged motor vehicle;

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

 

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

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upon date and time, between normal business hours;

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

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

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

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

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repair shop. If the insurer’s appraiser fails to inspect the damaged motor vehicle within the allotted

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number of business days for an initial appraisal or a supplemental appraisal, the insurer shall forfeit

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

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

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

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

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repair shop and the insurer;

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

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claimant proportionally to claim delays caused by the insurer.

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

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

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

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

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

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

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

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

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

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was damaged;

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

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

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

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

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the time it was damaged;

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

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

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

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

 

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

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

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

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

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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

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dispose of or otherwise retain the salvage;

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

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

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

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

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

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

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

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coordinate, administrate, or facilitate the necessary sublet service, and an automotive industry

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standard markup. Examples of sublet services include, but are not limited to, towing, transportation,

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suspension, alignments, electronic calibrations, diagnostic work, mechanical work, and paid

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charges to release a vehicle;

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     (32)(i) When a claim is settled, or partially settled, where the named insured is represented

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by a public adjuster licensed pursuant to § 27-10-5, failing to obey a direction to pay letter directing

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the insurer to issue a check or checks payable to the public adjuster for the public adjuster's fee, but

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not more than ten percent (10%) of the total amount of the settlement, and a separate check payable

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to the named insured or any loss payee or mortgagee, or both, whichever is appropriate, for the

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balance; provided that, the direction to pay letter is signed or electronically signed and dated or

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electronically dated by the named insured and contains the following information:

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     (A) Name of insured(s);

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     (B) The claim number (if obtained);

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     (C) The date or approximate date of the loss;

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     (D) The public adjuster's name;

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     (E) The name of the insurer;

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     (F) The public adjuster's fee; and

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     (G) The addresses to which each check shall be sent.

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     (ii) Nothing in this subsection shall be construed to:

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     (A) Prevent the insurance company's ability to question or challenge whether the services

 

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billed for are covered by the policy, related to an occurrence covered by the policy, or the amount

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

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business regulation; or

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     (B) Adversely affect the right of any mortgagee or other person with an interest in the

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policy unless such mortgagee or other person has also executed the "direct to pay".

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

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

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

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

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

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

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

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

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     SECTION 2. This act shall take effect on January 1, 2025.

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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 that any insurer refusing to honor a "direction to pay" executed by

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an insured for payment on a property damage benefit would constitute an unfair claims practice.

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     This act would take effect on January 1, 2025.

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