§431:13-103 Unfair methods of competition and unfair or deceptive acts or practices defined. (a) The following are defined as unfair methods of competition and unfair or deceptive acts or practices in the business of insurance:
(1) Misrepresentations and false advertising of insurance policies. Making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison that:
(A) Misrepresents the benefits, advantages, conditions, or terms of any insurance policy;
(B) Misrepresents the dividends or share of the surplus to be received on any insurance policy;
(C) Makes any false or misleading statement as to the dividends or share of surplus previously paid on any insurance policy;
(D) Is misleading or is a misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates;
(E) Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof;
(F) Is a misrepresentation for the purpose of inducing or tending to induce the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy;
(G) Is a misrepresentation for the purpose of effecting a pledge or assignment of or effecting a loan against any insurance policy;
(H) Misrepresents any insurance policy as being shares of stock;
(I) Publishes or advertises the assets of any insurer without publishing or advertising with equal conspicuousness the liabilities of the insurer, both as shown by its last annual statement; or
(J) Publishes or advertises the capital of any insurer without stating specifically the amount of paid-in and subscribed capital;
(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 the person's insurance business, which 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, or literature which is false, or maliciously critical of or derogatory to the financial condition of an insurer, and which is calculated to injure any person engaged in the business of insurance;
(4) Boycott, coercion, and intimidation.
(A) Entering into any agreement to commit, or by any 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; or
(B) Entering into any agreement on the condition, agreement, or understanding that a policy will not be issued or renewed unless the prospective insured contracts for another class or an additional policy of the same class of insurance with the same insurer;
(5) False financial statements.
(A) 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 knowingly causing, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of a material fact as to the financial condition of an insurer; or
(B) Knowingly making any false entry of a material fact in any book, report, or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to whom the insurer is required by law to report, or who has authority by law to examine into its condition or into any of its affairs, or, with like intent, 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 or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance;
(7) Unfair discrimination.
(A) 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 annuity contract or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contract;
(B) Making or permitting any unfair discrimination in favor of particular individuals or persons, or between insureds or subjects of insurance having substantially like insuring, risk, and exposure factors, or expense elements, in the terms or conditions of any insurance contract, or in the rate or amount of premium charge therefor, or in the benefits payable or in any other rights or privilege accruing thereunder;
(C) 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:
(i) The refusal, cancellation, or limitation is for a business purpose which is not a mere pretext for unfair discrimination; or
(ii) The refusal, cancellation, or limitation is required by law or regulatory mandate;
(D) 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 therein, because of the age of the residential property, unless:
(i) The refusal, cancellation, or limitation is for a business purpose which is not a mere pretext for unfair discrimination; or
(ii) The refusal, cancellation, or limitation is required by law or regulatory mandate;
(E) 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; however, nothing in this subsection shall prohibit an insurer from taking marital status into account for the purpose of defining persons eligible for dependent benefits;
(F) Terminating or modifying coverage, or refusing to issue or renew any property or casualty policy or contract of insurance solely because the applicant or insured or any employee of either is mentally or physically impaired; provided that this subparagraph shall not apply to accident and health or sickness insurance sold by a casualty insurer; provided further that this subparagraph 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;
(G) Refusing to insure, refusing to continue to insure, or limiting the amount of coverage available to an individual based solely upon the individual's having taken a human immunodeficiency virus (HIV) test prior to applying for insurance; or
(H) Refusing to insure, refusing to continue to insure, or limiting the amount of coverage available to an individual because the individual refuses to consent to the release of information which is confidential as provided in section 325‑101; provided that nothing in this subparagraph shall prohibit an insurer from obtaining and using the results of a test satisfying the requirements of the commissioner, which was taken with the consent of an applicant for insurance; provided further that any applicant for insurance who is tested for HIV infection shall be afforded the opportunity to obtain the test results, within a reasonable time after being tested, and that the confidentiality of the test results shall be maintained as provided by section 325‑101;
(8) Rebates. Except as otherwise expressly provided by law:
(A) Knowingly permitting or offering to make or making any contract of insurance, or agreement as to the contract other than as plainly expressed in the contract, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to the insurance, any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits, or any valuable consideration or inducement not specified in the contract; or
(B) Giving, selling, or purchasing, or offering to give, sell, or purchase as inducement to the insurance or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value not specified in the contract;
(9) Nothing in paragraph (7) or (8) shall be construed as including within the definition of discrimination or rebates any of the following practices:
(A) In the case of any life insurance policy or annuity contract, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance; provided that any bonus or abatement of premiums shall be fair and equitable to policyholders and in the best interests of the insurer 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 fairly represents the saving in collection expense;
(C) Readjustment of the rate of premium for a group insurance policy based on the loss or expense experience thereunder, at the end of the first or any subsequent policy year of insurance thereunder, which may be made retroactive only for the policy year;
(D) In the case of any contract of insurance, the distribution of savings, earnings, or surplus equitably among a class of policyholders, all in accordance with this article; and
(E) A reward under a wellness program established under a health care plan that favors an individual if the wellness program meets the following requirements:
(i) The wellness program is reasonably designed to promote health or prevent disease;
(ii) An individual has an opportunity to qualify for the reward at least once a year;
(iii) The reward is available for all similarly situated individuals;
(iv) The wellness program has alternative standards for individuals who are unable to obtain the reward because of a health factor;
(v) Alternative standards are available for an individual who is unable to participate in a reward program because of a health condition;
(vi) The insurer provides information explaining the standard for achieving the reward and discloses the alternative standards; and
(vii) The total rewards for all wellness programs under the health care plan do not exceed twenty per cent of the cost of coverage;
(10) Refusing to provide or limiting coverage available to an individual because the individual may have a third-party claim for recovery of damages; provided that:
(A) Where damages are recovered by judgment or settlement of a third-party claim, reimbursement of past benefits paid shall be allowed pursuant to section 663-10;
(B) This paragraph shall not apply to entities licensed under chapter 386 or 431:10C; and
(C) For entities licensed under chapter 432 or 432D:
(i) It shall not be a violation of this section to refuse to provide or limit coverage available to an individual because the entity determines that the individual reasonably appears to have coverage available under chapter 386 or 431:10C; and
(ii) Payment of claims to an individual who may have a third-party claim for recovery of damages may be conditioned upon the individual first signing and submitting to the entity documents to secure the lien and reimbursement rights of the entity and providing information reasonably related to the entity's investigation of its liability for coverage.
Any individual who knows or reasonably should know that the individual may have a third-party claim for recovery of damages and who fails to provide timely notice of the potential claim to the entity, shall be deemed to have waived the prohibition of this paragraph against refusal or limitation of coverage. "Third-party claim" for purposes of this paragraph means any tort claim for monetary recovery or damages that the individual has against any person, entity, or insurer, other than the entity licensed under chapter 432 or 432D;
(11) Unfair claim settlement practices. Committing or performing with such frequency as to indicate a general business practice any of the following:
(A) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
(B) With respect to claims arising under its policies, failing to respond with reasonable promptness, in no case more than fifteen working days, to communications received from:
(i) The insurer's policyholder;
(ii) Any other persons, including the commissioner; or
(iii) The insurer of a person involved in an incident in which the insurer's policyholder is also involved.
The response shall be more than an acknowledgment that such person's communication has been received and shall adequately address the concerns stated in the communication;
(C) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
(D) Refusing to pay claims without conducting a reasonable investigation based upon all available information;
(E) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
(F) Failing to offer payment within thirty calendar days of affirmation of liability, if the amount of the claim has been determined and is not in dispute;
(G) Failing to provide the insured, or when applicable the insured's beneficiary, with a reasonable written explanation for any delay, on every claim remaining unresolved for thirty calendar days from the date it was reported;
(H) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear;
(I) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds;
(J) Attempting to settle a claim for less than the amount to which a reasonable person would have believed the person was entitled by reference to written or printed advertising material accompanying or made part of an application;
(K) Attempting to settle claims on the basis of an application that was altered without notice, knowledge, or consent of the insured;
(L) Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made;
(M) 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;
(N) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician or advanced practice registered nurse of either 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;
(O) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage to influence settlements under other portions of the insurance policy coverage;
(P) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement; and
(Q) Indicating to the insured on any payment draft, check, or in any accompanying letter that the payment is "final" or is "a release" of any claim if additional benefits relating to the claim are probable under coverages afforded by the policy; unless the policy limit has been paid or there is a bona fide dispute over either the coverage or the amount payable under the policy;
(12) Failure to maintain complaint handling procedures. Failure of any insurer to maintain a complete record of all the complaints that it has received since the date of its last examination under section 431:2-302. This record shall indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of the complaints, and the time it took to process each complaint. For purposes of this section, "complaint" means any written communication primarily expressing a grievance;
(13) Misrepresentation in insurance applications. Making false or fraudulent statements or representations on or relative to an application for an insurance policy, for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, producer, or individual; and
(14) Failure to obtain information. Failure of any insurance producer, or an insurer where no producer is involved, to comply with section 431:10D-623(a), (b), or (c) by making reasonable efforts to obtain information about a consumer before making a recommendation to the consumer to purchase or exchange an annuity.
(b) The commissioner shall by certified mail notify the insurer's agent, as designated pursuant to section 431:2-205, of each complaint filed with the commissioner under this section.
(c) Three or more written complaints received by the commissioner within any twelve-month period charging separate violations of this section shall constitute a rebuttable presumption of a general business practice.
(d) Evidence as to numbers and types of complaints to the commissioner against an insurer, and the commissioner's complaint experience with other insurers writing similar lines of insurance, shall be admissible in an administrative or judicial proceeding brought under this section. No insurer shall be deemed in violation of this section solely by reason of the numbers and types of such complaints except if the presumption under subsection (c) is not rebutted.
(e) If it is found, after notice and an opportunity to be heard, that an insurer has violated this section, each instance of noncompliance may be treated as a separate violation of this section for the purposes of section 431:2-203.
(f) An insurer or licensee shall issue a written response with reasonable promptness, in no case more than fifteen working days, to any written inquiry made by the commissioner regarding a claim, consumer complaint, or sales or marketing practice. The response shall be more than an acknowledgment that the commissioner's communication has been received, and shall adequately address the concerns stated in the communication. [L 1987, c 347, pt of §2; am L 1988, c 330, §2; am L 1989, c 396, §1; am L 1997, c 83, §4; am L 2000, c 29, §1; am L 2002, c 155, §81 and c 228, §1; am L 2003, c 212, §104; am L 2007, c 257, §3; am L 2008, c 227, §§2, 5; am L 2009, c 11, §22; am L 2010, c 116, §1(24); am L 2014, c 45, §11; am L 2021, c 110, §14]
Violations of the unfair settlement provision, subsection (a), may be used as evidence to indicate bad faith in accordance with the guidelines of Best Place, Inc. v. Penn America Ins. Co. 27 F. Supp. 2d 1211 (1998).
Where plaintiff, an insured motorcyclist who sustained injuries when plaintiff was struck by a vehicle and obtained a $1.5 million tort settlement against the third-party driver of that vehicle, alleged that state statutes barred health insurer's claim for reimbursement for medical expenses insurer paid and insurer's lien on the settlement, the appellate court affirmed that this section and §663-10 did not conflict with the Employee Retirement Income Security Act of 1974 (ERISA) and did not impermissibly expand the scope of liability under §502(a) of ERISA. Instead, this section and §663-10 only impacted the insurer's subrogation rights against a third party tort settlement fund and there were no statutory provisions of ERISA that addressed reimbursement limitations. 937 F.3d 1262 (2019).
Where plaintiff, an insured motorcyclist who sustained injuries when plaintiff was struck by a vehicle and obtained a $1.5 million tort settlement against the third-party driver of that vehicle, alleged that state statutes barred health insurer's claim for reimbursement for medical expenses insurer paid and insurer's lien on the settlement, the appellate court affirmed that under the saving clause of §514 of the Employee Retirement Income Security Act of 1974, this section and §663-10 were saved from express preemption because they were directed at insurance practices and impacted risk pooling. Read together, these statutes prohibited an insurer from seeking certain types of reimbursement, thus impacting the eventual net value of any payment made to a plan member, i.e., insurers face more risk than they would otherwise. 937 F.3d 1262 (2019).
Plaintiff may not maintain a private cause of action for an alleged violation of this section. 28 F. Supp. 2d 588 (1997).
An insurer that does not respond promptly to a party's settlement demand and does not negotiate settlement in good faith may violate subsection (a)(10). 73 H. 412, 835 P.2d 627 (1992).
Evidence regarding workers' compensation insurer's failure to specifically address questions posed in a letter from claimant's counsel was insufficient to show that insurer failed to respond to communications "with such frequency as to indicate a general business practice" under subsection (a)(11)(B); insurer's failure thus did not violate this section or establish a genuine issue of material fact regarding claimant's allegation that insurer breached its duty to negotiate in good faith. 112 H. 195 (App.), 145 P.3d 738 (2006).
Discussed: 406 F. Supp. 3d 884 (2019); 407 F. Supp. 3d 978 (2019); 407 F. Supp. 3d 1016 (2019); and 407 F. Supp. 3d 1051 (2019).
Mentioned: 795 F. Supp. 1036 (1992); 255 F. Supp. 2d 1149 (2003).