A commercial logistics company files a major cargo loss claim involving high-value electronics after a transport vehicle is involved in an interstate accident. The primary insurer handles the claim through a third-party administrator (TPA).
Which of the following actions taken by the TPA during the claims process would be classified as statutory Unfair Claims Settlement Practices under standard NAIC model regulations? (Select all that apply)
- Delaying the claim payment by requiring the insured to submit a formal proof of loss form after they had already submitted a preliminary claim report containing substantially the same information.Answer
- Making it known to the insured that it is the insurer's policy to appeal arbitration awards to compel the insured to accept a settlement less than the arbitrated amount.Answer
- CSending a written notice to the insured 25 days into the investigation stating that additional time is required to obtain the official highway patrol accident report before a coverage determination can be made.
- DDenying the claim entirely because the insurer's investigation revealed the insured breached a strict, written warranty regarding the maximum allowed cargo weight.
Answer
The correct actions that constitute violations are requiring duplicative proof of loss forms to delay payment and making known a policy of appealing arbitration awards to coerce lower settlements.
The correct answers represent two distinct and explicit violations codified in the NAIC model act: intentionally requiring unnecessarily duplicative paperwork to stall a claim, and using the threat of arbitration appeals as leverage to coerce an unreasonably low settlement.
Step-by-Step Solution
Key Concept
Identifying specific statutory prohibitions under the NAIC Unfair Claims Settlement Practices Act versus compliant investigative procedures and legitimate contract enforcement.