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Difficulty: MediumUnfair Claims Settlement Practices

A policyholder files a homeowners insurance claim following a residential burglary. The assigned claims adjuster begins processing the file and interacting with the policyholder. Based on standard state regulations, which of the following actions by the adjuster would constitute an Unfair Claims Settlement Practice? (Select all that apply.)

  1. Refusing to issue payment for the undisputed stolen electronics until the policyholder accepts a compromise on a separate, disputed jewelry itemAnswer
  2. Verbally denying coverage for a damaged safe without providing a subsequent written explanation citing the specific policy exclusionAnswer
  3. C
    Sending a written notice to the policyholder explaining that the investigation requires an additional 30 days due to pending official police reports
  4. D
    Requiring the policyholder to submit a signed, sworn proof of loss form and original purchase receipts before concluding the claim valuation

Answer

The actions that constitute Unfair Claims Settlement Practices are refusing to pay undisputed portions of a claim to leverage a settlement on disputed portions, and failing to provide a written explanation citing policy provisions when denying a claim.
State regulations mandate that insurers must act in good faith. This includes paying undisputed portions of a claim promptly rather than using them as leverage, and providing a clear, written explanation citing specific policy language whenever a claim is denied.

Step-by-Step Solution

1
Evaluate the action of withholding undisputed claim payments.
Identified as a statutory violation.
Insurers must promptly pay claims where liability is clear; they cannot use undisputed funds to influence the settlement of other disputed coverage areas.
2
Evaluate the action of verbally denying a claim without written documentation.
Identified as a statutory violation.
Regulations require insurers to provide a reasonable, written explanation for a claim denial that specifically cites the relevant policy language.
3
Evaluate the actions of delaying the investigation with written notice and requesting a proof of loss.
Identified as lawful and compliant claims handling procedures.
Extending an investigation with proper written notice and demanding standard proof of loss documentation are necessary components of conducting a reasonable investigation.

Key Concept

Unfair Claims Settlement Practices
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Unfair Claims Settlement Practices

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