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Difficulty: HardUnfair Claims Settlement Practices

Review the following claims handling scenarios. Match each specific adjuster action to the statutory Unfair Claims Settlement Practice it most directly violates under NAIC model regulations.

  • Denying a theft claim by verbally citing the policy's standard actual cash value limitation, while the adjuster is fully aware the policyholder purchased a replacement cost endorsement that overrides it.Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.
  • Offering 3,000tosettleadocumentedandundisputed3,000 to settle a documented and undisputed 18,000 property damage claim, knowing the insured is facing severe financial hardship and lacks the resources to hire an attorney.Compelling insureds to institute litigation by offering substantially less than amounts ultimately recovered.
  • Informing a third-party claimant that their demand will not be considered until their own carrier formally denies the loss, despite the adjuster possessing police reports and video evidence clearly proving the insured's 100% fault.Failing to attempt in good faith to effectuate prompt, fair, and equitable settlements where liability has become reasonably clear.
  • Insisting that a policyholder submit a notarized 'Formal Sworn Statement in Proof of Loss' form before authorizing payment, even though the insured already provided a recorded, sworn telephone statement containing the exact same required facts.Delaying investigation or payment by requiring subsequent submissions of substantially the same information.

Answer

1. Denying a theft claim... -> Misrepresenting pertinent facts...
2. Offering $3,000 to settle... -> Compelling insureds to institute litigation...
3. Informing a third-party claimant... -> Failing to attempt in good faith to effectuate prompt, fair, and equitable settlements...
4. Insisting that a policyholder submit... -> Delaying investigation or payment by requiring subsequent submissions...
Each scenario illustrates a precise violation of the NAIC Unfair Claims Settlement Practices Act. Hiding endorsements is misrepresentation; lowballing undisputed claims compels litigation; ignoring clear evidence of fault violates the duty to settle; and asking for identical information twice is an illegal delay tactic.

Step-by-Step Solution

1
Analyze the scenario involving the hidden replacement cost endorsement.
Matches with 'Misrepresenting pertinent facts or insurance policy provisions'.
The adjuster is actively lying about or hiding available coverage to reduce the payout.
2
Evaluate the 3,000offeronan3,000 offer on an 18,000 undisputed claim.
Matches with 'Compelling insureds to institute litigation by offering substantially less'.
This severe underpayment tactic is designed to force an unfair compromise by exploiting the insured's inability to sue.
3
Review the third-party liability scenario where the insurer refuses to act despite video evidence of fault.
Matches with 'Failing to attempt in good faith to effectuate prompt, fair, and equitable settlements where liability has become reasonably clear'.
The insurer possesses undeniable proof of fault, triggering their duty to settle, but creates artificial barriers instead.
4
Assess the demand for a formal sworn statement after a sworn recorded statement was already captured.
Matches with 'Delaying investigation or payment by requiring subsequent submissions of substantially the same information'.
Requesting identical facts on a new medium is a prohibited delay tactic under the NAIC model act.

Key Concept

Identifying specific prohibited behaviors under the NAIC Unfair Claims Settlement Practices Act
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Topics

Unfair Claims Settlement Practices

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