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Difficulty: MediumUnfair Claims Settlement Practices

Pair the following improper claim handling behaviors with the corresponding regulatory prohibition they violate.

  • Requiring an insured to complete a preliminary damage report, and later demanding a formal proof of loss form requesting the exact same information before proceeding.Requiring duplicative, redundant information forms to delay investigation or payment
  • Refusing to pay a clearly covered auto liability claim unless the injured third party agrees to drop their ongoing bodily injury claim.Failing to promptly settle claims under one policy portion to influence settlements under another portion
  • Receiving a fully completed proof of loss for a business interruption claim but waiting 75 days without communicating any approval or denial decision.Failing to affirm or deny coverage within a reasonable time after proof of loss statements are completed
  • Verbally telling a claimant that their liability policy has a 10,000propertydamagelimit,whenthedeclarationspageactuallyshowsa10,000 property damage limit, when the declarations page actually shows a 50,000 limit.Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue

Answer

Behavior 1 maps to demanding duplicative forms. Behavior 2 maps to leveraging one coverage for another. Behavior 3 maps to failing to affirm or deny coverage reasonably after a proof of loss. Behavior 4 maps to misrepresenting policy provisions.
Each scenario illustrates a specific prohibited action under the NAIC Unfair Claims Settlement Practices Act. Misstating limits is misrepresentation; demanding duplicate forms is an improper delay tactic; holding one coverage hostage for another is illegal leveraging; and ignoring a completed proof of loss violates prompt decision requirements.

Step-by-Step Solution

1
Analyze the first scenario regarding the demand for a preliminary report and a duplicate proof of loss.
This maps to requiring duplicative, redundant information forms to delay investigation or payment.
Statutes prohibit insurers from delaying claims by asking for the exact same information multiple times on different forms.
2
Analyze the second scenario involving withholding payment on an auto liability claim to force dropping a bodily injury claim.
This maps to failing to promptly settle claims under one policy portion to influence settlements under another portion.
This is a classic 'leveraging' tactic, which is strictly prohibited to ensure fair settlements.
3
Analyze the third scenario where the claims handler waits 75 days after receiving a proof of loss without making a decision.
This maps to failing to affirm or deny coverage within a reasonable time after proof of loss statements are completed.
Insurers have a statutory duty to provide a prompt coverage decision once all requested proof of loss documentation is submitted.
4
Analyze the fourth scenario where the adjuster falsely states the policy limit.
This maps to misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.
Lying about or misstating the actual coverage limits found in the policy declarations is a direct misrepresentation.

Key Concept

Unfair Claims Settlement Practices
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Unfair Claims Settlement Practices

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