Unfair Claims Practices

The Unfair Claims Settlement Practices Act establishes standards for how insurance companies must handle claims. Violations can result in penalties, fines, and license actions.

Overview of Unfair Claims Practices

Unfair claims practices occur when an insurer fails to handle claims properly, fairly, or in good faith.

General Categories

Specific Unfair Claims Practices

Failure to Acknowledge Claims Promptly

Failure to Act Reasonably Promptly

Insurers must investigate and process claims within a reasonable time:

• Begin investigation promptly upon receiving notice
• Request all necessary documentation at once
• Avoid unnecessary delays in processing
• Communicate status regularly

Failure to Affirm or Deny Coverage

Denial and Settlement Violations

Denying Claims Without Reasonable Investigation

Insurers cannot:

• Deny claims without investigating the facts
• Use incomplete information to justify denial
• Ignore evidence supporting the claim
• Fail to interview necessary witnesses

Failure to Provide Explanation of Denial

When denying a claim, insurers must:

Attempting to Settle for Less Than Reasonable

Failure to Settle Promptly When Liability Is Clear

When coverage is clear and liability is established:

• Payment must be made promptly
• Cannot delay while investigating unrelated claims
• Must pay undisputed portions while disputing remainder
• Cannot use delay as negotiating tactic

Key Point: Once the insurer has all necessary information and coverage is clear, they must pay the claim without unreasonable delay.

Record-Keeping Violations

Insurers must maintain proper documentation:

Penalties for Unfair Claims Practices