Unfair Claims Settlement Practices, including failure to provide notice

Hugh McDonald SECRETARY OF COMMERCE * AID AIWANSAS INSAJOAN“ ttttt NT * * BULLETIN NO. 20-2024 TO: ALL LICENSED PROPERTY AND CASUALTY INSURERS FROM: ARKANSAS INSURANCE DEPARTMENT Alan McClain COMMISSIONER, ARKANSAS INSURANCE DEPARTMENT SUBJECT: UNFAIR CLAIMS SETTLEMENT PRACTICES, INCLUDING FAILURE TO PROVIDE NOTICE WHEN INVESTIGATION CANNOT BE COMPLETED WITHIN 45 DAYS AND FAILURE TO NOTIFY FIRST PARTY CLAIMANTS OF ACCEPTANCE OR DENIAL OF CLAIM WITHIN FIFTEEN DAYS OF RECEIVING PROOF OF LOSS DATE: NOVEMBER 19, 2024 The Arkansas Insurance Department issues this Bulletin to remind property and casualty insurers of Arkansas Insurance Department Rule 43. Arkansas Insurance Department Rule 43, Section 8, requires every insurer to complete investigation of a claim within forty-five (45) calendar days after notification of claim, unless such investigation cannot reasonably be completed within such time. This rule applies regardless of whether a party is a first- or third-party claimant. If an investigation cannot be completed within forty-five days, an insurer shall notify the claimant that additional time is required and include the reasons or reasons the investigation cannot be timely completed with the notification. The Department is aware of several incidents involving multiple insurers in which an insurer failed to send notice to an insured that an investigation could not be completed within forty-five days. Some insurers that do send letters within forty-five days describe the reason for why an investigation cannot be completed as "still investigating." The Commissioner does not find this response specific enough to comply with Rule 43 and considers this response to be equivalent to failure to send the letter. Insurers are also reminded that Arkansas Insurance Department Rule 43, Section 9 requires an insurer to notify first party claimants of the insurer's acceptance or denial of a claim within fifteen (15) working days of receiving properly executed proofs of loss. If an insurer is unable to accept or deny the claim within fifteen days of receiving properly executed proof of loss, the insurer shall within that fifteen-day time period, notify the first party claimant in writing that more time is needed and state the reason or reasons why more time is needed. The issuance of this Bulletin serves as notice that the Commissioner considers the delays described above to be "unfair methods of competition and unfair or deceptive acts or practices in the business of insurance" pursuant to the Trade Practices Act, Ark. Code Ann. § 23-66-201 et seq. Arkansas Department of Commerce Arkansas Insurance Department 1 Commerce Way, Suite 102 • Little Rock, AR 72202 INSURANCE.ARKANSAS.GOV The Insurance Commissioner finds failure to comply with Sections 8 and 9 of Rule 43 to be "unfair claims settlement practices" as defined by Ark. Code Ann. § 23-66-206(12) subdivisions (B), (C), (E), and (F) as these practices are committed with such frequency as to indicate a general business practice. The Commissioner equates these delays with the below-mentioned unfair claims settlement practices: (B) Failing to acknowledge and act reasonably and promptly upon communications with respect to claims arising under insurance policies; (C) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; (E) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; [and] (F) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear[.] Pursuant to Ark. Code Ann. § 23-66-208(a) of the Trade Practices Act, the Insurance Commissioner has "power to examine and investigate the affairs of every person engaged in the business of insurance in this state in order to determine whether the person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice" prohibited by the Trade Practices Act. Following such investigation, should the Commissioner determine that a practice appears so regularly as to constitute an unfair trade practice, the Commissioner will take enforcement action. For questions related to this Bulletin, please direct all inquiries to the Arkansas Insurance Department's Legal Division at (501) 371-2820 or insurance.legal@arkansas.gov. Oreizezt, Alan McClain Arkansas Insurance Commissioner II- 1 9- .2y Date