Standards for Prompt, Fair, and Equitable Settlement of Claims

PURPOSE: This rule effectuates or aids in the interpretation of sections 375.1007(3) and 375.1007(4), RSMo. (1) Standards for Prompt, Fair, and Equitable Settlements Applicable to All Insurers, (excluding electronically submitted claims under health benefit plans subject to sections 376.383 to 376.384, RSMo). (A) Within fifteen (15) working days after the submission of all forms necessary to establish the nature and extent of any claim, the first-party claimant shall be advised of the acceptance or denial of the claim by the insurer. No insurer shall deny any claim on the grounds of a specific policy provision, condition or exclusion unless reference to that provision, condition or exclusion is included in the denial. The denial must be given to the claimant in writing and the claim file of the insurer shall contain a copy of the denial. (B) If a claim is denied for reasons other than those described in subsection (1)(A), an appropriate notation shall be made in the claim file of the insurer. (C) If the insurer needs more time to determine whether a claim should be accepted or denied, it shall so notify the first-party claimant within the time otherwise allotted for acceptance or denial, giving the reasons more time is needed. If the investigation remains incomplete, the insurer, within fortyfive (45) days from the date of the initial notification and every forty-five (45) days after, shall send the claimant a letter setting forth the reasons additional time is needed for investigation. (D) No insurer shall fail to settle any firstparty claim on the basis that responsibility for payment should be assumed by others except as otherwise may be provided by policy provisions. (E) No insurer shall continue negotiations or settlement of any claim directly with a claimant who is neither an attorney nor represented by an attorney until the claimant’s rights may be affected by a statute of limitations or a policy time limit, without giving the claimant written notice that the time limit may be expiring and may affect the claimant’s rights. The notice shall be given to first-party claimants thirty (30) days and to third-party claimants sixty (60) days before the date on which the time limit may expire. (F) No insurer shall make any statement which indicates that the rights of a third-party claimant may be impaired if a form of release is not completed within a given period of time unless the statement is given for the purpose of notifying the third-party claimant of the provision of a statute of limitations. (G) All insurers offering cash settlements of first-party long-term disability income claims shall develop a present value calculation of future benefits utilizing contingencies, such as mortality, morbidity, and interest rate assumptions, etc., appropriate to the risk. A copy of the amount so calculated shall be given to the insured and signed by him/her at the time a settlement is entered into, and a copy of the amount with the calculations shall be given to the insured at the time the insured is first approached regarding settlement. This acknowledgment of advice of probable value of the contract, together with a copy of the calculations used to arrive at the amount, shall be maintained in the claim file whenever a cash settlement is accepted by the insured. This regulation does not apply to the settlement of liability insurance claims or structured settlements made in settlement of liability insurance claims. The furnishing of a present value calculation to an insured is not construed to imply or impose any liability on the insurer. (H) For death benefit claims on all life insurance policies, consistent with section 408.020, interest accrues at the rate of nine percent (9%) per annum, unless a different interest rate is specified in the policy, from the date of death of the insured until the date the claim is paid if the insurer fails to pay the policy proceeds within thirty (30) days of submission of proof of death and receipt of all necessary proofs of loss. Interest at the same rate continues to accrue on any unpaid interest not included with the death benefit payment. (2) Standards for Prompt, Fair, and Equitable Settlements Applicable to Automobile Insurance. (A) Where liability and damages are reasonably clear, insurers shall not recommend that third-party claimants make claim under their own policies to avoid paying claims under the insurer’s insurance policy or insurance contract. (B) Insurers shall not require a claimant to travel unreasonably either to inspect a replacement automobile, to obtain a repair estimate, or to have the automobile repaired at a specific repair shop. (C) Insurers, upon the claimant’s request, shall include the first-party claimant’s deductible, if any, in subrogation demands. Subrogation recoveries shall be shared on a proportionate basis with the first-party claimants, unless the deductible amount has been otherwise recovered. No deduction for expenses can be made from the deductible recovery unless an outside attorney is retained to collect this recovery. The deduction may then be for only a pro rata share of the allocated loss adjustment expense. (D) Estimates. 1. If an insurer prepares an estimate of the cost of automobile repairs, the estimate shall be in an amount for which it may be reasonably expected the damages can be satisfactorily repaired. The insurer shall give a copy of the estimate to the claimant and may furnish to the claimant the names of one (1) or more conveniently located repair shops. 2. No insurer may prepare an estimate, except an estimate prepared at the insured’s request by a person or entity having no contractual relationship with the insurer, of the cost of automobile repairs based on the use of an after-market part, unless each of the following conditions are met: A. The insurer discloses to the claimant in writing, either on the estimate or in a separate document attached to the estimate, the following information in no smaller than ten- (10-) point type: “This estimate has been prepared based on the use of an automobile part(s) not made by the original equipment manufacturer. Parts used in the repair of your vehicle by other than the original manufacturer are required to be at least equal in kind and quality in terms of fit, quality, and performance to the original manufacturer parts they are replacing.” All after-market parts installed on the vehicle shall be clearly identified on the repair estimate; B. No insurer shall require the use of after-market parts in the repair of an automobile unless the after-market part is at least equal in kind and quality to the original part in terms of fit, quality, and performance. Insurers specifying the use of after-market parts shall consider the cost of any modifications which may become necessary when making the repair; and C. All after-market parts, which are subject to this regulation and manufactured after October 31, 1991, shall carry sufficient permanent identification so as to identify its manufacturer, with the identification being accessible to the extent possible after installation. 3. Definitions. A. Insurer includes any person authorized to represent the insurer with respect to a claim and who is acting within the scope of the person’s authority. B. After-market part, for purposes of this regulation, means sheet metal or plastic parts which generally constitute the exterior of a motor vehicle, including inner and outer panels, not made by the original equipment manufacturer. (E) When the amount claimed is reduced because of betterment or depreciation, all information for the reduction shall be contained in the claim file. These reductions shall be itemized and appropriate in amount. (F) When the insurer elects to repair and designates a specific repair shop for automobile repairs, the insurer shall cause the damaged automobile to be restored to its condition prior to the loss at no additional cost to the claimant other than as stated in the policy and within a reasonable period of time. (G) The insurer shall not use as a basis for cash settlement with a first-party claimant an amount which is less than the amount which the insurer would pay if repairs were made, other than in total loss situations, unless the amount is agreed to by the insured. (3) Standards for Prompt, Fair, and Equitable Settlements Applicable to Health Insurance. (A) Precertification. An insurer may require that claimants for health insurance benefits have their course of treatment certified in advance of incurring the claim based upon the course of treatment, so long as the following conditions are met: 1. The rules of the insurer for precertification are fully disclosed to the covered person in advance of any incurred claim or course of treatment; and 2. Precertification determinations are made in a prompt, fair, and equitable manner. (B) Denial of Precertified Claims. 1. No insurer may deny, in whole or in part, any claim for health insurance benefits if— A. The claim is based upon a course of treatment which has been precertified; and B. The claim denial is based upon one (1) or more of the following reasons: (I) The claim or course of treatment was not medically necessary; or (II) The claim or course of treatment was experimental. 2. The provisions of paragraph (3)(B)1. of this rule do not apply to any claim against an insurer which has a contract— A. With the health care provider who provided the treatment upon which the claim is based; and B. Which provides that the health care provider will hold the insured harmless from the denial of the claim. (4) Standards for Prompt Investigations of Claims. Every insurer shall complete an investigation of a claim within thirty (30) days after notification of the claim, unless the investigation cannot reasonably be completed within this time. AUTHORITY: sections 374.045 and 375.1000–375.1018, RSMo 2016.* This rule was previously filed as 4 CSR 190-10.060(6), (7), and (11). Original rule filed Aug. 5, 1974, effective Aug. 15, 1974. Rescinded and readopted: Filed Aug. 16, 1978, effective Dec. 11, 1978. Amended: Filed Sept. 11, 1980, effective Feb. 16, 1981. Amended: Filed Sept. 14, 1981, effective Jan. 15, 1982. Amended: Filed Aug. 4, 1986, effective Jan. 1, 1987. Amended: Filed Jan. 5, 1987, effective June 1, 1987. Amended: Filed Aug. 4, 1987, effective Dec. 24, 1987. Amended: Filed Dec. 9, 1988, effective April 28, 1989. Amended: Filed Nov. 2, 1989, effective Feb. 15, 1990. Emergency amendment filed Feb. 21, 1990, effective March 5, 1990, expired June 2, 1990. Amended: Filed Feb. 26, 1990, effective June 11, 1990. Amended: Filed Dec. 12, 1990, effective June 10, 1991. Amended: Filed May 2, 1991, effective Oct. 31, 1991. Emergency amendment filed May 15, 1991, effective May 25, 1991, expired Sept. 21, 1991. Amended: Filed May 16, 1991, effective Oct. 31, 1991. Emergency amendment filed Oct. 3, 1991, effective Oct. 13, 1991, expired Feb. 9, 1992. Amended: Filed Oct. 3, 1991, effective March 9, 1992. Amended: Filed Oct. 1, 1996, effective June 30, 1997. Amended: Filed Nov. 1, 2007, effective July 30, 2008. Amended: Filed Dec. 13, 2018, effective July 30, 2019. *Original authority: 374.045, RSMo 1967, amended 1993, 1995, 2008 and 375.1000–375.1018, see RSMo 2016.