230-RICR-20-40-2
230-RICR-20-40-2. Unfair Property/Casualty Claims Settlement Practices (version Amendment, 02/18/2014 to 02/18/2014)
State of Rhode Island and Providence Plantations
DEPARTMENT OF BUSINESS REGULATION
Division of Insurance
1511 Pontiac Avenue, Bldg. 69-2
Cranston, Rhode Island 02920
CONCISE EXPLANATORY STATEMENT
Insurance Regulation_73 – _Unfair Claims Settlement Practices
The Department of Business Regulation (“Department”) hereby adopts amendments to
Insurance Regulation 73 effective February 18, 2014 and makes this statement in
accordance with R.I. Gen. Laws § 42-35-2.3. The Department makes these amendments
in order to address the recent enactment of R.I. Gen. Laws 27-9.1-4 (25) regarding total
loss vehicles; to bring the remaining portions of the regulation into conformance with the
NAIC model other than those areas for which there is specific Rhode Island language, to
address issues that have arisen since the last amendment of this regulation and to
incorporate the substance of bulletins previously issued by the Department into the
regulation. There are 22 differences between the text of the proposed rule as published in
accordance with R.I. Gen. Laws § 42-35-3 and the rule as adopted. Those differences
are:
1.
A portion of the proposed amendment to section 3(D) was eliminated.
2.
Two typographical errors in section 3(N) were corrected.
3.
A phrase proposed to be included in section 3(L) was eliminated and the
words “his, her or its” were added to clarify the meaning of the definition.
4.
The phrase “by a claimant” contained in the definition was moved to the
first line from the third line in section 3(N).
5.
The phrase “holding insured status” was added to section 3(Q).
6.
The phrase “first party” was added to section 5(C) to clarify the
applicability of the section.
7.
In section 7(A) the Department declined to change the phrase “properly
executed proofs of loss” to “notification of claim” as it had proposed and the word
“Department” was substituted for “insurance regulatory authority.”
8.
Section 7(F) was amended to clarify that it did not apply to claims in
which damages are in dispute.
9.
Section 7(G) was amended to substitute “first party claimant” for
“insured.”
10.
Section 8(A)(1) was amended to fix a grammatical error and to clarify that
section 8(A)(3) provided an exception to the general rule.
11.
Section 8(A)(2)(a) and (d) were amended to clarify that a filing to qualify
an entity under R.I. Gen Laws § 27-9.1-4(25) can be made by any interested person not
just the entity itself.
12.
Section 8(A)(2)(b) was amended to clarify that filings under this section
can be approved or rejected or the Department can hold a hearing on the filings.
13.
Section 8(A)(2)(c) was amended to clarify that a bulletin would be issued
identifying qualifying entities and that the bulletin may be amended from time to time.
14.
Section 8(A)(3) was amended to provide for those situations in which a
title does not exist.
15.
Section 8(A)(4) was added to address questions as to whether various
portions of Section 8 apply to first party claims, third party claims or both. This section
contains the substantive provisions of 8(B)(2) but its repeat here clarifies that fair market
value, as defined in the statute, must be paid on all vehicles regardless of whether the
claim is a first or third party claim.
16.
Section 8(B)(1) and (2) were amended to substitute “first party claimant”
for “insured” for clarity; change the phrase “taxes, license fees and registration fees”
contained in the NAIC model act to “taxes, title, registration and other fees” to properly
represent the fees charged in Rhode Island and to eliminate the proposed phrase “to
purchase a comparable automobile” to clarify that the minimum that must be used is the
statutory “fair market value.”
17.
Section 8(B)(3) was amended to clarify that it applies to first party claims
and the final paragraph was moved to 8(E)(3) as it is applicable to both first and third
party claims.
18.
Section 8(C)(1) was amended to change the word “estimate” used in the
NAIC model to “appraisal” used in Rhode Island statute and to add a phrase contained in
the NAIC model but inadvertently omitted from the proposal. In section 8(C)(1)(i) The
Department rewrote the second sentence to clarify its applicability to all repairs in
accordance with the Rhode Island statute.
19.
Section 8(C)(5) was amended to change the word “replacement” used in
the NAIC model to the word “aftermarket” used in Rhode Island statute.
20.
Section 8(D)(7) was amended to change the word “customers” to
“consumers.”
21.
Sections 8(E) and 9 were amended to substitute “first part claimant” for
“insured”
22.
Section 10 was amended to clarify that an insurance producer may file a
complaint on behalf of his or her customer and to add back the last line of the section
which had been proposed to be deleted.
The Department received other comments which it declined to address by changes in the
regulation. Those comments were so numerous that it is impractical to address each
individually. However, the following is the departments reasoning in the consideration of
some of the more pervasive comments:
1.
With regard to section 8, numerous comments were received advocating
the position that the use of the words “for the purpose of this subdivision” evidence a
legislative intent that R.I. Gen. Laws § 27-9.1-4(25) should only be applied to the
determination of whether the vehicle was a total loss with the actual claim payment made
to the claimant determined by another method. The basis for the analysis is an
assumption that the undefined term “subdivision” means subsection (25) of section 4 of
chapter 9.1 of title 27. However, when read in the context of the statute as a whole, a
more reasonable interpretation of “subdivision” is that it refers to the chapter in which the
section belongs – chapter 9.1 of title 27. To hold otherwise is to accept that the
legislature included this section in the chapter entitled “Unfair Claim Settlement
Practices” but did not intend it to apply to the actual claim only to the determination as to
whether or not the vehicle would be repaired. The interpretation advocated would appear
to violate the “purpose” section of the chapter at R.I. Gen. Laws § 27-9.1-1 which
provides in relevant part “[t]he purpose of this chapter is to set forth standards for the
investigation and disposition of claims arising under policies or certificates of insurance
issued to residents of Rhode Island.” In fact, such an interpretation could actually result
in a violation of another “unfair claims practice.” R.I. Gen. Laws § 27-9.1-4(a)(3)
requires an insurer to “…adopt and implement reasonable standards for the prompt
investigation and settlement of claims arising under its policies.” If the insurer “totals” a
vehicle using one method of valuation and then offers to pay the insured a lower amount
than that valuation the use of these two separate standards for the same valuation could
be considered to be “unreasonable.” The definition of “subdivision” adopted by the
Department is consistent with the fact that the same phrase is used in R.I. Gen. Laws §
31-46-3 but has a different meaning than the use in Title 27, chapter 4. For these reasons
the Department has declined to amend its proposal.
2.
With regard to other comments made concerning “fair market value” the
Department would like to clarify that this regulation applies to insurers and provides the
minimum value of a vehicle. The inclusion of this definition does not prevent an insurer
from paying a first or third party claimant more for a vehicle with special characteristics
that increase its value. A number of insurers asked for a “safe harbor” provision for
insurers that used an approved source. This is a misunderstanding of the regulation. The
regulation does not alter any additional amounts that may be owed under the insurance
contract to an insured (e.g. aftermarket enhancements that the insurer agreed to cover)
nor does it alter the civil law on the amount of actual damages owed to a third party in a
unique situation. Rather it provides a minimum in recognition of the fact that the insurer
is in a superior bargaining position to the first or third party claimant. There were also a
number of comments contending that until vendors are approved insurers cannot settle
claims. This is simply not true. Every insurer is more than aware of at least one entity
that clearly qualifies as “nationally recognized compilation of retail values commonly
used by the automotive industry to establish values of motor vehicles.” If there is any
question that source should be used until the approval process is completed. Insurers that
use a source which is not a “nationally recognized compilation of retail values commonly
used by the automotive industry to establish values of motor vehicles” subsequent to the
passage of the statute will be subject to administrative action.
3.
The Department declined to make changes to the NAIC model language in
sections 3(N) and 3(P) as the language proposed reflects the Departments intent.
4.
The Department eliminated the definitions of “Person” and “Policy” in
sections 3(R) and 3(S) because it did not feel that they were necessary to the regulation
and are not included in the NAIC model.
5.
The Department declined to include the NAIC model time limits in section
4(A) because that time limit conflicts with Rhode Island Insurance Regulation 67.
6.
The Department declined to change section 6(A) to the NAIC language
which allows an insurer to document a conversation in its claim notes rather than send
notification in writing. The Department has encountered too many disputes between
claimants and insurers regarding notification to accept claim notes as evidence of the
conversation. Allowing the expanded definition of writing will simplify the procedure
for insurers while providing appropriate evidence of the communication if a dispute
arises.
7.
The Department declined to substitute the word “detailed” for the word
“adequate” in section 6(C) although an adequate response is required to be detailed.
8.
The Department declined to limit section 7(D) to situations in which the
claimant or insured is not represented by counsel.
9.
The Department declined to amend section 7(E) to allow insurers to make
time sensitive offers of settlement.
10.
The Department rejected the suggestion that section 7(F) be limited to
property damage.
11.
The Department rejected the suggestion that sections 8(C) and (E)(5) (now
(6)) be amended to eliminate the requirement that the insurer assure that the repair is
done properly. This provision only applies where the insurer has designated the shop (in
the very limited circumstances where that is permissible.) In that circumstance the
insurer should be required to stand behind its selection of the shop.
12.
The Department declined to amend the provisions of section 8(D). This
provision comes from a bulletin which was subject to a federal lawsuit. The resulting
language was carefully negotiated between the parties to that lawsuit. While many of the
suggestions are good, the Department does not feel comfortable making language
changes to language negotiated in settlement of a lawsuit.
Dated – January 28, 2014
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Reg. # 73
State of Rhode Island and Providence Plantations
DEPARTMENT OF BUSINESS REGULATION
Division of Insurance
1511 Pontiac Avenue
Cranston, RI 02920
INSURANCE REGULATION 73
UNFAIR PROPERTY/CASUALTY CLAIMS SETTLEMENT PRACTICES
Table of Contents
Section 1
Authority
Section 2
Purpose
Section 3
Definitions
Section 4
File and Record Documentation
Section 5
Misrepresentation of Policy Provisions
Section 6
Failure to Acknowledge Pertinent Communications
Section 7
Standards for Prompt, Fair and Equitable Settlements Applicable to All
Insurers
Section 8
Standards for Prompt, Fair and Equitable Settlements Applicable to
Automobile Insurance
Section 9
Standards for Prompt, Fair and Equitable Settlements Applicable to Fire
and Extended Coverage Type Policies with Replacement Cost Coverage
Section 10
Department Complaint Review
Section 11
Effective Date
Section 1.
Authority
This Regulation is adopted under the authority of R.I. Gen. Laws § 27-9.1-1 et
seq. and R.I. Gen. Laws § 42-14-17.
Section 2.
Purpose
The purpose of this Regulation is to establish minimum standards for the investigation
and disposition of property and casualty claims arising under insurance policies or
certificates as defined in this Regulation and issued to residents of Rhode Island. It is not
intended to cover claims involving workers' compensation, fidelity, suretyship, or boiler
and machinery insurance. The various provisions of this regulation are intended to define
procedures and practices which constitute unfair claims practices. Nothing herein shall be
construed to create nor imply a private cause of action for violation of this regulation.
This is merely a clarification of original intent and does not indicate any change of
position.
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Reg. # 73
Section 3.
Definitions
All definitions contained in R.I. Gen. Laws §§ 27-9.1-1 et seq, and 27-29-1 et seq. are
hereby incorporated by reference. As otherwise used in this regulation:
A.
"Aftermarket Part," as defined in R.I. Gen. Laws § 27-10.2-1, means a
motor vehicle body replacement part that is not an original equipment
manufacturer part.
B.
"Automobile Body Shop," as defined in R.I. Gen. Laws § 5-38-1, means
any establishment, garage, or work area enclosed within a building where
repairs are made or caused to be made to motor vehicle bodies, including
fenders, bumpers, chassis and similar components of motor vehicle bodies
as distinguished from the seats, motor, transmission and other accessories
for propulsion and general running gear of motor vehicles, except as
provided in R.I. Gen. Laws § 5-38-20.
C.
“Agent” means any individual, corporation, association, partnership or
other legal entity authorized to represent an insurer with respect to a claim.
D.
"Claimant" means either a first party claimant, a third party claimant, or
both.
E.
"Claim File" means any retrievable electronic file, paper file or
combination of both.
F.
"Days" means calendar days.
G.
"Department" means the Rhode Island Department of Business
Regulation.
H.
"Director" means the Director of the Department of Business Regulation
or his or her designee.
I.
"Division" means the Insurance Division of the Department of Business
Regulation.
J.
"Documentation" includes, but is not limited to, all pertinent
communications, transactions, notes, work papers, claim forms, bills, and
explanation of benefits forms relative to the claim.
K.
“Fair Market Value” means the retail value of a motor vehicle as set forth
in a current edition of a nationally recognized compilation of retail values
commonly used by the automotive industry to establish values of motor
vehicles.
Page 3 of 16
Reg. # 73
L.
"First Party Claimant" means an individual, corporation, association,
partnership or other legal entity asserting a right to payment under his, her
or its insurance policy or insurance contract arising out of a loss covered
by the policy or contract.
M.
"Investigation" means all activities of an insurer directly or indirectly
related to the determination of liabilities under coverages afforded by an
insurance policy or insurance contract.
N.
"Notification of Claim" means any notification, by a claimant, whether in
writing or other means, acceptable under the terms of an insurance policy
to an insurer or its agent which reasonably apprises the insurer of the facts
pertinent to a claim.
O.
"Original equipment manufacturer part" or "OEM part" shall be defined as
in R.I. Gen. Laws § 27-10.2-1(2).
P.
"Replacement Vehicle" means a motor vehicle which is of like kind and
quality. A motor vehicle of like kind and quality shall be: (i) manufactured
by the same manufacturer; (ii) be the same or newer model year; (iii) have
a similar body style; (iv) have similar options and mileage; and (v) be in as
good or better overall condition as the motor vehicle deemed to be a total
loss.
Q.
"Third Party Claimant" means any person asserting a claim against any
person holding insured status under a policy or certificate of an insurer.
R.
“Writing” includes electronic communications pursuant to R.I. Gen. Laws
§ 42-127.1-1 et seq.
S.
“Written communications” includes all correspondence, regardless of
source or type, that is materially related to the handling of the claim.
Section 4.
File and Record Documentation
Each insurer's claim files for policies or certificates are subject to examination
and investigation by the Director or by the Director’s duly appointed designees. To aid in
such examination:
A.
The Insurer shall maintain claim data that is accessible and retrievable for
examination. An insurer shall be able to provide the claim number, line of
coverage, date of loss and date of payment of the claim, date of denial or
date closed without payment. This data must be available for all open files
and for closed files for the current year and four (4) preceding years.
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Reg. # 73
B.
Detailed documentation shall be contained in each claim file in order to
permit reconstruction of the insurer's activities relative to each claim.
C.
Each relevant document within the claim file shall be noted as to date
received, date processed, or date mailed.
D.
For those insurers that do not maintain hard copy files, claim files must be
in appropriate electronic media and be capable of duplication to hard copy.
Section 5.
Misrepresentation of Policy Provisions
A.
No insurer shall fail to fully disclose to first party claimants all pertinent
benefits, coverages, or other provisions of a policy or contract under
which a claim is presented.
B.
No agent shall conceal from first party claimants benefits, coverages or
other provisions of any insurance policy or insurance contract when such
benefits, coverages or other provisions are pertinent to a claim.
C.
A first party claim shall not be denied on the basis of failure to exhibit
property unless there is documentation of breach of the policy provisions
in the claim file.
D.
No insurer shall deny a claim based upon the failure of a first party
claimant to give written notice of loss within a specified time limit unless
the written notice is a written policy condition, or first party claimant’s
failure to give written notice after being requested to do so is so
unreasonable as to constitute a breach of the first party claimant’s duty to
cooperate with the insurer.
E.
No insurer shall indicate to a first party claimant on a payment draft, check
or in any accompanying letter that said payment is "final" or "a release" of
any claim or specified part of a claim unless the policy limit has been paid
or there has been a compromise settlement agreed to by the first party
claimant and the Insurer as to coverage and amount payable under the
contract.
F.
No insurer shall issue checks or drafts in partial settlement of a loss or
claim under a specific coverage that contains language purporting to
release the insurer or its insured from total liability.
Section 6.
Failure to Acknowledge Pertinent Communications
A.
Every insurer, upon receiving notification of claim shall, within fifteen
(15) days acknowledge the receipt of such notice in writing unless
payment is made within that period of time.
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Reg. # 73
B.
In addition to the requirements in subsection 6(A), the insurer upon
receiving notification of claim shall inform the claimant in the insurer's
written acknowledgment of receipt of the claim, or sooner if the claimant
inquires, if coverage exists for the rental of an automobile comparable to
the claimant's damaged vehicle.
C.
Every insurer, upon receipt of any inquiry from the Department regarding
a claim shall, within twenty-one (21) days of receipt of such inquiry,
furnish the Department with an adequate written response to the inquiry.
D.
An appropriate reply in writing shall be made within fifteen (15) days on
all other pertinent communications from a claimant which reasonably
suggest that a response is expected.
E.
Upon request by an Automobile Body Shop, an insurer must notify the
Automobile Body Shop of the name(s), address(es), telephone number(s)
of any lienholder(s) on the vehicle which is the subject of the claim.
F.
Every insurer, upon receiving notification of claim, shall promptly provide
necessary claim forms, instructions and reasonable assistance so that first
party claimants can comply with the policy conditions and the insurer’s
reasonable requirements. Compliance with this paragraph within fifteen
(15) days of notification of a claim shall constitute compliance with
Subsection A of this section.
Section 7.
Standards for Prompt, Fair and Equitable Settlements Applicable to All
Insurers
A.
Within twenty one (21) days after receipt by the insurer of properly
executed proofs of loss, the first party claimant shall be advised of the
acceptance or denial of the claim by the Insurer. No insurer shall deny a
claim on the grounds of a specific provision, condition, or exclusion
unless reference to such provision, condition, or exclusion is included in
the denial. The denial must be given to the first party claimant in writing
and the claim file of the insurer shall contain such documentation of the
denial as required by section 4.
Where there is a reasonable basis supported by specific information
available for review by the Department that the first party claimant has
fraudulently caused or contributed to the loss, the insurer is relieved from
the requirements of this subsection; provided, however, that the first party
claimant shall be advised of the acceptance or denial of the claim within a
reasonable time for full investigation after receipt by the insurer of a
properly executed proof of loss.
Page 6 of 16
Reg. # 73
B.
If the Insurer needs more time to determine whether a first party claim
should be accepted or denied, it shall notify the first party claimant within
twenty-one (21) days after receipt of the proofs of loss, giving the reasons
more time is needed. If the investigation remains incomplete, the insurer
shall, forty-five (45) days from the initial notification and every forty-five
(45) days thereafter, send to the first party claimant a letter setting forth
the reasons additional time is needed for Investigation.
Where there is a reasonable basis supported by specific information for
suspecting that the first party claimant has fraudulently caused or
contributed to the loss, the first party claimant shall be advised of the
acceptance or denial of the claim by the insurer within a reasonable time
for full investigation after receipt by the insurer of a properly executed
proof of loss.
C.
Insurers shall not fail to settle a first party claims on the basis that
responsibility for payment should be assumed by others except as may
otherwise be provided by policy provisions.
D.
No insurer shall commence or continue negotiations for settlement of a
claim if the claimants rights may be affected by a statute of limitations,
unless the insurer has given the claimant written notice of such limitation.
Notice shall be given to first party claimants at least thirty (30) days and to
third party claimants at least sixty (60) days before the date on which any
such statute of limitations may expire.
E.
No insurer shall make statements indicating that the rights of a third party
claimant may be impaired if a form or 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.
F.
The insurer shall affirm or deny liability within a reasonable time and shall
tender payment of all claims in which damages are not in dispute within
thirty (30) days of affirmation of liability. In claims where multiple
coverages are involved payments which are not in dispute and where the
payee is known should be tendered within thirty (30) days if such payment
would terminate the insurer’s known liability under that individual
coverage.
G.
No insurer shall request or require any first party claimant to submit to a
polygraph examination unless authorized under the applicable insurance
contract and state law.
H.
If, after an insurer denies a claim, the claimant objects to such denial, , the
insurer shall notify the Claimant in writing that he or she may have the
Page 7 of 16
Reg. # 73
matter reviewed by the Rhode Island Department of Business Regulation,
Division of Insurance, via the contact information for the Department
promulgated in a Bulletin for this specific purpose
Section 8.
Standards for Prompt, Fair and Equitable Settlements Applicable to
Automobile Insurance
A.
Total Loss Vehicles
(1)
Pursuant to R.I. Gen. Laws § 27-9.1-4(25) an insurer may not designate a
vehicle a total loss if the cost to rebuild or reconstruct the motor vehicle to
pre accident condition is less than 75% of the fair market value of the
motor vehicle immediately preceding the time it was damaged unless the
requirements of subsection (3) below are met.
(2)
Fair market value means the retail value of the motor vehicle as set forth
in a current edition of a nationally recognized compilation of retail values
commonly used by the automotive industry to establish values of motor
vehicles.
a.
To qualify as “nationally recognized compilation of retail values
commonly used by the automotive industry,” a filing must be made
with the Department requesting that the entity be deemed to
qualify under R.I. Gen. Laws § 27-9.1-4(25). The filing may be
made by the entity itself or any person seeking qualification of an
entity for this purpose. Initial filings should be made within ten
(10) days of the effective date of this section.
b.
The Department will review the filings and determine whether it
will hold a hearing on those entities that have made such
application to obtain input from all interested persons or approve
or reject the filings without further information.
c.
The Department will publish a bulletin identifying those entities
that qualify. The bulletin will be updated as entities are added or
removed due to changes in circumstances.
d.
Applications requesting to add entities may be filed at any time
and will be addressed by the Department in due course.
(3)
If the total cost to rebuild or reconstruct the motor vehicle is less than 75%
the vehicle may be considered a total loss with the written agreement of
the owner. The owner is the person or entity listed on the title to the
motor vehicle if a title exists.
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(4)
a.
A cash settlement shall be based upon the fair market value of the
motor vehicle less any deductible provided in the policy, if
applicable, including all applicable taxes, title, registration and
other fees incident to transfer of evidence of ownership of a
comparable automobile.
b.
When the cash settlement amount is affected by betterment or
depreciation, the insurer must support the deviation by
documentation in the claim file by giving particulars of the
automobile condition that warrant said deviation. Any deductions
or betterment from fair market value, including deduction for
salvage, must be measurable, discernible, itemized and specified as
to dollar amount and shall be appropriate in amount. Deduction
shall not be made for reconditioning or dealer preparation. The
basis for determining fair market value shall be fully explained to
the claimant. All information that is the basis for such reduction
shall be contained in the claim file and a copy of the valuation
shall be provided to the claimant.
c.
If the insurer in the process of adjusting a total loss makes a
deduction for salvage of the claimant's vehicle, the insurer must
furnish the claimant with the name and address of a salvage dealer
who will purchase the salvage for the amount deducted.
B.
Replacement Vehicles and Cash Settlement.
When the policy provides for the adjustment and settlement of first party
automobile total losses on the basis of fair market value or a replacement with
another of like kind and quality, one of the following methods shall apply:
(1)
The insurer may elect to offer a replacement automobile that is at least
comparable in that it will be by the same manufacturer, same or newer
year, similar body style, similar options and mileage as the first party
claimant vehicle and in as good or better overall condition and available
for inspection at a licensed dealer within a reasonable distance of the first
party claimant’s residence. The insurer shall pay all applicable taxes, title,
registration and other fees incident to transfer of evidence of ownership of
the automobile paid, at no cost other than any deductible provided in the
policy. The offer and any rejection thereof must be documented in the
claim file.
(2)
(i)
The insurer may elect a cash settlement based upon the fair market
value of the motor vehicle less any deductible provided in the
policy including all applicable taxes, title, registration and fees
incident to transfer of evidence of ownership of a comparable
automobile.
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Reg. # 73
(ii)
When the cash settlement amount is affected by betterment or
depreciation, the insurer must support the deviation by
documentation in the claim file by giving particulars of the
automobile condition that warrant said deviation. Any deductions
or betterment from fair market value, including deduction for
salvage, must be measurable, discernible, itemized and specified as
to dollar amount and shall be appropriate in amount. Deduction
shall not be made for reconditioning or dealer preparation. The
basis for determining fair market value shall be fully explained to
the claimant. All information that is the basis for such reduction
shall be contained in the claim file and a copy of the valuation
shall be provided to the claimant.
If the insurer in the process of adjusting a total loss makes a
deduction for salvage of the claimant's vehicle, the insurer must
furnish the claimant with the name and address of a salvage dealer
who will purchase the salvage for the amount deducted.
(3)
Right of Recourse - If the insurer is notified within thirty-five (35) Days of
the receipt of the claim draft that the insured cannot purchase a
comparable vehicle for the fair market value, the insurer shall reopen its
claim file and the following procedure(s) shall apply:
(i)
The insurer may locate a comparable vehicle by the same
manufacturer, same year, similar body style and similar options
and price range for the insured for the fair market value determined
by the insurer at the time of settlement. Any such vehicle must be
available through licensed dealers;
(ii)
The insurer shall either pay the insured the difference between the
fair market value before applicable deductions and the cost of the
comparable vehicle of like kind and quality which the insured has
located, or negotiate and effect the purchase of this vehicle for the
insured;
(iii)
The insurer may elect to offer a replacement in accordance with
the provisions set forth in Section 8(B)1; or
(iv)
The insurer may conclude the loss settlement as provided for under
the appraisal section of the insurance contract in force at the time
of loss. This appraisal shall be binding against both parties, but
shall not preclude or waive any other rights either party has under
the insurance contract or a common law.
Page 10 of 16
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The insurer is not required to take action under this subsection if its
documentation to the claimant at the time of settlement included
written notification of the availability and location of a specified
and comparable vehicle of the same manufacturer, same year,
similar body style and similar options in as good or better
condition as the total loss vehicle which could have been
purchased for the fair market value before applicable deductions.
The documentation shall include the vehicle identification number.
C.
Vehicle Repairs
(1)
Partial losses shall be settled on the basis of a written appraisal or for
claims less than $2,500 on the basis of an appraisal or estimate. The
insurer shall supply the claimant with a copy of the appraisal upon which
the settlement is based. The appraisal shall be reasonable, in accordance
with applicable policy provisions, and of an amount which will allow for
repairs to be made in a workmanlike manner. If the claimant subsequently
claims, based upon a written appraisal which he or she obtains, that
necessary repairs will exceed the written appraisal prepared by or for the
insurer, the insurer shall:
(i)
pay the difference between the written appraisal and a higher
appraisal obtained by the claimant, or
(ii)
promptly provide the claimant with the name of at least one
Automobile Body Shop that will make the repairs for the amount
of the written appraisal . If the insurer designates only one or two
such repairers, the insurer shall assure that the repairs are
performed in a workmanlike manner. The insurer shall maintain
documentation of all such communications. The claimant shall not
be required to use said Automobile Body Shop; however, the
insurer shall not be required to pay for the difference between the
insurer's written appraisal and the claimant's appraisal if the
claimant chooses to use another Automobile Body Shop.
(2)
When settling a claim, the amount of the settlement shall allow for the
motor vehicle to be repaired to its condition prior to the loss within a
reasonable time period.
(3)
When the amount claimed is reduced because of betterment or
depreciation all information for such reduction shall be contained in the
claim file. The deductions shall be itemized and specified as to dollar
amount and shall be appropriate for the amount of deductions.
(4)
An insurer may not withhold payment to a claimant, pending reinspection
under R.I. Gen. Laws § 27-10.1-9.
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(5)
Aftermarket Crash Parts
(a)
The purpose of this subsection is to set forth standards for the
prompt, fair and equitable settlements applicable to automobile
insurance with regard to the use of aftermarket crash parts. It is
intended to regulate the use of aftermarket crash parts in
automobile damage repairs paid by insurers. It also requires that all
aftermarket crash parts, as defined in this section, be identified and
be of the same quality as the original part.
(b)
For motor vehicles less than thirty (30) months beyond the date of
manufacture, the insurer shall not specify the use of an aftermarket
crash part or used parts whether OEM or otherwise, for the repair
of the motor vehicle unless the automobile body shop has written
consent from the claimant pursuant to R.I. Gen. Laws § 27-10.2-2.
(c)
All aftermarket crash parts, which are subject to this section and
manufactured after the effective date of this section, shall carry
sufficient permanent non-removable identification so as to identify
its manufacturer. Such identification shall be accessible to the
extent possible after installation.
(d)
For all motor vehicles thirty (30) months or more beyond date of
manufacture, no insurer shall require the use of aftermarket crash
parts in the repair of an automobile unless the aftermarket crash
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
aftermarket crash parts, when allowable under R.I. Gen. Laws §
27-10.2-2, shall consider the cost of any modifications which may
become necessary when making the repair.
D.
Steering
(1)
The purpose of R.I. Gen. Laws § 27-29-4 is to protect consumers from
unfair methods of competition or unfair or deceptive acts or practices.
Specifically, the legislative intent of subsection (15) is to assure
consumers (first and third party claimants) the right to have a free choice
in selecting an automobile body repair shop. The purpose of this section is
to clarify insurance companies’ obligations pursuant to R.I. Gen. Laws §
27-29-4(15).
(2)
R.I. Gen. Laws § 27-29-4(15) defines one unfair method of competition
and unfair or deceptive act or practice in the business of insurance as:
[r]equiring that repairs be made to an automobile at a specified auto body
repair shop or interfering with the insured's or claimant's free choice of
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repair facility. The insured or claimant shall be promptly informed by the
insurer of his or her free choice in the selection of an auto body repair
shop. Once the insured or claimant has advised the insurer that an auto
body repair shop has been selected, the insurer may not recommend that a
different auto body repair shop be selected to repair the automobile.
[Emphasis added]
(3)
When a claim is reported to an insurer, the insurer must promptly inform
the claimant (first or third party) of his or her free choice in the selection
of an automobile body repair shop. The insurer may not require repairs to
be made at a specific auto body shop or interfere with the insured’s or
claimant’s free choice of repair facility. In addition, once the insured or
claimant tells the insurer that he/she has selected an automobile body
repair shop, the insurer may not recommend a different auto body repair
shop.
(4)
R.I. Gen. Laws § 27-29-4(15) does not prevent an insurer from
communicating true information to a consumer. The mere transmittal of
information does not constitute “steering.” Providing truthful, non-
coercive information about options available to consumers is not a
“recommendation” prohibited by the statute. The fact that a consumer
alters his or her choice of repairer after speaking with an insurer does not
itself establish a violation of the statute. However, an insurer may not
disseminate false information. At no time shall an insurer make any
misrepresentation to the claimant (first or third party) about any of the
following: the limitations, scope, and/or quality of the work of any
automobile body repair shop or of the warranty or guarantee provided by
any shop for the work performed.
(5)
The choice of an auto body shop is the consumers. Insurers should guide
their conduct by that principle. Examples of conduct, in the totality of the
circumstance, that constitute “interfering” can be found in the
Departments’ administrative decision in Providence Auto Body v. Allstate
Insurance Company, DBR 07-I-0114. Further, the Department does not
interpret R.I. Gen. Laws § 27-29-4(15) as prohibiting the insured or
claimant from receiving, or the insurance company from conveying to, the
insured or claimant information concerning the insurer’s obligations and
benefits under the contract (policy).
(6)
The provisions of this section also apply to claims involving motor vehicle
glass installation.
(7)
Insurers shall not require that vehicles be removed from a repair shop for
purposes of appraisal, where an appraisal may reasonably be conducted at
the repair shop in question. While insurers may request appraisal at a
centralized location, if the owner does not agree the appraisal should occur
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at the consumers’ selected repair shop or other requested location unless
there are documented circumstances of impossibility.
E.
Miscellaneous Requirements
(1)
Where liability and damages are reasonably clear, insurers shall not
recommend that third party claimants make claim under their own policies
solely to avoid paying claims under such insurer’s policy.
(2)
Insurers shall not require a claimant to travel an unreasonable distance to
inspect a replacement automobile.
(3)
In order to fully compensate for the loss to the consumer, the insurer must
include applicable sales tax in its calculation of settlement value in any
total loss claim.
(4)
The claimant may exercise his or her right to arbitration pursuant to R.I.
Gen. Laws § 27-10.3-1.
(5)
An insurer shall include the first party claimant's deductible, if any, in
subrogation demands. Pursuant to R.I. Gen. Laws § 27-8-12 upon
settlement of the subrogation claim, the first party claimant's insurer shall
pay the first party claimant the full deductible or the amount collected if
less than the full deductible, less the first party claimant 's prorated share
of the subrogation expenses, if any. The subrogation expenses, as opposed
to the first party claimant 's deductible, are subject to prorating based on
percentage of fault. The insurer may only retain funds in excess of the
deductible portion of the recovery as set forth in this section.
(6)
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.
(7)
Storage and Towing. Storage and towing rates set by regulation or order of
an administrative agency with jurisdiction over that subject matter, shall
be considered the appropriate and reasonable charges for those services.
The insurer shall provide reasonable notice to a first or third party
claimant prior to termination of payment for automobile storage. Such
insurer shall provide reasonable time for the claimant to remove the
vehicle from storage prior to the termination of payment.
The insurer shall provide written notice to a claimant, with a copy to the
storage facility, prior to termination of payment for motor vehicle storage
charges. Such notice shall be given in reasonable time so as to provide the
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claimant the opportunity to remove the vehicle from storage prior to the
termination of payment.
(8)
An insurer taking possession of a motor vehicle with a Rhode Island
certificate of title that has been declared a total loss because of damage to
that vehicle shall
(a)
Apply for a salvage certificate of title within ten (10) days in
accordance with R.I. Gen. Laws § 31-46-1 and R.I. Gen. Laws §
31-46-1.1.
(b)
Prior to making application with the division of motor vehicles,
evaluate the damage to the vehicle and properly classify the
salvage as either “parts only” or “repairable” as defined in R. I.
Gen. Laws §31-46-1.1.
(c)
Maintain copies of all documents utilized to evaluate the damage
for classification purposes.
(d)
Produce such documentation as required by the division of motor
vehicles upon applying for the salvage certificate of title.
(e)
In accordance with R.I. Gen. Laws §27-8-14 all insurers shall
report all vehicle thefts within thirty (30) days of the theft and all
salvage declarations to the National Insurance Crime Bureau
(NICB) or similar organization that maintains a central database of
automobile theft and salvage.
Section 9.
Standards for Prompt, Fair and Equitable Settlements Applicable to
Fire and Extended Coverage Type Policies with Replacement Cost
Coverage
A.
Replacement Cost
When the insurance policy provides for the adjustment and settlement of first
party claimant losses based on replacement cost, the following shall apply:
(1)
When a loss requires repair or replacement of an item or part, any
consequential physical damage incurred in making such repair or
replacement not otherwise excluded by the policy, shall be included in the
loss. The first party claimant shall not have to pay for betterment nor any
other cost except for the applicable deductible.
(2)
When a loss requires replacement of items and the replaced items do not
match in quality, color or size, the insurer shall replace all such items so as
to conform to a reasonably uniform appearance. This applies to interior
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and exterior losses. The first party claimant shall not bear any cost over
the applicable deductible, if any.
B.
Actual Cash Value
(1)
When the insurance policy provides for the adjustment and settlement of
losses on an actual cash value basis on residential fire and extended
coverage, the Insurer shall determine actual cash value as follows:
replacement cost of property at time of loss less depreciation, if any. Upon
the first party claimant 's request, the insurer shall provide a copy of the
claim file worksheet(s) detailing any and all deductions for depreciation.
(2)
In cases in which the first party claimant 's interest is limited because the
property has nominal or no economic value, or a value disproportionate to
replacement cost less depreciation, the determination of actual cash value
as set forth above is not required. In such cases, the insurer shall provide,
upon the first party claimant 's request, a written explanation of the basis
for limiting the amount of recovery along the amount payable under the
policy.
Section 10.
Department Complaint Review
A claimant who believes that there has been a violation of this Regulation may
file a written complaint with the Division. All complaints filed with the Department shall
be processed in accordance with the Division's internal complaint review process and, if
the Division determines that reasonable cause exists, the complaint shall be handled in
accordance with the Department's Rules of Practice and Procedure in Administrative
Hearings.
All complaints filed with Department must be in writing. The Department will
only accept complaints filed by the individual claimant, the claimant's designated
immediate family member (spouse, parent, sibling or offspring), an insurance producer
licensed by the Department with regard to policies of insurance effected by him or her,
claimant's attorney admitted to practice law in this state, executor and/or administrator or
other court-appointed legal representative of the claimant's estate. If a complaint relates
to a claim which is under consideration by any court of this or any other state, the
Division may defer jurisdiction over the matter to that court. Nothing herein shall be
deemed to prohibit either the insurer or the claimant from seeking redress in the
appropriate judicial forum.
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Section 11.
Effective Date
This Regulation shall become effective twenty (20) days after filing with the
Secretary of State as indicated below.
EFFECTIVE DATE:
February 14, 1994
AMENDED:
March 29, 1999
REFILED:
December 19, 2001
AMENDED:
February 18, 2014