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The Vermont Statutes Online



Title

08

:
Banking and Insurance






Chapter

129

:
INSURANCE TRADE PRACTICES











 

§

4724. Unfair methods of competition or unfair or deceptive acts or practices

defined

The following

are hereby defined as unfair methods of competition or unfair or deceptive acts

or practices in the business of insurance:

(1)

Misrepresentations and false advertising of insurance policies. Making,

issuing, circulating, or causing to be made, issued, or circulated, any

estimate, illustration, circular, statement, sales presentation, omission, or

comparison which:

(A)

misrepresents or fails to adequately disclose the benefits, advantages,

conditions, exclusions, limitations, or terms of any insurance policy; or

(B)

misrepresents the dividends or share of the surplus to be received on any

insurance policy; or

(C) makes any

false or misleading statements as to the dividends or share of surplus

previously paid on any insurance policy; or

(D) is

misleading or is a misrepresentation as to the financial condition of any

person, or as to the legal reserve system upon which any life insurer operates;

or

(E) uses any

name or title of any insurance policy or class of insurance policies

misrepresenting the true nature thereof; or

(F) is a

misrepresentation for the purpose of inducing or tending to induce the lapse,

forfeiture, exchange, conversion, or surrender of any insurance policy; or

(G) is a

misrepresentation for the purpose of effecting a pledge or assignment of or

effecting a loan against any insurance policy; or

(H)

misrepresents any insurance policy as being shares of stock.

(2) False

information and advertising generally. Making, publishing, disseminating,

circulating, or placing before the public or causing, directly or indirectly,

to be made, published, disseminated, circulated, or placed before the public,

in a newspaper, magazine, or other publication, in the form of a notice,

circular, pamphlet, letter, or poster or over any radio station or television

station, or in any other way, an advertisement, announcement, or statement

containing any assertion, representation, or statement with respect to the business

of insurance or with respect to any person in the conduct of his or her

business, which is untrue, deceptive, or misleading.

(3) Defamation.

Making, publishing, disseminating, or circulating, directly or indirectly, or

aiding, abetting, or encouraging the making, publishing, disseminating, or

circulating of any oral or written statement or any pamphlet, circular, article

or literature which is false, or maliciously critical of or derogatory to the

financial condition of any person and which is calculated to injure such

person.

(4)(A) Boycott,

coercion, and intimidation. Entering into any agreement to commit, or by any

concerted action committing any act of boycott, coercion, or intimidation

resulting in or tending to result in unreasonable restraint of trade, or

monopoly in, the business of insurance.

(B) Committing

any act of boycott, coercion, or intimidation in the marketing or sale of any

insurance contracts.

(5) False

financial statements and entries.

(A) Knowingly

filing with any supervisory or other public official, or knowingly making,

publishing, disseminating, circulating, or delivering to any person, or placing

before the public, or knowingly causing directly or indirectly, to be made,

published, disseminated, circulated, delivered to any person, or placed before

the public, any false material statement of fact as to the financial condition

of a person.

(B) Knowingly

making any false entry of a material fact in a book, report, or statement of

any person or knowingly omitting to make a true entry of any material fact

pertaining to the business of such person in any book, report, or statement of

such person.

(C) Knowingly

concealing, withholding or destroying, mutilating, altering, or by any means

falsifying any documentary material in the possession, custody, or control of

any person after that person:

(i) has received

a complaint to which that documentary material is directly relevant; or

(ii) knows that

the documentary material is relevant to an investigation or an examination of

that person being made by the Commissioner.

(6) Stock

operations and advisory board contracts. Permitting agents, officers, or

employees to issue or deliver agency or company stock or other capital stock,

or benefit certificates or share in any common-law corporation, or securities

or any special or advisory board contracts or other contracts of any kind

promising returns and profits as an inducement to insure.

(7) Unfair

discrimination; arbitrary underwriting action.

(A) Making or

permitting any unfair discrimination between insureds of the same class and

equal risk in the rates charged for any contract of insurance, or in the

dividends or other benefits payable thereon, or in any other of the terms and

conditions of such contracts.

(B) Making or

permitting unfair discrimination against an applicant or an insured, on the

basis of the sex, sexual orientation, gender identity, or marital status of the

applicant or insured, with regard to:

(i) Underwriting

standards and practices or eligibility requirements; or

(ii) Rates;

however, nothing in this subdivision shall prevent any person who contracts to

insure another from setting rates for such insurance in accordance with

reasonable classifications based on relevant actuarial data or actual cost

experience in accordance with section 4656 of this title.

(C)(i) Inquiring

or investigating, directly or indirectly as to an applicant's, an insured's or

a beneficiary's sexual orientation, or gender identity in an application for

insurance coverage, or in an investigation conducted by an insurer, reinsurer,

or insurance support organization in connection with an application for such

coverage, or using information about gender, marital status, medical history,

occupation, residential living arrangements, beneficiaries, zip codes, or other

territorial designations to determine sexual orientation or gender identity;

(ii) Using

sexual orientation, gender identity, or beneficiary designation in the

underwriting process or in the determination of insurability;

(iii) Making

adverse underwriting decisions because medical records or a report from an

insurance support organization reveal that an applicant or insured has

demonstrated AIDS-related concerns by seeking counseling from health care

professionals;

(iv) Making

adverse underwriting decisions on the basis of the existence of nonspecific

blood code information received from the medical information bureau or a

national data bank, but this prohibition shall not bar investigation in

response to such a nonspecific blood code;

(v) The

provisions of this subdivision (C) shall not be construed to prohibit an

insurer from requesting an applicant or insured to take an HIV-related test on

the basis of the health history or current condition of health of the applicant

or insured in accordance with the provisions of subdivision (20) of this

section.

(D) Making or

permitting any unfair discrimination against any individual by conditioning

insurance rates, the provision or renewal of insurance coverage, or other

conditions of insurance based on medical information, including the results of

genetic testing, where there is not a relationship between the medical

information and the cost of the insurance risk that the insurer would assume by

insuring the proposed insured. In demonstrating the relationship, the insurer

can rely on actual or reasonably anticipated experience. As used in this

subdivision, "genetic testing" shall be defined as the term is

defined in 18 V.S.A. § 9331(7).

(E) Making or

permitting unfair discrimination between married couples and parties to a civil

union as defined under 15 V.S.A. § 1201, with regard to the offering of

insurance benefits to a couple, a spouse, a party to a civil union, or their

family. The Commissioner shall adopt rules necessary to carry out the purposes

of this subdivision. The rules shall ensure that insurance contracts and

policies offered to married couples, spouses, and families are also made

available to parties to a civil union and their families. The Commissioner may

adopt by order standards and a process to bring the forms currently on file and

approved by the Department into compliance with Vermont law. The standards and

process may differ from the provisions contained in chapter 101, subchapter 6,

and sections 4062, 4201, 4515a, 4587, 4685, 4687, 4688, 4985, 5104, and 8005 of

this title where, in the Commissioner's opinion, the provisions regarding

filing and approval of forms are not desirable or necessary to effectuate the

purposes of this section.

(8) Rebates.

(A) Except as

otherwise expressly provided by law, knowingly permitting or offering to make

or making any contract of insurance or agreement as to such contract other than

as plainly expressed in the insurance contract issued thereon, or paying or

allowing, or giving or offering to pay, allow, or give, directly or indirectly,

as inducement to such insurance, any rebate or premiums payable on the

contract, or any special favor or advantage in the dividends or other benefits

thereon, or any valuable consideration or inducement whatever not specified in

the contract; or giving, or selling, or purchasing or offering to give, sell,

or purchase as inducement to such insurance contract or annuity or in

connection therewith, any stocks, bonds, or other securities of any insurance

company or other corporation, association, or partnership, or any dividends or

profits accrued thereon, or anything of value whatsoever of value not specified

in the contract.

(B) Making

available through any rating plan or form, property, casualty, or surety

insurance to any firm, corporation, or association of individuals, any

preferred rate or premium based upon any fictitious grouping of such firm,

corporation, or individuals. The grouping of risks by way of membership,

nonmembership, license, franchise, employment, contract, agreement, or any

other method or means, when the grouping of risks have no preferred

characteristic over similar risks written on an individual basis, for the

purpose of insuring such grouped risks at a preferred rate or premium or on a

preferred form is a "fictitious grouping." This subdivision shall not

apply to life or health and disability insurance or annuity contracts.

(C) Nothing in

subdivision (7) or (8)(A) of this section shall be construed as including

within the definition of discrimination or rebates any of the following

practices:

(i) in the case

of any contract of life insurance or life annuity, paying bonuses to

policyholders or otherwise abating their premiums in whole or in part out of

surplus accumulated from nonparticipating insurance, provided that such bonuses

or abatement of premiums shall be fair, and equitable to policyholders and for

the best interest of the company and its policyholders;

(ii) in the case

of life insurance policies issued on the industrial debit plan, making

allowance to policyholders who have continuously for a specified period made

premium payments directly to an office of the insurer in an amount which fairly

represents the saving in collection expenses;

(iii)

readjustment of the rate of premium for a group insurance policy based on the

loss or expense thereunder, at the end of the first or any subsequent policy

year of insurance thereunder, which may be made retroactive only for such

policy year.

(9) Unfair claim

settlement practices. Committing or performing with such frequency as to

indicate a business practice any of the following:

(A)

misrepresenting pertinent facts or insurance policy provisions relating to

coverage at issue;

(B) failing to

acknowledge and act reasonably 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;

(D) refusing to

pay claims without conducting a reasonable investigation based upon all available

information;

(E) failing to

affirm or deny coverage of claims within a reasonable time after proof of loss

statements have been completed;

(F) not

attempting in good faith to effectuate prompt, fair, and equitable settlements

of claims in which liability has become reasonably clear;

(G) attempting

to settle a claim for less than the amount to which a reasonable person would

have believed he or she was entitled by reference to written or printed

advertising material accompanying or made a part of the application;

(H) attempting

to settle claims on the basis of an application which was altered without

notice to, or knowledge or consent of the insured;

(I) making claim

payments to insureds or beneficiaries not accompanied by a statement setting

forth the coverage under which the payments are made;

(J) making known

to insureds or claimants a policy of appealing from arbitration awards in favor

of insureds or claimants for the purpose of compelling them to accept

settlements or compromises less than the amount awarded in arbitration;

(K) delaying the

investigation or payment of claims by requiring an insured, claimant, or the

physician of either to submit a preliminary claim report and then requiring the

subsequent submission of formal proof of loss forms, both of which submissions

contain substantially the same information;

(L) failing to

promptly settle claims where liability has become reasonably clear under one

portion of the insurance policy coverage in order to influence settlements

under other portions of the insurance policy coverage;

(M) failing to

promptly provide a reasonable explanation on the basis in the insurance policy

in relation to the facts or applicable law for denial of a claim or for the

offer of a compromise settlement.

(10) Failure to

maintain complaint handling procedures. Failure of any person to maintain a

complete record of all of the complaints which it has received since the date

of its last examination under section 3563 or 3564 of this title. This record

shall indicate the total number of complaints, their classification by line of

insurance, the nature of each complaint, the disposition of these complaints,

the time it took to process each complaint, and such other information as the

Commissioner may require. As used in this subdivision, "complaint"

shall mean any written communication primarily expressing a grievance.

(11)

Misrepresentation in insurance applications. Making false or fraudulent

statements or representations on or relative to an application for an insurance

policy, for the purpose of obtaining a fee, commission, money, or other benefit

from any insurers, agent, broker, or individual.

(12) Failure of

agent, broker, or insurer to act as fiduciary. Failure of any insurance agent,

broker, or insurer to act as a fiduciary in regard to premiums, return premiums

or other sums of money received by him or her in his or her capacity as

insurance agent, insurance broker, or insurer by failure to pay or transmit in

a timely manner those sums of money to the persons to whom it is owed.

(13)

Misrepresentation of services or products. Any person offering his or her, or

its services or insurance policies to the public in such a way as to mislead or

to fail to adequately disclose to the public the true nature of the policies or

the services offered.

(14)

Nondisclosure of fees or charges. Failure of any agent or broker to obtain a

prior written agreement with a client, policyholder, or other member of the

public concerning fees or charges made by that agent or broker directly to the client,

policyholder, or member of the public for that agent or broker procuring,

servicing, or providing advice on insurance contracts. Commissions, expense

allowances, bonuses, fees, or any other compensation received directly by

agents or brokers from any legal entity engaged in the insurance business is

exempt from this subdivision.

(15) Financed

premiums. Misrepresenting or failing to completely disclose the terms,

conditions, or benefits of financing premiums for insurance policies where the

financing of the premiums constitute part of the solicitation or sale of the

policy.

(16) Unsuitable

policies. Soliciting, selling, or issuing an insurance policy when the person

soliciting, selling, or issuing the policy has reason to know or should have

reason to know that it is unsuitable for the person purchasing it.

(17) Failure to

instruct or supervise representatives. Failure of an employer or principal

engaged in the business of insurance to instruct or supervise any full-time

agent, or full-time adjuster, or full or part-time employee after that employer

or principal has knowledge of a deceptive or unfair act or practice prohibited

by this chapter which was committed by that agent, adjuster, or employee.

(18) Doing

business with a person known to be committing deceptive or unfair acts or using

prohibited practices. Accepting business from or contracting with or continuing

contractual relations with a person whom the other person knows or has or

should have reason to know is repeatedly committing deceptive or unfair acts or

practices prohibited by this title.

(19) Failure to

comply with filed rates, rules, regulations, or forms. Failure to comply with

any rates, rules, regulations, or forms filed with the Commissioner.

(20) HIV-related

tests. Failing to comply with the provisions of this subdivision regarding

HIV-related tests. "HIV-related test" means a test approved by the

United States Food and Drug Administration and the Commissioner, used to

determine the existence of HIV antibodies or antigens in the blood, urine, or

oral mucosal transudate (OMT).

(A) No person

shall request or require that a person reveal having taken HIV-related tests in

the past.

(B)(i) No person

shall request or require that an individual submit to an HIV-related test

unless he or she has first obtained the individual's written informed consent

to the test. Before written, informed consent may be granted, the individual

shall be informed, by means of a printed information statement which shall have

been read aloud to the individual by any agent of the insurer at the time of

application or later and then given to the individual for review and retention,

of the following:

(I) an

explanation of the test or tests to be given, including: the tests'

relationship to AIDS, the insurer's purpose in seeking the test, potential uses

and disclosures of the results, limitations on the accuracy of and the meaning

of the test's results, the importance of seeking counseling about the

individual's test results after those results are received, and the availability

of information from and the telephone numbers of the Vermont AIDS hotline and

the Centers for Disease Control and Prevention; and

(II) an

explanation that the individual is free to consult, at personal expense, with a

personal physician or counselor or the State Department of Health, or obtain an

anonymous test at the individual's choice and personal expense, before deciding

whether to consent to testing and that such delay will not affect the status of

any application or policy; and

(III) a summary

of the individual's rights under this subdivision (20), including subdivisions

(F)-(K); and

(IV) an

explanation that the person requesting or requiring the test, not the

individual or the individual's health care provider, will be billed for the

test, that the individual has a choice to receive the test results directly or

to designate in writing prior to the administration of the test any other

person through whom to receive the results, and any HIV positive test result

from a test performed pursuant to this subdivision (20) shall be reported to

the Vermont Department of Health pursuant to 18 V.S.A. § 1001.

(ii) In

addition, before drawing blood or obtaining a sample of the urine or OMT for

the HIV-related test or tests, the person doing so shall give the individual to

be tested an informed consent form containing the information required by the

provisions of this subdivision (B), and shall then obtain the individual's

written informed consent. If an OMT test is administered in the presence of the

agent or broker, the individual's written informed consent need only be

obtained prior to administering the test, in accordance with the provisions of

this subdivision (B).

(C)(i) The forms

for informed consent, information disclosure, and test results disclosure used

for HIV-related testing shall be filed with and approved by the Commissioner

pursuant to section 3541 of this title; and

(ii) Any testing

procedure shall be filed and approved by the Commissioner in consultation with

the Commissioner of Health.

(D) No

laboratory may be used by an insurer or insurance support organization for the

processing of HIV-related tests unless it is approved by the Vermont Department

of Health. Any requests for approval under this subdivision shall be acted upon

within 120 days. The Department may approve a laboratory without on-site

inspection or additional proficiency data if the laboratory has been certified

under the Clinical Laboratory Improvement Act, 42 U.S.C. § 263a or if it meets

the requirements of the federal Health Care Financing Administration under the

Clinical Laboratory Improvement Amendments.

(E) The test

protocol shall be considered positive only if test results are two positive

ELISA tests, and a Western Blot test confirms the results of the two ELISA

tests, or upon approval of any equally or more reliable confirmatory test or

test protocol which has been approved by the Commissioner and the U.S. Food and

Drug Administration. If the result of any test performed on a sample of urine

or OMT is positive or indeterminate, the insurer shall provide to the

individual, no later than 30 days following the date of the first urine or OMT

test results, the opportunity to retest once, and the individual shall have the

option to provide either a blood sample, a urine sample, or an OMT sample for

that retest. This retest shall be in addition to the opportunities for retest

provided in subdivisions (F) and (G) of this subdivision (20).

(F) If an

individual has at least two positive ELISA tests but an indeterminate Western

Blot test result, the Western Blot test may be repeated on the same sample. If

the Western Blot test result is indeterminate, the insurer may delay action on

the application, but no change in preexisting coverage, benefits, or rates

under any separate policy or policies held by the individual may be based upon

such indeterminacy. If action on an application is delayed due to indeterminacy

as described herein, the insurer shall provide the individual the opportunity

to retest once after six but not later than eight months following the date of

the first indeterminate test result. If the retest Western Blot test result is

again indeterminate or is negative, the test result shall be considered as

negative, and a new application for coverage shall not be denied by the insurer

based upon the results of either test. Any underwriting decision granting a

substandard classification or exclusion based on the individual's prior

HIV-related test results shall be reversed, and the company performing a retest

which had forwarded to a medical information bureau reports based upon the

individual's prior HIV-related test results shall request the medical

information bureau to remove any abnormal codes listed due to such prior test

results.

(G)(i) Upon the

written request of an individual for a retest, an insurer shall retest, at the

insurer's expense, any individual who was denied insurance, or offered

insurance on any other than a standard basis, because of the positive results

of an HIV-related test:

(I) once within

the three-year period following the date of the most recent test; and

(II) in any

event, upon the approval by the Commissioner of an alternative test or test

protocol for the presence of HIV antibodies or antigens.

(ii) If such

retest is negative, a new application for coverage shall not be denied by the

insurer based upon the results of the initial test. Any underwriting decision

granting a substandard classification or exclusion based on the individual's

prior HIV-related test results shall be reversed, and the company performing a

retest which had forwarded to a medical information bureau reports based upon

the individual's prior HIV-related test results shall request the medical

information bureau to remove any abnormal codes listed due to such prior test

results.

(H) An insurer,

on the basis of the individual's written informed consent as specified in

subdivision (B) of this subdivision, if necessary to make underwriting

decisions regarding the particular individual's application, may disclose the

results of an individual's HIV-related test results to its reinsurers, or to

those contractually retained medical personnel, laboratories, insurance support

organizations, and insurance affiliates (but not agents or brokers) that are

involved in underwriting decisions regarding the individual's particular

application. Other than the disclosures permitted by this subdivision, the

entities listed herein, including the insurer, shall not further disclose to

anyone individually identified HIV-related test result information without a

separately obtained written authorization from the individual; provided,

however, that if an individual's test result is positive or indeterminate, then

an insurer may report a code to the medical information bureau provided that a

nonspecific test result code is used which does not indicate that the

individual was subjected to HIV-related testing.

(I) An insurer,

reinsurer, contractually retained medical personnel, laboratories, medical

information bureau, or other national data bank, insurance affiliate, or

insurance support organizations that are obligated not to disclose any

individually-identifiable records of HIV-related tests pursuant to this

subdivision (20) shall have no duty to disclose this information to any person

except in compliance with a court order or as provided in subdivision (B) or

(H) nor shall it have any liability to any person for refusing or failing to

disclose such information.

(J) Any

individual who sustains damage as a result of the unauthorized negligent or

knowing disclosure of that individual's individually-identifiable HIV-related

test result information in violation of subdivision (H) of this subdivision

(20) may bring an action for appropriate relief in Superior Court against any

person making such a disclosure. The Court may award costs and reasonable

attorney's fees to the individual who prevails in an action brought under this

subdivision.

(K) In addition

to any other remedy or sanction provided by law, after notice and opportunity

for hearing the Commissioner may assess an administrative penalty in an amount

not to exceed $2,000.00 for each violation against any person who violates any

provision of this subdivision (20) or subdivision (7)(C) of this section.

(21) Automobile

glass services. In the case of claims for damage to automobile glass under a

policy of insurance covering, in whole or in part, motor vehicles:

(A) Failing to

inform an insured, at the time a claim is made, of the right of the insured to

choose freely any company or location for providing automobile glass services.

(B)

Intimidating, coercing, threatening, or misinforming an insured for the purpose

of inducing the insured to use a particular company or location to provide

automobile glass services.

(22) Genetic

testing.

(A) Conditioning

insurance rates, the provision or renewal of insurance coverage or benefits or

other conditions of insurance for any individual on:

(i) any

requirement or agreement of the individual to undergo genetic testing; or

(ii) the results

of genetic testing of a member of the individual's family unless the results

are contained in the individual's medical record.

(B) As used in

this subdivision, "genetic testing" shall be defined as the term is

defined in 18 V.S.A. § 9331(7). (Amended 1967, No. 186, eff. April 17, 1967;

1973, No. 216 (Adj. Sess.), § 4, eff. May 1, 1974; 1975, No. 180 (Adj. Sess.);

1979, No. 28, § 5; 1987, No. 194 (Adj. Sess.), §§ 1, 2; 1991, No. 135 (Adj.

Sess.), § 7; 1991, No. 194 (Adj. Sess.); 1997, No. 160 (Adj. Sess.), § 5a, eff.

Jan. 1, 1999; 1999, No. 91 (Adj. Sess.), § 17, eff. Jan. 1, 2001; 2001, No. 23,

§ 1; 2007, No. 41, § 9; 2007, No. 73, § 3, eff. April 1, 2008.)