TITLE 27

Insurance

CHAPTER 27-29

Unfair Competition and Practices

SECTION 27-29-4



   § 27-29-4  Unfair methods of competition

and unfair or deceptive acts or practices defined. [Effective until

January 1, 2016.]. –

The following are defined as unfair methods of competition and unfair and

deceptive acts or practices in the business of insurance:



   (1) Misrepresentations and false advertising of policies

or contracts. Making, issuing, circulating, or causing to be made, issued,

or circulated, any estimate, illustration, circular, or statement, sales

presentation, omission, or comparison misrepresenting the terms of any policy

issued or to be issued or the benefits, conditions, or advantages promised by

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

policy, or making any false or misleading statement as to the dividends or

share of surplus previously paid on any policy, or making any misleading

representation or any misrepresentation as to the financial condition of any

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

operates, or using any name or title of any policy or class of policies

misrepresenting the true nature of that policy or class of policies, or making

any misrepresentation to any policyholder insured in any company including any

intentional misquote of a premium rate, for the purpose of inducing or tending

to induce the policyholder to lapse, forfeit, or surrender his or her

insurance, or misrepresenting for the purpose of effecting a pledge or

assignment of or effecting a loan against any policy, or misrepresenting any

policy as being share or 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, or in the form of a notice, circular, pamphlet, letter, or poster,

or over any radio 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 insurance 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 of literature which is false or

maliciously critical of or derogatory to the financial condition of an insurer,

and which is calculated to injure any person engaged in the business of

insurance;



   (4) 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, or monopoly in, the business of insurance;



   (5)(i) False financial statements. 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 causing directly or indirectly, to be made, published, disseminated,

circulated, delivered to any person, or placed before the public any false

material statement of financial condition of an insurer; or



   (ii) Knowingly making any false entry of a material fact in

any book, report, or statement of any insurer or knowingly omitting to make a

true entry of any material fact pertaining to the business of the insurer in

any book, report, or statement of the insurer;



   (6) Stock operations and advisory board contracts.

Issuing or delivering or permitting agents, officers, or employees to issue or

deliver agency company stock or other capital stock, or benefit certificates or

shares in any common law corporation, or securities of any special or advisory

board contracts or other contracts of any kind promising returns and profits as

an inducement to insurance;



   (7)(i) Unfair discrimination. Making or permitting any

unfair discrimination between individuals of the same class and equal

expectation of life in the rates charged for any policy of life insurance or of

life annuity or in the dividends or other benefits payable on any such policy

or life annuity, or in any other of the terms and conditions of the policy; or



   (ii) Making or permitting any unfair discrimination between

individuals of the same class and of essentially the same hazard in the amount

of premium, policy fees, or rates charged for any policy or contract of

accident or health insurance or in the benefits payable under any policy or

contract, or in any of the terms or conditions of that policy, or in any other

manner;



   (iii) Making or permitting any unfair discrimination between

individuals or risks of the same class and of essentially the same hazards by

refusing to issue, refusing to renew, canceling, or limiting the amount of

insurance coverage on a property or casualty risk because of the geographic

location of the risk, unless:



   (A) The refusal, cancellation, or limitation is for a

business purpose that is not a pretext for unfair discrimination; or



   (B) The refusal, cancellation, or limitation is required by

law or regulation;



   (iv) Making or permitting any unfair discrimination between

individuals or risks of the same class and of essentially the same hazards by

refusing to issue, refusing to renew, canceling, or limiting the amount of

insurance coverage on a residential property risk, or the personal property

contained in the residential property risk, because of the age of the

residential property, unless:



   (A) The refusal, cancellation, or limitation is for a

business purpose that is not a pretext for unfair discrimination; or



   (B) The refusal, cancellation, or limitation is required by

law or regulation;



   (v) Refusing to insure, refusing to continue to insure, or

limiting the amount of coverage available to an individual because of the sex

or marital status of the individual; nothing in this subsection shall prohibit

an insurer from taking marital status into account for the purpose of defining

persons eligible for dependent benefits; or



   (vi) To terminate, or to modify coverage, or to refuse to

issue or refuse to renew any property or casualty policy solely because the

applicant or insured or any employee of either is mentally or physically

impaired; provided, that this subsection shall not apply to accident and health

insurance sold by a casualty insurer and, provided that this subsection shall

not be interpreted to modify any other provision of law relating to the

termination, modification, issuance or renewal of any insurance policy or

contract;



   (8)(i) Rebates. Except as otherwise expressly provided

by law, knowingly permitting or offering to make or making any policy or

agreement as to the policy other than as plainly expressed in the policy issued

on it, or paying or allowing or giving or offering to pay, allow, or give,

directly or indirectly, as inducement to the policy, any rebate of premiums

payable on the policy, or any special favor or advantage in the dividends or

other benefits on the policy, or any valuable consideration or inducement not

specified in the policy, or giving, selling, or purchasing or offering to give,

sell, or purchase as inducement to the policy, or in connection with the

policy, any stocks, bonds, or other securities of any insurance company or

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

accrued on the security, or anything of value not specified in the policy;



   (ii) Nothing in subdivision (7) of this section or paragraph

(i) of this subdivision shall be construed as including within the definition

of discrimination or rebates any of the following practices:



   (A) In the case of any contract of life insurance policies or

life annuity, annuities paying bonuses to policyholders or abating their

premiums in whole or in part out of surplus accumulated from nonparticipating

insurance; provided, that any bonuses or abatement of premiums shall be fair

and equitable to policyholders and for the best interests of the company and

its policyholders;



   (B) 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;

and



   (C) Readjustment of the rate of premium for a group insurance

policy based on the loss or expense experience under it, at the end of the

first or any subsequent policy year of insurance under the policy, which may be

made retroactive only for the policy year;



   (9)(i) Free choice of insurance producer or insurer.

When any person, firm, or corporation engaged in the business of lending money

on the security of real or personal property, or in the business of

negotiating, purchasing, selling, or holding loans on the security of real

property, or in the business of building, selling, or financing the sale or

purchase of real property, or any trustee, director, officer, agent, or other

employee of that person, firm, or corporation, requires that property insurance

be procured for the property, the borrower, debtor, or purchaser shall have

free choice of insurance producer and insurer through or by which the insurance

is to be placed or written, subject only to the right of the builder, creditor,

lender, or seller:



   (A) To require evidence, to be produced at a reasonable time

prior to commencement or renewal of risk, that the insurance providing

reasonable coverage has been obtained in an amount equal to the amount required

by the builder, creditor, lender, or seller;



   (B) To require insurance in an insurer authorized to do

business and having a licensed resident insurance producer agent in this state;

and



   (C) To refuse to accept insurance in a particular insurer on

reasonable grounds related to solvency;



   (ii) When any contractor or subcontractor is required to

procure a surety bond or policy of insurance with respect to any building or

construction contract which is about to be, or which has been bid or entered

into, the contractor or subcontractor shall have free choice of insurance

producer and insurer through or by which the surety bond or insurance is to be

written; provided, that the owner or contractor shall have the right: (A) to

require evidence, to be produced at a reasonable time prior to commencement or

renewal of risk, that the insurance providing reasonable coverage has been

obtained in an amount equal to the amount required by the builder, creditor,

lender, or seller; (B) to require insurance in an insurer authorized to do

business and having a licensed resident insurance producer in this state; and

(C) to refuse to accept insurance in a particular insurer on reasonable grounds

related to solvency; provided, that the owner or contractor shall have the

right to approve the form, sufficiency, or manner of execution of the surety

bond or policy or insurance furnished by the insurance company or insurance

producer selected by the contractor or subcontractor;



   (iii) No person who lends money or extends credit may:



   (A) Solicit insurance for the protection of real property

after a person indicates interest in securing a first mortgage credit extension

until that person has received a commitment in writing from the lender as to a

loan or credit extension;



   (B) Unreasonably reject a policy furnished by the borrower

for the protection of the property securing the creditor lien. A rejection

shall not be deemed unreasonable if it is based on reasonable standards,

uniformly applied, relating to the extent of coverage required and the

financial soundness and the services of an insurer. The standards shall not

discriminate against any particular type of insurer, nor shall the standards

call for rejection of a policy because it contains coverage in addition to that

required in the credit transaction;



   (C) Require that any borrower, mortgagor, purchaser, insurer,

or insurance producer pay a separate charge, in connection with the handling of

any policy required as security for a loan on real estate, or pay a separate

charge to substitute the policy of one insurer for that of another. This

subsection does not include the interest that may be charged on premium loans

or premium advancements in accordance with the terms of the loan or credit

document;



   (D) Use or disclose, without the prior written consent of the

borrower, mortgagor, or purchaser taken at a time other than the making of the

loan or extension of credit, information relative to a policy which is required

by the credit transaction, for the purpose of replacing the insurance; or



   (E) Require any procedures or conditions of duly licensed

insurance producers or insurers not customarily required of those insurance

producers or insurers affiliated or in any way connected with the person who

lends money or extends credit;



   (iv) Every person who lends money or extends credit and who

solicits insurance on real and personal property subject to paragraph (iii) of

this subdivision shall explain to the borrower in writing that the insurance

related to the credit extension may be purchased from an insurer or insurance

producer of the borrower's choice, subject only to the lender's right to reject

a given insurer or insurance producer as provided in paragraph (iii)(B) of this

subdivision. Compliance with disclosures as to insurance required by truth in

lending laws or comparable state laws shall be compliance with this subsection;



   (v) This requirement for a commitment shall not apply in

cases where the premium for the required insurance is to be financed as part of

the loan or extension of credit involving personal property transactions;



   (vi) The commissioner shall have the power to examine and

investigate those insurance related activities of any person or insurer that

the commissioner believes may be in violation of this section. Any affected

person may submit to the commissioner a complaint or material pertinent to the

enforcement of this section;



   (vii) Nothing in this section shall prevent a person who

lends money or extends credit from placing insurance on real or personal

property in the event the mortgagor, borrower, or purchaser has failed to

provide required insurance in accordance with the terms of the loan or credit

document;



   (viii) Nothing contained in this section shall apply to

credit life or credit accident and health insurance.



   (10) Notice of free choice of insurance producer or

insurer. Every debtor, borrower, or purchaser of property with respect to

which insurance of any kind on the property is required in connection with a

debt or loan secured by the property or in connection with the sale of the

property, shall be informed in writing by the builder, creditor, lender, or

seller, of his or her right of free choice in the selection of the insurance

producer and insurer through or by which the insurance is to be placed. There

shall be no interference, either directly or indirectly, with the borrower's,

debtor's, or purchaser's free choice of an insurance procedure and of an

insurer which complies with the requirements of this section, and the builder,

creditor, lender, seller, owner, or contractor shall not refuse the policy

tendered by the borrower, debtor, purchaser, contractor, or subcontractor. Upon

notice of any refusal of the tendered policy, the insurance commissioner shall

order the builder, creditor, lender, seller, owner, or contractor to accept the

tendered policy, if the commissioner determines that the refusal is not in

accordance with the requirements of this section. Failure to comply with an

order of the insurance commissioner shall be deemed a violation of this section;



   (11) Using insurance information to detriment of

another. Whenever the instrument requires that the purchaser, mortgagor, or

borrower furnish insurance of any kind on real property being conveyed or is

collateral security to a loan, the mortgagee, vendor, or lender shall refrain

from disclosing or using any and all insurance information to his or her or its

own advantage and to the detriment of either the borrower, purchaser,

mortgagor, insurance company, or agency complying with the requirements

relating to insurance;



   (12) Prohibited group enrollments. No insurer shall

offer more than one group policy of insurance through any person unless that

person is licensed, at a minimum, as an insurance producer. This prohibition

shall not apply to employer-employee relationships, or to any of these

enrollments;



   (13) Failure to maintain complaint handling

procedures. No insurer shall fail to maintain a complete record of all the

complaints it received since the date of its last examination pursuant to the

general laws providing for examination of insurers. This record shall indicate

the total number of complaints, their classification by line of insurance, the

nature of each complaint, the disposition of each complaint, and the time it

took to process each complaint. For the purposes of this subsection,

"complaint" means any written communication primarily expressing a grievance;



   (14) Misrepresentation in insurance applications.

Making false or fraudulent statements or representations on or relative to an

application for a policy, for the purpose of obtaining a fee, commission,

money, or other benefit from any insurers, insurance producer, or individual

person; and



   (15) Requiring 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 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. An auto

body repair shop may file a complaint with the department of business

regulation alleging a violation of this subdivision (15). Whenever the

department of business regulation has reason to believe that an insurer has

violated this subdivision (15), the department shall conduct an investigation

and may convene a hearing. A complaint filed by an auto body repair shop must

be accompanied by a statement written and signed by the insured or claimant

setting forth the factual basis of the complaint, and the insured or claimant

must voluntarily appear and testify at any administrative proceedings on the

complaint.



History of Section.

(P.L. 1958, ch. 53, § 4; P.L. 1966, ch. 54, § 1; P.L. 1976, ch. 201,

§ 1; P.L. 1993, ch. 180, § 24; P.L. 1997, ch. 342, § 1; P.L.

2004, ch. 488, § 1.)