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900 Consumer Rights

Published: 2015

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Title 18 Insurance

900 Consumer Rights

902 Prohibited Unfair Claim Settlement Practices [Formerly Regulation 26]

Claim Settlement Practices Which, When Committed Or Performed with Such Frequency as to Indicate a General Business Practice, Are Prohibited

1.0 Authority for Regulation; Basis for Regulation

1.1 18 Del.C. §314 authorizes the Insurance Commissioner to "...make reasonable rules and regulations necessary for or as an aid to the administration or effectuation of any provision of this title."

1.2 18 Del.C. Ch. 23 entitled "Unfair Business Practices in the Insurance Business," 18 Del.C. §2304(16) Unfair Claim Settlement Practices; 18 Del.C. §2304(17) Failure to Maintain Complaint Handling Procedures; and 18 Del.C. §2304(18) Misrepresentation in Insurance Applications, provide the basis for this regulation.

1.2.1 The Following Claim Settlement Practices When Committed or Performed with such Frequency as to Indicate a General Practice are Prohibited: Misrepresenting pertinent facts or insurance policy provisions relating to coverage at issue. Failing to acknowledge and respond within 15 working days, upon receipt by the insurer, to communications with respect to claims by insureds arising under insurance policies. Failing to implement prompt investigation of claims arising under insurance policies within 10 working days upon receipt of the notice of loss by the insurer. Refusing to pay claims without conducting an investigation based upon all available information when the notice of loss received by the insurer indicates that such an investigation is necessary to properly determine such a denial of payment. Failing to affirm or deny coverage or a claim or advise the person presenting the claim, in writing, or other proper legal manner, of the reason for the inability to do so, within 30 days after proof of loss statements have been received by the insurer. Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims in which liability has become clear. Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts which they might be entitled to under normal fair claims evaluations. Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application. Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge of the insured. Making claims payments to insured or beneficiaries not accompanied by a statement setting forth the coverage under which the payment has been made. 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 a formal proof of loss form, both of which submissions contain substantially the same information, unless the formal proof of loss is required by law, prevailing rules, or the policy. Failing to promptly settle claims, where liability has become clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage. Failing when requested to promptly provide an explanation of the basis in the insurance policy in relation to facts or applicable law for denial of a claim or for the offer of a compromise settlement. Such explanation may be made verbally but when given, must be documented in the claims file.

2.0 Violations; Penalties

2.1 Failure to comply will subject the violators to the provisions of 18 Del.C. §1732 (c)(2) and 18 Del.C. §2307(a) which deals with hearings, license revocation, suspension or fine for non-compliance of any regulation.

3.0 Severability

If any provision of this Regulation shall be held invalid, the remainder of the Regulation shall not be affected thereby.

4.0 Effective Date

This Regulation shall become effective August 1, 1977.