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20.4 Unfair Claim Settlement Practices

To protect the rights of the insured, most states have adopted a model of the Unfair Claim Settlement Practices Act, which are laws passed by state legislatures to regulate the behavior of insurance companies with respect to the payment of claims.

The regulations relate primarily to the treatment of policyholders and claimants. The content of these statutes varies from state to state, although most are similar in actual requirements. A copy of the Unfair Claims Settlement Practices Act that applies to a specific state can be obtained by contacting the specific state's Insurance Commissioner's Office.

Florida law defines the following acts as unfair claim settlement practices:

1. Attempting to settle claims on the basis of an application, when serving as a binder or intended to become a part of the policy, or any other material document which was altered without notice to, or knowledge or consent of, the insured.

2. Making a material misrepresentation to an insured or any other person having an interest in the proceeds payable under such contract or policy on less favorable terms than those provided in, and contemplated by, such contract or policy.

3. Committing or performing with such frequency as to indicate a general business practice any of the following:

a. failing to adopt and implement standards for the proper investigation of claims;

b. misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;

c. failing to acknowledge and act promptly upon communications with respect to claims;

d. denying claims without conducting reasonable investigations based upon available information;

e. failing to affirm or deny coverage of claims upon the written request of the insured within a reasonable time after proof-of-loss statements have been completed;

f. failing to promptly provide a reasonable explanation in writing to the insured of 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;

g. failing to promptly notify the insured of any additional information necessary for the processing of a claim; or

h. failing to clearly explain the nature of the requested information and the reasons why such information is necessary.