Public Hearing on Unfair Claim Settlement Practices Bill Scheduled for March 13 in Senate Appropriations Committee
SB 103, a bill that would prohibit an insurer from “providing compensation in any form that is based on the decision to deny, or delay the resolution of a claim, or to cancel or rescind an insurance policy” will be heard in the Senate Appropriations Committee March 13 at 7:30 a.m. (MDT) in room SCR 356.
NAMIC has recently sent an email letter to members of the Senate Appropriations Committee requesting that they VOTE NO on SB 103 for the following reasons:
- Political rhetoric should not trump claims practice reality – The fact of the matter is simple, insurers do NOT reward their adjusters for denying insurance claims. During the Senate Health and Human Services Committee hearing, Sen. Carroll, the bill sponsor, was unable to cite even a single incident of an insurance carrier rewarding or providing economic incentives to adjusters to encourage them to deny insurance claims.
- SB 103 is unnecessary because the Division of Insurance already has ample regulatory authority to investigate and discipline insurance carriers that wrongfully deny insurance claims, or improperly rescind or cancel an insurance policy.
- Current state law protects consumers from unfair claims settlement practices, like an insurer providing economic rewards to adjusters to induce the employee to wrongfully deny an insurance claim. Specifically, CRS 10-3-1104(1)(h) already enumerates several prohibited activities that would arguable prevent an insurer from establishing an internal procedure that would provide economic rewards to adjusters to induce the employee to wrongfully deny an insurance claim and violate state insurance law.
- Insurance companies already have a clear legal and contractual duty to honor the terms and conditions of their insurance policies and to engage in reasonable claim settlement practices. Thus, SB 61 does NOT provide insurance consumers with any new consumer protections. All it does is create an impractical and unworkable prohibition that is rife with legal ambiguities, i.e. What does "compensation in any form …" entail? What does "based on the decision to deny …" mean?
- SB 103 will turn every insurance claim denial into a potential bad faith claim. If SB 103 becomes law, plaintiff attorneys will be able to specifically argue that the claim denial at issue was motivated by the insurer providing "compensation in any form" to the adjuster to encourage the denial of the claim, even if the claim denial was completely appropriate pursuant to state law and the terms of the insurance policy.
The practical effect of SB 103 is that it will expose insurance companies to bad faith damages settlement demands whenever the insurer denies an insurance claim. This threat of litigation and/or regulatory action will place improper pressure on the claims process, increase the filing of frivolous lawsuits, and force insurance carriers to spend more premium dollars on defense costs.
NAMIC requests that its member companies that write insurance in Colorado encourage their employees, insurance producers, and policyholders to contact members of the Senate Appropriations Committee before the public hearing to express their concerns with this anti-insurance consumer/pro-trial lawyer proposed legislation.
Emails may be sent to Senate Appropriation Committee Members:
NAMIC will be submitting written testimony to the Senate Appropriations Committee in opposition to SB 103 arguing that the proposed legislation is an unnecessary and unwise cost-driver that could lead to higher insurance rates for consumers.