H. B. 4526
(By Delegate Trump)
[Introduced February 18, 2004
; referred to the
Committee on Banking and Insurance then the Judiciary.]
A BILL to amend and reenact §33-11-2, §33-11-3, §33-11-4, §33-11-5,
§33-11-6, §33-11-7, §33-11-8 and §33-11-10 of the code of West
Virginia, 1931, as amended, all relating to the Unfair Trade
Practices Act; substituting the term "party" for "person"
under the act in order to prevent individual insurance agents
or adjusters from being personally named in lawsuits under the
act.
Be it enacted by the Legislature of West Virginia:
That §33-11-2, §33-11-3, §33-11-4, §33-11-5, §33-11-6,
§33-11-7, §33-11-8 and §33-11-10 of the code of West Virginia,
1931, as amended, be amended and reenacted, all to read as follows:
ARTICLE 11. UNFAIR TRADE PRACTICES.
§33-11-2. Definitions.
As used in this article:
(a) "Person" "Party" includes any individual, company, insurer, association, organization, society, reciprocal, business
trust, corporation, or any other legal entity, including agents and
brokers."Person" "Party also includes hospital service
corporations, medical service corporations and dental service
corporations as defined in article twenty-four of this chapter, and
health care corporations as defined in article twenty-five of this
chapter. For purposes of this article hospital service
corporations, medical service corporations, dental service
corporations, and health care corporations shall be deemed to be in
the business of insurance.
(b) "Commissioner" means the insurance commissioner of West
Virginia.
(c) "Insurance policy" or "insurance contract" means the
contract effecting insurance, or the certificate thereof, by
whatever name called, and includes all clauses, riders,
endorsements and papers attached thereto and a part thereof.
§33-11-3. Unfair methods of competition and unfair or deceptive
acts or practices prohibited.
No person party shall engage in this state in any trade
practice which is defined in this article as, or determined
pursuant to section seven of this article to be, an unfair method
of competition or an unfair or deceptive act or practice in the
business of insurance.
§33-11-4. Unfair methods of competition and unfair or deceptive acts or practices defined.
The following are defined as unfair methods of competition and
unfair or deceptive acts or practices in the business of insurance:
(1) Misrepresentation and false advertising of insurance
policies. -- No person party shall make, issue, circulate, or cause
to be made, issued or circulated, any estimate, circular,
statement, sales presentation, omission or comparison which:
(a) Misrepresents the benefits, advantages, conditions 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 party, 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. -- No person
party shall make, publish, disseminate, circulate or place before
the public, or cause, 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 party in the conduct of his or her insurance
business, which is untrue, deceptive or misleading.
(3) Defamation. -- No person party shall make, publish,
disseminate or circulate, directly or indirectly, or aid, abet or
encourage 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 the person party.
(4) Boycott, coercion and intimidation. -- No person party
shall enter into any agreement to commit, or by any concerted
action commit, 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) False statements and entries. -- (a) No person party shall
knowingly file with any supervisory or other public official, or
knowingly make, publish, disseminate, circulate or deliver to any
person party, or place before the public, or knowingly cause
directly or indirectly, to be made, published, disseminated,
circulated, delivered to any person party, or placed before the
public, any false material statement of fact as to the financial
condition of a person party.
(b) No person party shall knowingly make any false entry of a
material fact in any book, report or statement of any person party
or knowingly omit to make a true entry of any material fact
pertaining to the business of any person party in any book, report
or statement of such person.
(6) Stock operations and advisory board contracts. -- No
person party shall issue or deliver or permit 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 or any special or advisory board
contracts or other contracts of any kind promising returns and
profits as an inducement to insurance.
(7) Unfair discrimination. -- (a) No person party shall make
or permit any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any
contract of life insurance or of life annuity or in the dividends
or other benefits payable thereon, or in any other of the terms and
conditions of the contract.
(b) No person party shall make or permit 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 and
sickness insurance or in the benefits payable thereunder, or in any
of the terms or conditions of the contract, or in any other manner
whatever.
(c) As to kinds of insurance other than life and accident and
sickness, no person party shall make or permit any unfair
discrimination in favor of particular persons, or between insureds
or subjects of insurance having substantially like insuring, risk
and exposure factors or expense elements, in the terms or
conditions of any insurance contract, or in the rate or amount of
premium charge therefor. This paragraph shall not apply as to any
premium or premium rate in effect pursuant to article twenty of
this chapter.
(8) Rebates. -- (a) Except as otherwise expressly provided by
law, no person party shall knowingly permit or offer to make or
make any contract of life insurance, life annuity, or accident and
sickness insurance, or agreement as to any contract other than as plainly expressed in the insurance contract issued thereon, or pay
or allow or give or offer to pay, allow or give, directly or
indirectly, as inducement to any insurance or annuity, any rebate
of 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 give or sell, or purchase or offer to give, sell or
purchase as inducement to any 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 not specified in the contract.
(b) Nothing in subdivision (7) or paragraph (a) of subdivision
(8) of this section shall be construed as including within the
definition of unfair 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 any such bonuses or
abatement of premiums shall be fair and equitable to policyholders
and for the best interests of the insurer 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;
(iv) Issuing life or accident and sickness policies on a
salary savings or payroll deduction plan at a reduced rate
commensurate with the savings made by the use of the plan.
(c) With respect to insurance other than life, accident and
sickness, ocean marine or marine protection and indemnity
insurance, no person party shall knowingly charge, demand or
receive a premium for the insurance except in accordance with an
applicable filing on file with the commissioner. No person party
shall pay, allow or give, directly or indirectly, either as an
inducement to insurance or after insurance has been effected, any
rebate, discount, abatement, credit or reduction of the premium
named in a policy of insurance, or any special favor or advantage
in the dividends or other benefits to accrue thereon, or any
valuable consideration or inducement whatever, not specified in the
policy of insurance, except to the extent provided for in an
applicable filing. No insured named in a policy of insurance, nor any relative, representative or employee of the insured shall
knowingly receive or accept directly or indirectly, any rebate,
discount, abatement, credit or reduction of premium, or any special
favor or advantage or valuable consideration or inducement.
Nothing in this section shall be construed as prohibiting the
payment of commissions or other compensation to duly licensed
agents and brokers, nor as prohibiting any insurer from allowing or
returning to its participating policyholders, members or
subscribers, dividends, savings or unabsorbed premium deposits. As
used in this section the word "insurance" includes suretyship and
the word "policy" includes bond.
(9) Unfair claim settlement practices. -- No person party
shall commit or perform with such frequency as to indicate a
general business practice any of the following:
(a) Misrepresenting pertinent facts or insurance policy
provisions relating to coverages 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) Compelling insureds to institute litigation to recover
amounts due under an insurance policy by offering substantially
less than the amounts ultimately recovered in actions brought by
the insureds, when the insureds have made claims for amounts
reasonably similar to the amounts ultimately recovered;
(h) 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;
(i) Attempting to settle claims on the basis of an application
which was altered without notice to, or knowledge or consent of,
the insured;
(j) Making claims payments to insureds or beneficiaries not
accompanied by a statement setting forth the coverage under which
payments are being made;
(k) 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;
(l) 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;
(m) 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;
(n) Failing to promptly provide a reasonable explanation 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;
(o) Failing to notify the first party claimant and the
provider(s) of services covered under accident and sickness
insurance and hospital and medical service corporation insurance
policies whether the claim has been accepted or denied and if
denied, the reasons therefor, within fifteen calendar days from the
filing of the proof of loss: Provided, That should benefits due
the claimant be assigned, notice to the claimant shall not be
required: Provided, however, That should the benefits be payable
directly to the claimant, notice to the health care provider shall
not be required. If the insurer needs more time to investigate the
claim, it shall so notify the first party claimant in writing within fifteen calendar days from the date of the initial
notification and every thirty calendar days, thereafter; but in no
instance shall a claim remain unsettled and unpaid for more than
ninety calendar days from the first party claimant's filing of the
proof of loss unless, as determined by the insurance commissioner:
(1) There is a legitimate dispute as to coverage, liability or
damages; or (2) the claimant has fraudulently caused or contributed
to the loss. In the event that the insurer fails to pay the claim
in full within ninety calendar days from the claimant's filing of
the proof of loss, except for exemptions provided above, there
shall be assessed against the insurer and paid to the insured a
penalty which will be in addition to the amount of the claim and
assessed as interest on the claim at the then current prime rate
plus one percent. Any penalty paid by an insurer pursuant to this
section shall not be a consideration in any rate filing made by the
insurer.
(10) Failure to maintain complaint handling procedures. -- No
insurer shall fail to maintain a complete record of all the
complaints which it has received since the date of its last
examination under section nine, article two of this chapter. 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, and the time it took to
process each complaint. For purposes of this subsection, "complaint" shall mean any written communication primarily
expressing a grievance.
(11) Misrepresentation in insurance applications. -- No person
party shall make 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 insurer, agent, broker or individual.
(12) Failure to maintain privacy of consumer financial and
health information. -- Any licensee who violates any provision of
the commissioner's rule relating to the privacy of consumer
financial and health information shall be deemed to have violated
the provisions of this article: Provided, That any licensee who
complies with the provisions of this subsection, a commissioner's
rule, or a court order shall not be deemed to be in violation of
any other provisions of sections three and four of this article by
their compliance with this subsection, the rule or court order.
For purposes of this subsection, "licensee" means all licensed
insurers, producers and other persons licensed or required to be
licensed, or authorized or required to be authorized, or registered
or required to be registered pursuant to this chapter.
§33-11-5. Favored agent or insurer; coercion of debtors.
(a) No person party may:
(1) Require, as a condition precedent to the lending of money
or extension of credit, or any renewal thereof, that the person to whom such money or credit is extended or whose obligation the
creditor is to acquire or finance, negotiate any policy or contract
of insurance through a particular insurer or group of insurers or
agent or broker or group of agents or brokers;
(2) Unreasonably disapprove the insurance policy provided by
a borrower for the protection of the property securing the credit
or lien;
(3) Require directly or indirectly that any borrower,
mortgagor, purchaser, insurer, broker, or agent pay a separate
charge, in connection with the handling of any insurance policy
required as security for a loan on real estate, or pay a separate
charge to substitute the insurance policy of one insurer for that
of another; or
(4) Use or disclose information resulting from a requirement
that a borrower, mortgagor or purchaser furnish insurance of any
kind on real property being conveyed or used as collateral security
to a loan, when such information is to the advantage of the
mortgagee, vendor, or lender, or is to the detriment of the
borrower, mortgagor, purchaser, insurer, or the agent or broker
complying with such a requirement.
(b) (1) Subdivision (3), subsection (a) does not include the
interest which may be charged on premium loans or premium
advancements in accordance with the security instrument.
(2) For purposes of subdivision (2), subsection (a) such disapproval shall be deemed unreasonable if it is not based solely
on reasonable standards uniformly applied, relating to the extent
of coverage required and the financial soundness and the services
of an insurer. Such standards shall not discriminate against any
particular type of insurer, nor shall such standards call for the
disapproval of an insurance policy because such policy contains
coverage in addition to that required.
(3) The commissioner may investigate the affairs of any person
party to whom this subsection applies to determine whether such
person party has violated this subsection. If a violation of the
subsection is found, the person party in violation shall be subject
to the same procedures and penalties as are applicable to other
provisions of this article.
(4) For purposes of this section, "person" "party" includes
any individual, corporation, association, partnership, or other
legal entity.
§33-11-6. Violations, cease and desist and penalty orders and
modifications thereof.
If, after notice and hearing, the commissioner determines that
any person party has engaged in or is engaging in any method of
competition, act or practice in violation of the provisions of this
article or any rules or regulations promulgated by the commissioner
thereunder, the commissioner shall issue an order directing such
person party to cease and desist from engaging in such method of competition, act or practice, and in addition thereto, the
commissioner may at his or her discretion order any one or more of
the following:
(a) Require the payment to the state of West Virginia of a
penalty in a sum not exceeding one thousand dollars for each and
every act or violation, but not to exceed an aggregate penalty of
ten thousand dollars, unless the person party knew or reasonably
should have known he or she was in violation of this article, in
which case the penalty shall be not more than five thousand dollars
for each and every act or violation, but not to exceed an aggregate
penalty of fifty thousand dollars in any six month period.
(b) Revoke or suspend the license of such person party if he
or she knew or reasonably should have known that he or she was in
violation of this article.
(c) No order of the commissioner pursuant to this article or
order of court to enforce it, or holding of a hearing, shall in any
manner relieve or absolve any person party affected by such order
or hearing from any other liability, penalty or forfeiture under
law.
§33-11-7. Undefined acts or practices.
If, after notice and hearing, the commissioner determines that
any person party transacting insurance is engaging in this state in
any method of competition or act or practice in the transaction of
such insurance which is not defined in this article, and that such method of competition is unfair or such act or practice is unfair
or deceptive, the commissioner shall issue an order directing such
person party to cease and desist from engaging in such method of
competition, act or practice.
§33-11-8. Penalty for violation of cease and desist orders.
If, after notice and hearing, the commissioner determines that
any person party has violated a cease and desist order issued by
the commissioner and which such order is still in effect, the
commissioner may at his or her discretion order any one or more of
the following:
(a) Require the payment to the state of West Virginia of a
penalty in a sum not exceeding ten thousand dollars for each and
every act or violation.
(b) Revoke or suspend the license of such person party.
§33-11-10. Severability.
In the event any provision of this article, or the application
of such provision to any person party or circumstance, shall be
held unconstitutional or otherwise invalid by any court of
competent jurisdiction, the remainder of this article or the
application of the provisions to other persons parties or
circumstances shall not be affected thereby.
NOTE: The purpose of this bill is to prevent resident company
insurance adjusters or agents from being named individually in
lawsuits involving the company with which they are employed for alleged violations of the Unfair Trade Practices Act. The
practical effect of removing resident adjusters will be that these
actions, assuming they meet the federal jurisdictional amount in
controversy threshold of $75,000, will be required to proceed in
federal court rather than state court.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
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