NAII Says Calif. Bill Would Hinder Fraud-Fighting Tactics

The National Association of Independent Insurers (NAII) announced that the California Assembly Insurance Committee on July 11 will hold a hearing to debate legislation that would impede insurer efforts to investigate claims involving suspected insurance fraud. The NAII stated it will testify against the bill, which passed the full Senate on June 4.

Sam Sorich, NAII’s vice president and western regional manager, stated that several restrictions on homeowners insurance policies that SB 658 would impose could drive up the cost of claims and create a new avenue for deception. He added that the legislation would allow insurers and policyholders to immediately resort to lawsuits and lengthy litigation.

According to the NAII, homeowners insurance contracts stipulate that, in the event of a claim, policyholders may be examined under oath so insurers can effectively determine the facts of a claim. SB 658 would hinder this process by mandating that insurers pay the fees of attorneys who policyholders retain for representation while being examined under oath. The examination under oath is a contractual matter, not a judicial proceeding, Sorich said. Costs from attorney fees that would be added to the claim could exceed the cost of the claim itself.

SB 658 also would allow the policyholder to assert a privilege against self-incrimination and, thus, refuse to answer questions about the claim, which Sorich said would thwart the insurer’s fraud investigation. Moreover, Sorich noted that the policyholder’s refusal to cooperate in the examination could not be used as a defense for denial of the claim, a situation which could encourage the filing of fraudulent claims.

In addition, the bill would enable the insurer or the policyholder to bypass the appraisal of loss procedure, which produces an award that determines the value of damage. Under SB 658, insurers or policyholders could immediately resort to lawsuits and extensive litigation, rejecting a balanced approach at determining payment for a loss. NAII believes this provision is inconsistent with the public policy in favor of settling disputes without litigation.

Topics California Carriers Fraud