A “lawyer-friendly” bill that would make it a violation of Montana’s unfair claim settlement practices act if an insurer engages in any single act that violates the statute will strain the resources of the insurance department and hamper the insurance business in the state, according to the National Association of Independent Insurers (NAII).
At a hearing recently before the Senate Business and Labor Committee, the NAII presented its objections to S.B. 106.
“The insurance department’s primary responsibility in the market conduct area should be to assure that no insurer conducts its daily business activity in a manner that violates the insurance code, explained Donald S. Cleasby, assistant vice president and assistant general counsel for the NAII. “It’s not a wise use of the Department’s limited resources to be going after insurers who have inadvertent and isolated violations of the unfair claims practices act. The Department ‘s efforts would be put to better use by prosecuting insurers that regularly violate the act, and thus pose the greater harm to Montana insurance consumers.”
Under current law, an insurer must engage in enough of those acts to constitute a general business practice before the Department can take enforcement action, Cleasby noted.
S.B. 106 would also remove the general business practice standard from the requirement that insurers paying medical benefit payments do so within 30 days of proof of loss, and allow the commissioner to assess an administrative penalty for specified claims actions even if a single action rather than a general business practice standard.
Cleasby added that safeguards also exist for consumers through other sources. For example, the NAIC Market Conduct Examiners Handbook has “error tolerance standards” stating that if in a sample of policy files an insurer is found to have violated statutory, regulatory or other requirements in 10 percent or more of the files for procedures other than claims and 7 percent or more for claims, it is above error tolerance levels.
“Individual consumers already have adequate remedies for insurers that violate these acts even once and the violation results in harm to the consumer,” he added. “Montana law expressly allows individuals to bring a cause of action for any single violation of many provisions in the Unfair Claim Settlement Practices Act.”
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