TITLE 14. INSURANCE
REGISTRAR'S NOTICE: The
State Corporation Commission is claiming an exemption from the Administrative
Process Act in accordance with § 2.2-4002 A 2 of the Code of Virginia,
which exempts courts, any agency of the Supreme Court, and any agency that by
the Constitution is expressly granted any of the powers of a court of record.
Title of Regulation: 14VAC5-400. Rules Governing
Unfair Claim Settlement Practices (amending 14VAC5-400-10 through 14VAC5-400-80;
adding 14VAC5-400-25, 14VAC5-400-90 through 14VAC5-400-110).
Statutory Authority: §§ 12.1-13, 38.2-223, and 38.2-510
of the Code of Virginia.
Public Hearing Information: A public hearing will be
held upon request.
Public Comment Deadline: May 1, 2017.
Agency Contact: Katie Johnson, Policy Advisor, Policy,
Compliance, and Administration Division, Bureau of Insurance, State Corporation
Commission, P.O. Box 1157, Richmond, VA 23218, telephone (804) 371-9688, FAX
(804) 371-9873, or email firstname.lastname@example.org.
The proposed amendments closely follow the National
Association of Insurance Commissioners' Unfair Claims Settlement Practices Act,
Unfair Property/Casualty Claims Settlement Practices Model Regulation, and
Unfair Life, Accident and Health Claims Settlement Practices Model Regulation.
The proposed amendments (i) set forth claims settlement standards that are
specific to automobile insurance, property policies, accident and sickness
insurance, life insurance, and annuities; (ii) include clear compliance
standards for all insurers and claim settlement standards that are applicable
specifically to property policies, accident and sickness insurance, life
insurance, and annuities; and (iii) clarify that 14VAC5-400 applies to all
insurance policies issued in Virginia, except workers' compensation, title
insurance, and fidelity and surety insurance.
In response to comments received, the reproposed amendments
(i) clarify the definitions of "insured," "insurer," and
"provider"; (ii) include an exception for claims-made policies; (iii)
limit the requirement that a signed release indicating payment is final or
indicating a settlement has been reached may be obtained from a first party
claimant; (iv) limit the release language to the insurer or its insured; (v)
change some of the timeframes; (vi) create an exception to the notification
requirement if a provider submits a claim; (vii) remove the requirement
pertaining to language translations; (viii) add a requirement that a total loss
valuation be provided to a claimant upon request; (ix) separate provisions for
auto storage and towing; (x) specifically address prescription drug claims; and
(xi) allow an insurer to provide to a policyholder a summary of prescription
drug claims through an insurer's electronic portal, by telephone, or via
written summary upon request.
AT RICHMOND, MARCH 20, 2017
COMMONWEALTH OF VIRGINIA, ex rel.
STATE CORPORATION COMMISSION
CASE NO. INS-2016-00265
Ex Parte: In the matter of
Amending the Rules Governing
Unfair Claim Settlement Practices
ORDER TO TAKE NOTICE OF REVISED PROPOSED RULES
By Order to Take Notice ("Order") entered November
14, 2016, insurers and interested persons were ordered to take notice that
subsequent to January 31, 2017, the State Corporation Commission
("Commission") would consider the entry of an order adopting
amendments to rules set forth in Chapter 400 of Title 14 of the Virginia
Administrative Code, entitled "Rules Governing Unfair Claim Settlement
Practices" ("Rules"), which amend the Rules at 14 VAC 5-400-10
through 14 VAC 5-400-80, and add new Rules at 14 VAC 5-400-25 and 14 VAC
5-400-90 through 14 VAC 5-400-110, unless on or before January 31, 2017, any
person objecting to the adoption of the amendments to the Rules filed a request
for a hearing with the Clerk of the Commission ("Clerk").
The Order also required insurers and interested persons to
file their comments in support of or in opposition to the proposed amendments
to the Rules with the Clerk on or before January 31, 2017.
The Bureau of Insurance ("Bureau") held meetings on
January 10, 2017, and January 12, 2017, to allow for insurers and interested
persons to discuss and address questions about the proposed Rules with Bureau
staff. In addition to comments and questions that the Bureau received during
these meetings, the Commission received timely filed comments from the American
Council of Life Insurers (ACLI), the National Risk Retention Association,
Allstate Insurance Company, the American Insurance Association, CareFirst
BlueCross BlueShield, ProAssurance Corporation, America's Health Insurance
Plans (AHIP), the Property Casualty Insurers Association, PIAA, the Virginia
Association of Health Plans (VAHP), and the National Association of Mutual
The Bureau considered the comments received and responded to
them in its Response to Comments, which the Bureau filed with the Clerk on
March 15, 2017. In its Response to Comments, the Bureau recommended numerous
revisions to the proposed amendments that address many of the comments
The Bureau recommends that the proposed amendments to the
Rules and the revisions to these proposed amendments be exposed for an
additional comment period expiring May 1, 2017.
NOW THE COMMISSION, having considered the comments, the
Bureau's Response to Comments and recommendations, and the proposed amendments
to the Rules, is of the opinion that interested persons should have an
opportunity to comment on the revised proposed Rules by May 1, 2017.
Accordingly, IT IS ORDERED THAT:
(1) The revised proposed Rules, which amend the Rules at 14
VAC 5-400-10 through 14 VAC 5-400-80, and add new Rules at 14 VAC 5-400-25 and
14 VAC 5-400-90 through 14 VAC 5-400-110, are attached hereto and made a
(2) All interested persons who desire to comment in support
of or in opposition to, or request a hearing to consider the revised proposed
Rules, shall file such comments or hearing request on or before May 1, 2017,
with Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control
Center, P.O. Box 2118, Richmond, Virginia 23218. Interested persons
desiring to submit comments electronically may do so by following the
instructions at the Commission's website: http://www.scc.virginia.gov/case. All
comments shall refer to Case No. INS-2016-00265.
(3) If no written request for a hearing on the revised
proposed Rules is received on or before May 1, 2017, the Commission, upon
consideration of any comments submitted in support of or in opposition to the
revised proposed Rules, may adopt the revised Rules as proposed by the Bureau.
(4) The Bureau forthwith shall provide notice of the revised
proposed Rules to all insurers licensed by the Commission to operate in the
Commonwealth of Virginia, except for insurers licensed exclusively to write
workers' compensation insurance, title insurance, or fidelity and surety
insurance, as well as all interested persons.
(5) The Commission's Division of Information Resources
forthwith shall cause a copy of this Order, together with the proposal to amend
the Rules, to be forwarded to the Virginia Registrar of Regulations for
appropriate publication in the Virginia Register of Regulations.
(6) The Commission's Division of Information Resources shall
make available this Order and the attached proposed amendment to the Rules on
the Commission's website: http://www.scc.virginia.gov/case.
(7) The Bureau shall file with the Clerk of the Commission an
affidavit of compliance with the notice requirements of Ordering Paragraph (4)
(8) This matter is continued.
AN ATTESTED COPY hereof shall be sent by the Clerk of the
Commission to: Kiva B. Pierce, Assistant Attorney General, Division of Consumer
Counsel, Office of the Attorney General, 202 N 9th Street, 8th Floor, Richmond,
Virginia 23219-3424; and a copy hereof shall be delivered to the Commission's
Office of General Counsel and the Bureau of Insurance in care of Deputy
Commissioner Althelia P. Battle and Deputy Commissioner Rebecca Nichols.
Scope Purpose and scope.
This The purpose of this chapter defines
certain is to set forth minimum standards which, if violated with
such frequency as to indicate a general business practice, will be deemed to
constitute unfair claim settlement practices for the acknowledgment,
investigation, and disposition of claims arising under insurance policies
issued pursuant to the laws of the Commonwealth of Virginia. This chapter
applies to all persons as hereinafter defined in 14VAC5-400-20
and to all insurance policies and insurance contracts except policies of
workers' compensation insurance, title insurance, and fidelity and
surety insurance and contracts or plans for future hospitalization, medical,
surgical, dental, optometric or legal services. This chapter is not
exclusive, and other acts, not herein specified, may also be deemed to be a
violation of the Unfair Trade Practices Act (§ 38.2-500 et seq. of the Code of
definition of "person" contained in §
38.2-501 of the Code of Virginia shall apply to this chapter and, in addition,
where used in this chapter following words and terms when used in this
chapter shall have the following meanings unless the context clearly indicates
"Agent" means any
association, partnership or other legal entity person authorized to
represent an insurer with respect to a claim ;.
"Claim" means a demand for payment by a claimant
and does not mean an inquiry concerning coverage
either a first party
claimant, a third party claimant, or both, and includes such claimant's a
designated legal representative and includes a member of the claimant's
immediate family, or any other representative designated by the
"Commission" means the State Corporation Commission
of the Commonwealth of Virginia;.
"Documentation" includes all pertinent
communications, including electronic communications and transactions, data,
notes, work papers, claim forms, bills, and explanation of benefits forms
relative to the claim.
"Estimate" means a written statement of the cost
of repairs to an automobile or to property, including any supplements.
"Explanation of benefits" means any form
provided by any insurer that explains the amounts covered under a policy or
plan and shows the amounts payable by a covered person to a health care
"First party claimant" means an
corporation, association, partnership or other legal entity asserting insured,
a beneficiary, a policy owner, or an annuitant who asserts a right to
payment under an insurance policy or insurance contract issued to such
individual, corporation, association, partnership or other legal entity
arising out of the occurrence of the contingency or loss covered by such policy
"Insured" means a person covered by an insurance
policy [ with legal rights to the benefits provided by the
"Insurer" means a person licensed to issue or
that issues any insurance policy or insurance contract in this
Commonwealth and [ or any third party acting on its
behalf ]. Insurer shall also include surplus lines
"Investigation" means all activities of an insurer
or indirectly related to the determination of liability and extent of loss
under coverages afforded by an insurance policy or insurance contract; used
to make a determination that the claim should be paid, denied, or closed.
"Notification of claim" means any notification,
whether in writing or other means acceptable under the terms of the insurance
policy or insurance contract, to an insurer or its agent, by a claimant, which
reasonably apprises the insurer of the facts pertinent to a claim;
"Person" has the same meaning as defined in §
38.2-501 of the Code of Virginia.
"Policy" means insurance policy, contract,
certificate of insurance, evidence of coverage, or annuity.
"Proof of loss" means all necessary
documentation reasonably required by the insurer to make a determination of
benefit or coverage.
"Provider" means any person providing
health care ] services [ pursuant to
any accident and sickness policy ].
"Third party claimant" means any
corporation, association, partnership or other legal entity person
asserting a claim against any individual, corporation, association,
partnership or other legal entity an insured or a provider filing
a claim on behalf of an insured under an insurance policy or insurance
contract of an insurer;.
"Workers' Compensation insurance" includes, but
is not limited to, Longshoremen's and Harbor Workers' Compensation.
14VAC5-400-25. Compliance standards.
It shall be a violation of this chapter if any person:
1. Willfully violates any provision of this chapter; or
2. Commits a violation of any provision of this chapter
with such frequency as to indicate a general business practice.
14VAC5-400-30. File and record documentation.
The A. An insurer's claim files shall be
subject to examination by the Commission or by its duly appointed designees
commission. Such files shall contain all notes and work papers
pertaining to the claim in such detail that pertinent events and the dates of
such events can be reconstructed.
B. An insurer shall maintain [
claim data so that it is accessible and retrievable for examination. Claim
data includes the claim number, line of coverage, date of loss and date
received, as well as date of payment of the claim, date of denial, or date
closed without payment.
C. Detailed documentation shall be maintained for each
claim file in order to permit reconstruction of all transactions relating to
D. Each document within the claim file shall be noted as
to date received, date processed, or date mailed.
E. All data and documentation shall be maintained for all
open and closed files for the current year and, at a minimum, the three
preceding calendar years.
14VAC5-400-40. Misrepresentation of policy provisions.
person shall knowingly obscure or conceal from first
party claimants, either directly or by omission, benefits, coverages or other
provisions of any insurance policy or insurance contract when such insurer
shall fail to fully disclose to a first party claimant all pertinent
benefits, coverages, or other provisions are pertinent to a claim
of an insurance policy under which a claim is presented and document the
claim file accordingly.
B. No person shall misrepresent benefits, coverages, or
other provisions of any insurance policy when such benefits, coverages, or
other provisions are pertinent to a claim.
C. No insurer shall deny a claim for failure of a first
party claimant to submit to physical examination or for failure of
the first party claimant to exhibit the property which is the
subject of the claim without proof of demand by such insurer and unfounded
refusal by a claimant to do so unless there is documentation of breach
of the policy provisions in the claim file.
C. D. No insurer shall , except where there
is a time limit specified in the policy, make statements, written or otherwise,
requiring a deny a claim based on the failure of a claimant to give
written notice of loss or proof of loss within a specified time limit and
which seek to relieve the company of its obligations if such a time limit is
not complied with [ required by the or give notice of
loss within a specified period of time unless either or both requirements are ]
policy [ provisions conditions. An insurer shall
not be relieved of its obligations under the policy ] unless the
failure [ of a claimant ] to [ comply with give
either written notice of loss or meet time limit requirements for notice ]
such time limit in fact [ the notice requirements ]
prejudices the insurer's rights [ in accordance with the policy ].
D. E. No insurer shall [ request a first
party claimant to sign a release that extends beyond the subject matter that
gave rise to the claim ] payment [ . An insurer shall not ]
include with any payment or in any accompanying correspondence [ an
indication ] that payment is "final" or "a
release" of any claim unless the policy limit has been paid or a
compromise settlement has been agreed to by the [ first party ]
E. F. No insurer shall issue checks or
drafts a payment in partial settlement of a loss or claim under
for a specific coverage which contain that contains
language that purports purporting to release the insurer or its
insured [ the first party claimant its insured ]
from its total liability.
Failure to acknowledge Acknowledgment
of pertinent communications.
Every An insurer, upon receiving
notification of a claim shall, within [ 10 15 ] working
calendar days, acknowledge the receipt of such notice to the
[ first party ] claimant unless payment is made
within such period of time [ . Acknowledgment may be sent to a
provider claimant, except that if a provider submits a claim,
acknowledgment of the claim is satisfied if payment or denial of the claim is
made to the provider within 21 calendar days ]. If an acknowledgement
acknowledgment is made by means other than writing, an appropriate
notation of such acknowledgement acknowledgment shall be made in
the claim file of the insurer and dated. Notification given by a claimant to an
agent of an insurer shall be notification to the insurer.
Every insurer, upon Upon receipt of any
inquiry from the Commission commission respecting a claim, an
insurer shall , within 15 working days of receipt of such inquiry,
furnish an adequate a complete response to the inquiry within
[ 14 15 ] calendar days of receipt.
C. An appropriate reply shall be made within [
15 ] working calendar days on all other pertinent
communications from a claimant which that reasonably suggest that
a response is expected.
Every insurer, upon Upon receiving
notification of a first party claim, an insurer shall promptly
provide necessary claim forms, instructions, and reasonable assistance so
that first party claimants can [ , including language translations, ]
in order for the claimant to comply with the policy conditions and the
insurer's reasonable requirements ; provided, however, every insurer, upon
receiving notification of a third party claim, shall promptly provide the third
party claimant with all necessary claim forms. Compliance with this subdivision
subsection within [ 10 15 ] working calendar
days of notification of a claim shall constitute compliance with subsection A
of this section.
14VAC5-400-60. Standards for prompt investigation of claims.
Unless otherwise specified in the policy, within 15
working Within [ 10 15 ] calendar
days after receipt by the insurer of [ any required properly
executed ] proofs proof of loss, a first party claimant
shall be advised of the acceptance or denial of the claim by the insurer. If
the insurer needs more time to determine whether a first party claim
should be accepted or denied, it shall notify the first party claimant within
[ 15 ] working [ 10 ] calendar
days after receipt of the proofs proof of loss giving the reasons
more time is needed.
Unless otherwise specified in the policy, if If
an investigation of a first party claim has not been completed, every an
insurer shall, within 45 calendar days from the date of the notification
of a first party claim and every 45 calendar days thereafter, send to
the first party claimant a letter written notice setting forth
the reasons additional time is needed for investigation.
Standards for prompt, fair and equitable
settlement of claims Claims settlement standards applicable to all
A. Any denial of a claim
must [ , including
a partial denial, ] shall be given to a claimant in writing
and the claim file of the insurer shall contain a copy of the denial.
No An insurer shall deny a claim unless
provide a reasonable written explanation of the basis for such
any claim denial is included in the written denial. Specific
The written explanation shall provide a specific reference to a policy
provision, condition, or exclusion shall be made when a denial is
based on such provision, condition or exclusion [ , if any ].
Insurers An insurer shall not fail to
settle first party claims deny a [ first party ] claim
on the basis that responsibility for payment should be assumed by others except
as may otherwise be provided by policy provisions.
D. In any case where there is no dispute as to coverage or
every an insurer must shall offer to a
first party claimant , or to a first party claimant's authorized
representative, an amount which that is fair and reasonable
as shown by the investigation of the claim, provided the amount so offered is
within policy limits and in accordance with policy provisions.
E. An insurer shall not unreasonably refuse to pay any
claim in accordance with the provisions of the policy.
F. An insurer shall not compel a first party
claimant to institute a suit to recover amounts due under the policy by
offering substantially less than the amounts ultimately recovered in a suit
brought by the first party claimant. ]
Standards for prompt, fair and equitable
settlements Claims settlement standards applicable to automobile
A. Where liability is reasonably clear,
insurer shall not recommend that a third party claimants claimant
make claims a claim under their its own policies
policy solely to avoid paying claims a claim under such
insurer's insurance the insured's policy or insurance contract.
Insurers An insurer shall not require a
claimant to travel unreasonably either to inspect a replacement automobile, to
obtain a repair estimate, or to have the automobile repaired at a
specific repair shop.
Insurers An insurer shall , upon the
claimant's request, include the first party claimant's insured's
deductible, if any, in subrogation demands. Subrogation recoveries shall be
shared on a proportionate basis with the first party claimant insured,
unless the deductible amount has been otherwise recovered. No deduction for expenses
can be made from the deductible recovery unless an outside attorney is retained
to collect such recovery. The deduction may then be for only a pro rata share
of the allocated loss adjustment expense.
If When an insurer prepares an estimate of the
cost of automobile repairs, such the estimate shall be in
an amount for which it may be reasonably expected the damage
[ can may reasonably be expected to ] be
satisfactorily repaired. The insurer shall give a copy of the estimate to the
claimant and may furnish to the claimant the names of one or more conveniently
located qualified repair shops. [ A total loss valuation shall be
provided to the claimant upon request. ]
E. When the amount claimed is reduced because of betterment
or depreciation, all information for such reduction shall be contained in the
claim file. Such deductions shall be itemized and specified as to dollar amount
and shall be appropriate for the amount of deductions.
F. When an insurer elects to repair and the automobile is
fact repaired in a repair shop selected by the insurer or designated
by the insurer as a repair shop that will repair the automobile for the amount
offered by the insurer, the insurer shall cause the damaged automobile to be
restored to its condition prior to the loss at no additional cost to the
claimant other than as stated in the policy and within a reasonable period of
G. An insurer shall provide reasonable notice to a
claimant prior to termination of payment for automobile storage charges. The
insurer shall provide reasonable time for the claimant to remove the automobile
from storage prior to the termination of payment.
Unless H. If towing is a result of a
covered loss, unless ] the insurer has provided a claimant with the
[ name names ] of [ a ]
specific towing [ company companies ] prior
to the claimant's use of another towing company, the insurer shall pay all
reasonable towing charges irrespective of the towing company used by the
H. I. ] Prior to
termination of payment for transportation or rental reimbursement expenses, the
insurer shall provide reasonable time for the claimant to receive payment for
automobile repairs [ or replacement ]. In the
event of a total loss, the insurer shall provide reasonable time for a claimant
to [ acquire receive payment for ] a
14VAC5-400-90. Claims settlement standards applicable to
When an insurer prepares an estimate of the cost of
repairs to property, the estimate shall be an amount for which the damage can
be satisfactorily repaired. The insurer shall give a copy of the estimate to
14VAC5-400-100. Claims settlement standards applicable to
accident and sickness insurance, life insurance, and annuities.
An A life or annuity ]
insurer shall review any notice of claim or proof of loss submitted against
one policy to determine if such notice of claim or proof of loss may fulfill
the insured's obligation under any other policy issued by that insurer.
B. For accident and sickness claims, an insurer shall
provide to a first party claimant an explanation of benefits describing the
coverage for which the claim is paid or denied within [
15 ] calendar days of receipt of proof of loss, unless otherwise
specified in the policy.
[ C. ] An insurer shall [
an explanation of benefits for make available a summary of ]
prescription drug claims [ that may be provided in the
aggregate no less frequently than quarterly electronically or
provide a written summary at the request of the insured. A summary of
prescription drugs shall describe the amounts covered under the policy, amounts
denied, and amounts payable by the insured and insurer ].
C. D. ] An insurer shall
not arbitrarily or unreasonably deny or delay payment of a claim in which
liability has become reasonably clear.
If any provision of this chapter or its application to any
person or circumstance is for any reason held to be invalid by a court, the
remainder of this chapter and the application of the provisions to other
persons or circumstances shall not be affected.
VA.R. Doc. No. R17-4967; Filed March 20, 2017, 1:53 p.m.