2012 -- H 7782 SUBSTITUTE A

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LC01801/SUB A

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO INSURANCE - UNFAIR COMPETITION AND PRACTICES

     Introduced By: Representatives Ucci, Winfield, and O`Neill

     Date Introduced: February 28, 2012

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 27-29-4 of the General Laws in Chapter 27-29 entitled "Unfair

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Competition and Practices" is hereby amended to read as follows:

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     27-29-4. Unfair methods of competition and unfair or deceptive acts or practices

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defined. -- The following are defined as unfair methods of competition and unfair and deceptive

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acts or practices in the business of insurance:

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      (1) Misrepresentations and false advertising of policies or contracts. - Making, issuing,

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circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, or

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statement, sales presentation, omission, or comparison misrepresenting the terms of any policy

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issued or to be issued or the benefits, conditions, or advantages promised by any policy or the

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dividends or share of the surplus to be received on any policy, or making any false or misleading

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statement as to the dividends or share of surplus previously paid on any policy, or making any

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misleading representation or any misrepresentation as to the financial condition of any insurer, or

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as to the legal reserve system upon which any life insurer operates, or using any name or title of

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any policy or class of policies misrepresenting the true nature of that policy or class of policies, or

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making any misrepresentation to any policyholder insured in any company including any

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intentional misquote of a premium rate, for the purpose of inducing or tending to induce the

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policyholder to lapse, forfeit, or surrender his or her insurance, or misrepresenting for the purpose

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of effecting a pledge or assignment of or effecting a loan against any policy, or misrepresenting

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any policy as being share or stock;

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      (2) False information and advertising generally. - Making, publishing, disseminating,

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circulating, or placing before the public or causing, directly or indirectly, to be made, published,

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disseminated, circulated, or placed before the public in a newspaper, magazine, or other

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publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or

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television station, or in any other way, an advertisement, announcement, or statement containing

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any assertion, representation, or statement with respect to the business of insurance or with

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respect to any person in the conduct of his or her insurance business which is untrue, deceptive,

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or misleading;

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      (3) Defamation. - Making, publishing, disseminating, or circulating, directly or

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indirectly, or aiding, abetting, or encouraging the making, publishing, disseminating, or

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circulating of any oral or written statement or any pamphlet, circular, article of literature which is

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false or maliciously critical of or derogatory to the financial condition of an insurer, and which is

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calculated to injure any person engaged in the business of insurance;

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      (4) Boycott, coercion, and intimidation. - Entering into any agreement to commit, or by

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any concerted action committing, any act of boycott, coercion, or intimidation resulting in or

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tending to result in unreasonable restraint of, or monopoly in, the business of insurance;

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      (5) (i) False financial statements. - Knowingly filing with any supervisory or other public

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official, or knowingly making, publishing, disseminating, circulating, or delivering to any person,

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or placing before the public or causing directly or indirectly, to be made, published, disseminated,

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circulated, delivered to any person, or placed before the public any false material statement of

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financial condition of an insurer; or

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      (ii) Knowingly making any false entry of a material fact in any book, report, or statement

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of any insurer or knowingly omitting to make a true entry of any material fact pertaining to the

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business of the insurer in any book, report, or statement of the insurer;

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      (6) Stock operations and advisory board contracts. - Issuing or delivering or permitting

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agents, officers, or employees to issue or deliver agency company stock or other capital stock, or

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benefit certificates or shares in any common law corporation, or securities of any special or

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advisory board contracts or other contracts of any kind promising returns and profits as an

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inducement to insurance;

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      (7) (i) Unfair discrimination. - Making or permitting any unfair discrimination between

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individuals of the same class and equal expectation of life in the rates charged for any policy of

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life insurance or of life annuity or in the dividends or other benefits payable on any such policy or

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life annuity, or in any other of the terms and conditions of the policy; or

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      (ii) Making or permitting any unfair discrimination between individuals of the same

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class and of essentially the same hazard in the amount of premium, policy fees, or rates charged

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for any policy or contract of accident or health insurance or in the benefits payable under any

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policy or contract, or in any of the terms or conditions of that policy, or in any other manner;

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      (iii) Making or permitting any unfair discrimination between individuals or risks of the

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same class and of essentially the same hazards by refusing to issue, refusing to renew, canceling,

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or limiting the amount of insurance coverage on a property or casualty risk because of the

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geographic location of the risk, unless:

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      (A) The refusal, cancellation, or limitation is for a business purpose that is not a pretext

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for unfair discrimination; or

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      (B) The refusal, cancellation, or limitation is required by law or regulation;

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      (iv) Making or permitting any unfair discrimination between individuals or risks of the

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same class and of essentially the same hazards by refusing to issue, refusing to renew, canceling,

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or limiting the amount of insurance coverage on a residential property risk, or the personal

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property contained in the residential property risk, because of the age of the residential property,

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unless:

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      (A) The refusal, cancellation, or limitation is for a business purpose that is not a pretext

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for unfair discrimination; or

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      (B) The refusal, cancellation, or limitation is required by law or regulation;

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      (v) Refusing to insure, refusing to continue to insure, or limiting the amount of coverage

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available to an individual because of the sex or marital status of the individual; nothing in this

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subsection shall prohibit an insurer from taking marital status into account for the purpose of

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defining persons eligible for dependent benefits; or

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      (vi) To terminate, or to modify coverage, or to refuse to issue or refuse to renew any

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property or casualty policy solely because the applicant or insured or any employee of either is

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mentally or physically impaired; provided, that this subsection shall not apply to accident and

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health insurance sold by a casualty insurer and, provided that this subsection shall not be

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interpreted to modify any other provision of law relating to the termination, modification,

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issuance or renewal of any insurance policy or contract;

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      (8) (i) Rebates. - Except as otherwise expressly provided by law, knowingly permitting

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or offering to make or making any policy or agreement as to the policy other than as plainly

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expressed in the policy issued on it, or paying or allowing or giving or offering to pay, allow, or

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give, directly or indirectly, as inducement to the policy, any rebate of premiums payable on the

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policy, or any special favor or advantage in the dividends or other benefits on the policy, or any

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valuable consideration or inducement not specified in the policy, or giving, selling, or purchasing

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or offering to give, sell, or purchase as inducement to the policy, or in connection with the policy,

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any stocks, bonds, or other securities of any insurance company or other corporation, association,

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or partnership, or any dividends or profits accrued on the security, or anything of value not

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specified in the policy;

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      (ii) Nothing in subdivision (7) of this section or paragraph (i) of this subdivision shall be

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construed as including within the definition of discrimination or rebates any of the following

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practices:

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      (A) In the case of any contract of life insurance policies or life annuity, annuities paying

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bonuses to policyholders or abating their premiums in whole or in part out of surplus accumulated

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from nonparticipating insurance; provided, that any bonuses or abatement of premiums shall be

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fair and equitable to policyholders and for the best interests of the company and its policyholders;

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      (B) In the case of life insurance policies issued on the industrial debit plan, making

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allowance to policyholders who have continuously for a specified period made premium

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payments directly to an office of the insurer in an amount which fairly represents the saving in

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collection expenses; and

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      (C) Readjustment of the rate of premium for a group insurance policy based on the loss

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or expense experience under it, at the end of the first or any subsequent policy year of insurance

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under the policy, which may be made retroactive only for the policy year;

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      (9) (i) Free choice of insurance producer or insurer. - When any person, firm, or

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corporation engaged in the business of lending money on the security of real or personal property,

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or in the business of negotiating, purchasing, selling, or holding loans on the security of real

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property, or in the business of building, selling, or financing the sale or purchase of real property,

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or any trustee, director, officer, agent, or other employee of that person, firm, or corporation,

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requires that property insurance be procured for the property, the borrower, debtor, or purchaser

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shall have free choice of insurance producer and insurer through or by which the insurance is to

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be placed or written, subject only to the right of the builder, creditor, lender, or seller:

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      (A) To require evidence, to be produced at a reasonable time prior to commencement or

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renewal of risk, that the insurance providing reasonable coverage has been obtained in an amount

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equal to the amount required by the builder, creditor, lender, or seller;

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      (B) To require insurance in an insurer authorized to do business and having a licensed

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resident insurance producer agent in this state; and

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      (C) To refuse to accept insurance in a particular insurer on reasonable grounds related to

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solvency;

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      (ii) When any contractor or subcontractor is required to procure a surety bond or policy

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of insurance with respect to any building or construction contract which is about to be, or which

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has been bid or entered into, the contractor or subcontractor shall have free choice of insurance

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producer and insurer through or by which the surety bond or insurance is to be written; provided,

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that the owner or contractor shall have the right: (A) to require evidence, to be produced at a

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reasonable time prior to commencement or renewal of risk, that the insurance providing

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reasonable coverage has been obtained in an amount equal to the amount required by the builder,

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creditor, lender, or seller; (B) to require insurance in an insurer authorized to do business and

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having a licensed resident insurance producer in this state; and (C) to refuse to accept insurance in

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a particular insurer on reasonable grounds related to solvency; provided, that the owner or

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contractor shall have the right to approve the form, sufficiency, or manner of execution of the

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surety bond or policy or insurance furnished by the insurance company or insurance producer

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selected by the contractor or subcontractor;

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      (iii) No person who lends money or extends credit may:

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      (A) Solicit insurance for the protection of real property after a person indicates interest in

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securing a first mortgage credit extension until that person has received a commitment in writing

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from the lender as to a loan or credit extension;

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      (B) Unreasonably reject a policy furnished by the borrower for the protection of the

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property securing the creditor lien. A rejection shall not be deemed unreasonable if it is based on

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reasonable standards, uniformly applied, relating to the extent of coverage required and the

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financial soundness and the services of an insurer. The standards shall not discriminate against

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any particular type of insurer, nor shall the standards call for rejection of a policy because it

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contains coverage in addition to that required in the credit transaction;

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      (C) Require that any borrower, mortgagor, purchaser, insurer, or insurance producer pay

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a separate charge, in connection with the handling of any policy required as security for a loan on

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real estate, or pay a separate charge to substitute the policy of one insurer for that of another. This

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subsection does not include the interest that may be charged on premium loans or premium

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advancements in accordance with the terms of the loan or credit document;

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      (D) Use or disclose, without the prior written consent of the borrower, mortgagor, or

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purchaser taken at a time other than the making of the loan or extension of credit, information

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relative to a policy which is required by the credit transaction, for the purpose of replacing the

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insurance; or

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      (E) Require any procedures or conditions of duly licensed insurance producers or

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insurers not customarily required of those insurance producers or insurers affiliated or in any way

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connected with the person who lends money or extends credit;

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      (iv) Every person who lends money or extends credit and who solicits insurance on real

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and personal property subject to paragraph (iii) of this subdivision shall explain to the borrower in

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writing that the insurance related to the credit extension may be purchased from an insurer or

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insurance producer of the borrower's choice, subject only to the lender's right to reject a given

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insurer or insurance producer as provided in paragraph (iii)(B) of this subdivision. Compliance

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with disclosures as to insurance required by truth in lending laws or comparable state laws shall

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be compliance with this subsection;

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      (v) This requirement for a commitment shall not apply in cases where the premium for

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the required insurance is to be financed as part of the loan or extension of credit involving

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personal property transactions;

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      (vi) The commissioner shall have the power to examine and investigate those insurance

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related activities of any person or insurer that the commissioner believes may be in violation of

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this section. Any affected person may submit to the commissioner a complaint or material

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pertinent to the enforcement of this section;

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      (vii) Nothing in this section shall prevent a person who lends money or extends credit

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from placing insurance on real or personal property in the event the mortgagor, borrower, or

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purchaser has failed to provide required insurance in accordance with the terms of the loan or

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credit document;

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      (viii) Nothing contained in this section shall apply to credit life or credit accident and

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health insurance.

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      (10) Notice of free choice of insurance producer or insurer. - Every debtor, borrower, or

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purchaser of property with respect to which insurance of any kind on the property is required in

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connection with a debt or loan secured by the property or in connection with the sale of the

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property, shall be informed in writing by the builder, creditor, lender, or seller, of his or her right

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of free choice in the selection of the insurance producer and insurer through or by which the

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insurance is to be placed. There shall be no interference, either directly or indirectly, with the

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borrower's, debtor's, or purchaser's free choice of an insurance procedure and of an insurer which

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complies with the requirements of this section, and the builder, creditor, lender, seller, owner, or

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contractor shall not refuse the policy tendered by the borrower, debtor, purchaser, contractor, or

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subcontractor. Upon notice of any refusal of the tendered policy, the insurance commissioner

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shall order the builder, creditor, lender, seller, owner, or contractor to accept the tendered policy,

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if the commissioner determines that the refusal is not in accordance with the requirements of this

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section. Failure to comply with an order of the insurance commissioner shall be deemed a

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violation of this section;

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      (11) Using insurance information to detriment of another. - Whenever the instrument

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requires that the purchaser, mortgagor, or borrower furnish insurance of any kind on real property

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being conveyed or is collateral security to a loan, the mortgagee, vendor, or lender shall refrain

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from disclosing or using any and all insurance information to his or her or its own advantage and

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to the detriment of either the borrower, purchaser, mortgagor, insurance company, or agency

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complying with the requirements relating to insurance;

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      (12) Prohibited group enrollments. - No insurer shall offer more than one group policy of

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insurance through any person unless that person is licensed, at a minimum, as an insurance

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producer. This prohibition shall not apply to employer-employee relationships, or to any of these

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enrollments;

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      (13) Failure to maintain complaint handling procedures. - No insurer shall fail to

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maintain a complete record of all the complaints it received since the date of its last examination

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pursuant to the general laws providing for examination of insurers. This record shall indicate the

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total number of complaints, their classification by line of insurance, the nature of each complaint,

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the disposition of each complaint, and the time it took to process each complaint. For the

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purposes of this subsection, "complaint" means any written communication primarily expressing

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a grievance;

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      (14) Misrepresentation in insurance applications. - Making false or fraudulent statements

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or representations on or relative to an application for a policy, for the purpose of obtaining a fee,

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commission, money, or other benefit from any insurers, insurance producer, or individual person;

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and

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      (15) Requiring that repairs be made to an automobile at a specified auto body repair shop

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or interfering with the insured's or claimant's free choice of repair facility. - The insured or

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claimant shall be promptly informed by the insurer of his or her free choice in the selection of an

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auto body repair shop. Once the insured or claimant has advised the insurer that an auto body

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repair shop has been selected, the insurer may not recommend that a different auto body repair

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shop be selected to repair the automobile. An auto body repair shop may file a complaint with the

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department of business regulation alleging a violation of this subdivision (15). Whenever the

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department of business regulation has reason to believe that an insurer has violated this

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subdivision (15), the department shall conduct an investigation and may convene a hearing. A

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complaint filed by an auto body repair shop must be accompanied by a statement written and

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signed by the insured or claimant setting forth the factual basis of the complaint, and the insured

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or claimant must voluntarily appear and testify at any administrative proceedings on the

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complaint.

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     SECTION 2. Section 27-9.1-4 of the General Laws in Chapter 27-9.1 entitled "Unfair

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Claims Settlement Practices Act" is hereby amended to read as follows:

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     27-9.1-4. "Unfair claims practices" defined. -- (a) Any of the following acts by an

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insurer, if committed in violation of section 27-9.1-3, constitutes an unfair claims practice:

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      (1) Misrepresenting to claimants and insured relevant facts or policy provisions relating

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to coverage at issue;

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      (2) Failing to acknowledge and act with reasonable promptness upon pertinent

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communications with respect to claims arising under its policies;

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      (3) Failing to adopt and implement reasonable standards for the prompt investigation and

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settlement of claims arising under its policies;

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      (4) Not attempting in good faith to effectuate prompt, fair, and equitable settlement of

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claims submitted in which liability has become reasonably clear;

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      (5) Compelling insured, beneficiaries, or claimants to institute suits to recover amounts

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due under its policies by offering substantially less than the amounts ultimately recovered in suits

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brought by them;

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      (6) Refusing to pay claims without conducting a reasonable investigation;

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      (7) Failing to affirm or deny coverage of claims within a reasonable time after having

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completed its investigation related to the claim or claims;

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      (8) Attempting to settle or settling claims for less than the amount that a reasonable

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person would believe the insured or beneficiary was entitled by reference to written or printed

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advertising material accompanying or made part of an application;

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      (9) Attempting to settle or settling claims on the basis of an application that was

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materially altered without notice to, or knowledge or consent of, the insured;

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      (10) Making claims payments to an insured or beneficiary without indicating the

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coverage under which each payment is being made;

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      (11) Unreasonably delaying the investigation or payment of claims by requiring both a

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formal proof of loss form and subsequent verification that would result in duplication of

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information and verification appearing in the formal proof of loss form;

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      (12) Failing in the case of claims denials or offers of compromise settlement to promptly

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provide a reasonable and accurate explanation of the basis of those actions;

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      (13) Failing to provide forms necessary to present claims within ten (10) calendar days

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of a request with reasonable explanations regarding their use;

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      (14) Failing to adopt and implement reasonable standards to assure that the repairs of a

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repairer owned by or required to be used by the insurer are performed in a workmanlike manner;

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      (15) Misleading a claimant as to the applicable statute of limitations;

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      (16) Failing to respond to a claim within thirty (30) days, unless the insured shall agree

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to a longer period;

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      (17) Engaging in any act or practice of intimidation, coercion, threat or

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misrepresentation of consumers rights, for or against any insured person, claimant, or entity to

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use a particular rental car company for motor vehicle replacement services or products; provided,

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however, nothing shall prohibit any insurance company, agent or adjuster from providing to such

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insured person, claimant or entity the names of a rental car company with which arrangements

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have been made with respect to motor vehicle replacement services; provided, that the rental car

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company is licensed pursuant to Rhode Island general laws section 31-5-33; or

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      (18) Refusing to honor a "direction to pay" executed by an insured, claimant, indicating

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that the insured or claimant, wishes to have the insurance company directly pay his or her motor

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vehicle replacement vehicle rental benefit to the rental car company of the consumer's choice;

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provided, that the rental car company is licensed pursuant to Rhode Island general laws section

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31-5-33. Nothing in this section shall be construed to prevent the insurance company's ability to

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question or challenge the amount charged, in accordance with its policy provisions, and the

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requirements of the department of business regulation;

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      (19) Modifying any published manual (i.e. motors, mitchells, or any automated appraisal

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system) relating to auto body repair without prior agreement between the parties;

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      (20) Failing to use a manual or system in its entirety in the appraisal of a motor vehicle;

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      (21) Refusing to compensate an auto body shop for documented charges as identified

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through industry recognized software programs or systems for paint and refinishing materials in

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auto body repair claims; and/or

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      (22) Failing to comply with the requirements of Rhode Island General Laws section 31-

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47-12.1.

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      (23) Failure to have an appraisal performed by a licensed appraiser where the motor

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vehicle has sustained damage estimated to exceed two thousand five hundred dollars ($2,500).

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Said licensed appraiser referred to herein must be unaffiliated with the repair facility repairing the

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subject motor vehicle.

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      (24) Failure to perform a supplemental appraisal inspection of a vehicle within four (4)

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business days after a request is received from an auto body repair shop.

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      (b) (1) Nothing contained in subsections 27-9.1-4(a)(19), (20), & (21) of this chapter

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shall be construed to interfere with an auto body repair facility's contract with an insurance

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company.

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      (2) If an insurance company and auto body repair facility have contracted under a direct

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repair program or any similar program thereto the provisions of subsections 27-9.1-4(a)(19), (20)

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& (21) shall not apply.

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      (3) If the insured or claimant elects to have the vehicle repaired at a shop of his or her

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choice, the insurer shall not limit or discount the reasonable repair costs based upon the charges

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that would have been incurred had the vehicle been repaired by the insurer's chosen shop(s).

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     SECTION 3. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

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by adding thereto the following chapter:

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     CHAPTER 10.4

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MOTOR VEHICLE PROPERTY DAMAGE CLAIMS SETTLEMENT ACT

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     27-10.4-1. Purpose of chapter. -- The general assembly declares that it is concerned

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with ensuring fair claims settlement practices with regard to motor vehicle property damage

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claims. The purpose of this chapter is to set forth standards for the disposition of such claims as it

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relates to vehicles that are to be repaired in auto body repair shops in the state of Rhode Island.

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     The director of the department of business regulation shall promulgate rules and

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regulations not inconsistent with purpose of this chapter.

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     27-10.4-2. Definitions. – (1) “Automobile body shop” referred to as “auto body shop”,

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means and includes any establishment, garage, or work area enclosed within a building where

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repairs are made or caused to be made to motor vehicle bodies, including fenders, bumpers,

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chassis and similar components of motor vehicle bodies as distinguished from the seats, motor,

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transmission, and other accessories for propulsion and general running gear of motor vehicles,

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except as provided in section 5-38-20;

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     (2) “Claimant” means a person, other than the insured, who claims that the insured is

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legally liable to them for damages resulting from an act, occurrence or other covered event as a

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result of which the insured’s policy may be obligated to provide coverage;

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     (3) “Insured” means the party named on a policy or certificate as the individual(s) with

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legal rights to the benefits provided by the policy;

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     (4) “Insurer” means any person, reciprocal exchange, interinsurer, Lloyds insurer,

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fraternal benefit society, and any other legal entity engaged in the business of insurance,

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including agents, brokers, insurance producers, adjusters and third-party administrators. For the

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purposes of this chapter, the entities in this subdivision shall be deemed to be engaged in the

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business of insurance and subject to this chapter;

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     (5) “Motor Vehicle” means any automobile, truck, or other self-propelled vehicle of any

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type; and

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     (6) “Person” means any natural or artificial entity including, but not limited to,

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individuals, partnerships, associations, trusts or corporations, or limited liability corporations.

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     27-10.4-3. Rental vehicles. – It is an improper claim settlement practice for any

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domestic, or foreign insurer transacting business in this state, or any employee or agent of the

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insurer to:

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     (1) Engage in any act or practice of intimidation, coercion, threat or misrepresentation of

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consumers’ rights, for or against any insured person, claimant, or entity to use a particular rental

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car company for motor vehicle replacement services or products; provided, however, nothing

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shall prohibit any insurance company, agent or adjuster from providing to such insured person,

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claimant or entity the names of a rental car company with which arrangements have been made

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with respect to motor vehicle replacement services; provided, that the rental car company is

11-215

licensed pursuant to Rhode Island general laws section 31-5-33: or

11-216

     (2) Refuse to honor a “direction to pay” executed by an insured, claimant, indicating that

11-217

the insured or claimant, wishes to have the insurance company directly pay his or her motor

11-218

vehicle replacement vehicle rental benefit to the rental car company of the consumer’s choice;

11-219

provided, that the rental car company is licensed pursuant to Rhode Island general laws section

11-220

31-5-33. Nothing in this section shall be construed to prevent the insurance company’s ability to

11-221

question or challenge the amount charged, in accordance with its policy provisions, and the

11-222

requirements of the department of business regulation.

11-223

     27-10.4-4. Steering prohibited. – It is an improper claim settlement practice for any

11-224

domestic, foreign, or alien insurer transacting business in this state, or any employee or agent of

11-225

the insurer to:

11-226

     (1) Require that repairs be made to an automobile at a specified auto body repair shop or

11-227

interfering with the insured’s or claimant’s free choice of repair facility. The insured or claimant

11-228

shall be promptly informed by the insurer of his or her free choice in the selection of an auto body

11-229

repair shop. Once the insured or claimant has advised the insurer that an auto body repair shop

11-230

has been selected, the insurer may not recommend that a different auto body repair shop be

11-231

selected to repair the automobile. An auto body repair shop may file a complaint with the

11-232

department of business regulation alleging a violation of this subdivision. Whenever the

11-233

department of business regulation has reason to believe that an insurer has violated this

11-234

subsection, the department shall conduct an investigation and may convene a hearing. A

11-235

complaint filed by an auto body repair shop must be accompanied by a statement written and

11-236

signed by the insured or claimant setting forth the factual basis of the complaint, and the insured

11-237

or claimant must voluntarily appear and testify at any administrative proceedings on the

11-238

complaint.

12-1

     27-10.4-5. Procedure pages. – It is an improper claim settlement practice for any

12-2

domestic, foreign, or alien insurer transacting business in this state, or any employee or agent of

12-3

the insurer to:

12-4

     (1) Modify any published manual (i.e., Motor, Mitchell or any automotive appraisal

12-5

system) relating to auto body repair without prior agreement between the parties;

12-6

     (2) Fail to use a manual or system in its entirety in the appraisal of a motor vehic1e;

12-7

     (3) Refuse to compensate an auto body shop for documented charges as identified

12-8

through industry recognized software programs or systems for paint and refinishing materials in

12-9

auto body repair claims; and/or

12-10

     (4) Fail to comply with the requirements of section 31-47-12.1.

12-11

     (5) Nothing contained in subdivisions 27-10.4-5(1)(2), and (3) of this chapter shall be

12-12

construed to interfere with an auto body repair facility’s contract with an insurance company.

12-13

     (6) If an insurance company and auto body shop have contracted under a direct repair

12-14

program or any similar program thereto the provisions of subdivisions 27-10.4-5(1), (2), and (3)

12-15

shall not apply.

12-16

     (7) If the insured or claimant elects to have the vehicle repaired at a shop of his or her

12-17

choice, the insurer shall not limit or discount the reasonable repair costs based upon the charges

12-18

that would have been incurred had the vehicle been repaired by the insurer’s chosen shop(s).

12-19

     27-10.4-6. Total losses. – It is an improper claim settlement practice for any domestic,

12-20

foreign, or alien insurer transacting business in this state, or any employee or agent of the insurer

12-21

to:

12-22

     (1) Deem a motor vehicle a total loss if the cost to rebuild or reconstruct the motor

12-23

vehicle to its pre-accident condition is less than seventy-five percent (75%) of the “fair market

12-24

value” of the motor vehicle immediately preceding the time it was damaged.

12-25

     (2) “Fair market value” means the retail value of a motor vehicle as set forth in a current

12-26

edition of a nationally recognized compilation of retail values commonly used by the automotive

12-27

industry to establish values of motor vehicles.

12-28

     (3) Nothing herein shall be construed to require a vehicle be deemed a total loss if the

12-29

total cost to rebuild or reconstruct the motor vehicle to its pre-accident condition is greater than

12-30

seventy-five percent (75%) of the fair market value of the motor vehicle immediately preceding

12-31

the time it was damaged.

12-32

     27-10.4-7. Appraisals required. – It is an improper claim settlement practice for any

12-33

domestic, foreign, or alien insurer transacting business in this state, or any employee or agent of

12-34

the insurer to:

13-1

     (1) Fail to have an appraisal performed by a licensed appraiser where the motor vehicle

13-2

has sustained damage estimated to exceed two thousand five hundred dollars ($2,500). Said

13-3

licensed appraiser referred to herein must be unaffiliated with the repair facility repairing the

13-4

subject motor vehicle; and

13-5

     (2) Fail to perform a supplemental appraisal inspection of a vehicle within four (4)

13-6

business days after a request is received from an auto body shop.

13-7

     27-10.4-8. Agreed price for repairs to motor vehicles. – (a) When determining the

13-8

amount an insurer must pay for repair a damaged motor vehicle, every insurer, agent, and

13-9

employee must:

13-10

     (1) Negotiate in good faith with an auto body shop chosen by an insured or claimant; and

13-11

     (2) Reach an agreed price with the auto body shop chosen by the insured or claimant to

13-12

repair the vehicle to pre-accident condition. In reaching an agreed price with the chosen auto

13-13

body shop, an insurer must negotiate all aspects of the repair in good faith, including, but not

13-14

limited to, the auto body labor rate charged by the auto body shop.

13-15

     (b) If an insurer and an auto body shop do not reach an agreed price to repair the vehicle

13-16

to pre-accident condition, the insurer may not:

13-17

     (1) Delay concluding the claim and must promptly issue payment for the amount it

13-18

determined; or

13-19

     (2) Require an insured or claimant to have the repairs performed at a different auto body

13-20

shop.

13-21

     (c) If an insurer and auto body shop do not reach an agreed price, the auto body shop may

13-22

assert a civil action against the insurer, its employees and agents for all amounts in dispute and

13-23

any other damages resulting therefrom pursuant to section 27-10.4-10.

13-24

     27-10.4-9. Penalties. – For each violation of this chapter, the offending insurance

13-25

company, its employees and agents, shall be fined a sum not to exceed five thousand dollars

13-26

($5,000) by the department of business regulation.

13-27

     27-10.4-10. Private actions. – (1) Any insured or claimant, or licensed auto body repair

13-28

facility may bring an action for money damages against an insurer, its employees and agents, as a

13-29

result of the use or employment by an insurer, employee, agent, or person of a method, act or

13-30

practice declared unlawful by sections 27-10.4-3, 27-10.4-5, 27-10.4-6, and 27-10.4-8.

13-31

Notwithstanding any provisions of law to the contrary, all such actions may be brought in the

13-32

small claims, district, and superior court of the state of Rhode Island in the county in which the

13-33

insurer maintains its principal place of business. If the insurer is a foreign entity all such actions

13-34

shall be brought in the county in which the party bringing the action resides. In the case of small

14-1

claims actions brought under this section, the filing fee shall be eighty dollars ($80.00).

14-2

     (2) In any action brought under this section, in addition to the relief provided in this

14-3

section, the court may award, in its discretion, reasonable attorneys’ fees and costs, and may

14-4

provide other equitable relief that it deems necessary or proper.

14-5

     (3) Notwithstanding any provision of the public or general laws to the contrary, this

14-6

chapter shall not be construed to prevent an insured or claimant from assigning its rights to an

14-7

auto body shop for any claims arising out of the damage to its motor vehicle.

14-8

     27-10.4-11. Severability. – If any provision of this chapter or the application of the

14-9

provision to any person or circumstances shall be held invalid, the remainder of the chapter and

14-10

the application of the provision to any person or circumstances other than those as to which it is

14-11

held invalid shall not be affected by that invalidity.

14-12

     SECTION 4. This act shall take effect upon passage.

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LC01801/SUB A

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE - UNFAIR COMPETITION AND PRACTICES

***

15-1

     This act would delete the section of law which requires that an insured or claimant be

15-2

promptly informed by the insurer of his or her free choice in the selection of an auto body repair

15-3

shop and would set forth standards for the disposition of motor vehicle property damage claims

15-4

that are to be repaired in auto body shops in Rhode Island.

15-5

     This act would take effect upon passage.

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LC01801/SUB A

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