2023 -- H 5855

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LC001988

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

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A N   A C T

RELATING TO INSURANCE -- UNFAIR CLAIMS PRACTICES ACT

     Introduced By: Representatives O'Brien, McEntee, Craven, Caldwell, Dawson, Serpa,
Bennett, Diaz, Vella-Wilkinson, and Slater

     Date Introduced: March 01, 2023

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 27-9.1-4, 27-9.1-6 and 27-9.1-7 of the General Laws in Chapter 27-

9.1 entitled "Unfair Claims Settlement Practices Act" are hereby amended to read as follows:

     27-9.1-4. “Unfair claims practices” defined.

     (a) Any of the following acts by an insurer, if committed in violation of § 27-9.1-3,

constitutes an unfair claims practice:

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

coverage at issue;

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

communications with respect to claims arising under its policies;

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

settlement of claims arising under its policies;

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

claims submitted in which liability has become reasonably clear;

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

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

brought by them;

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

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

completed its investigation related to the claim or claims;

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

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

material accompanying or made part of an application;

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

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

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

under which each payment is being made;

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

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

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

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

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

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

a request with reasonable explanations regarding their use;

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

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

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

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

a longer period;

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

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

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

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

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

to motor vehicle replacement services; provided, that the rental car company is licensed pursuant

to § 31-5-33;

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

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

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

provided, that the rental car company is licensed pursuant to § 31-5-33. Nothing in this section shall

be construed to prevent the insurance company’s ability to question or challenge the amount

charged, in accordance with its policy provisions, and the requirements of the department of

business regulation; provided that, the insurance company promptly notifies the rental car company

in writing of the reason. The written notification shall be made at or before the time that the

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insurance company submits payment to the rental car company;

     (19) Modifying any published manual, i.e., Motor’s Auto Repair Manual, Mitchells, or any

automated appraisal system, relating to auto body repair without prior agreement between the

parties;

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

     (21) Any insurer, or appraiser, refusing Refusing to compensate an auto body shop for its

documented charges as identified, through and based on, the most current version of automotive

industry-recognized software programs or systems for paint, body, and refinishing materials

utilized in auto body repair, in auto body repair claims, including, but not limited to, programs such

as Mitchell’s RMC, PMC Logic, Paint, Micromix, or other recognized a paint manufacturer’s

programs. An insurer shall not discount documented charges by failing to use a system in its

entirety, including an automotive industry standard markup;

     (22) Refusing to acknowledge and compensate an auto body repairer for documented

procedures identified as necessary by the original equipment manufacturer, paint manufacturer, or

recognized and accepted estimating system when included in the repairer's initial appraisal, (i.e.,

components that cannot be reused/reinstalled: requiring clips, retainers, and hardware);

     (22)(23) Failing to comply with the requirements of § 31-47-12.1;

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

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

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

subject motor vehicle; must perform a physical inspection of the damaged motor vehicle; and may

not perform an appraisal based upon pictures of the damaged motor vehicle;

     (25) Failure of an insurer's assigned appraiser, or representative, to promptly schedule an

appointment for an appraisal of a damaged vehicle with the auto body repair shop, at an agreed

upon date and time, during normal business hours;

     (24)(26) Failure to perform an initial appraisal within three (3) business days after a request

is received from an auto body repair shop, provided the damaged motor vehicle is on the premises

of the repair shop when the request is made, and failure to perform a supplemental appraisal

inspection of a vehicle within four (4) business days after a request is received from an auto body

repair shop. If the insurer's appraiser fails to inspect the damaged motor vehicle within the allotted

number of business days for an initial appraisal or a supplemental appraisal, the insurer shall forfeit

its right to inspect the damaged vehicle prior to repairs, and negotiations shall be limited to labor

and the price of parts and shall not, unless objective evidence to the contrary is provided by the

insurer, involve disputes as to the existence of damage or the chosen manner of repair. The time

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limitations set forth in this subsection may be extended by mutual agreement between the auto body

repair shop and the insurer;

     (27) Refusing to extend the rental vehicle coverage requirements of an insured or claimant

proportionally to claim delays caused by the insurer.

     (25)(28) Designating a motor vehicle a total loss if the cost to rebuild or reconstruct the

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

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

     (i) For the purposes of this subdivision, “fair market value” means the retail value of a

motor vehicle as set forth in a current edition of a nationally recognized compilation of retail values

commonly used by the automotive industry to establish values of motor vehicles;

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

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

five percent (75%) of the fair market value of the motor vehicle immediately preceding the time it

was damaged;

     (iii) Nothing herein shall prohibit an insurance company from agreeing to deem a vehicle

a total loss at the vehicle owner’s request and with the vehicle owner’s express written authorization

if the cost to rebuild or reconstruct the motor vehicle to its pre-accident condition is less than

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

the time it was damaged;

     (iv) If condition adjustments are made to the retail value of a motor vehicle designated a

total loss, all such adjustments must be in accordance with the standards set forth in the current

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

industry, used by the insurer to determine the retail value of the vehicle; and all such adjustments,

including prior damage deductions, must be itemized, fair, and reasonable; and

     (v) When a vehicle is deemed a total loss, if the insurer is not retaining the salvage, the

insurer must notify the owner of the vehicle in writing of the requirements of obtaining both a

salvage title and a reconstructed title from the department of motor vehicles pursuant to chapter 1

of title 31, and must obtain, in writing, the owner’s consent and acknowledgement that the insurer

is not retaining the salvage and include a statement of the owner’s obligation and potential costs to

dispose of or otherwise retain the salvage;

     (26)(29) Negotiating, or effecting the settlement of, a claim for loss or damage covered by

an insurance contract with an unlicensed public adjuster acting on behalf of an insured. Nothing

contained in this section shall be construed to preclude an insurer from dealing with any individual

or entity that is not required to be licensed under chapter 10 of title 27;

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     (27)(30) Refusing to pay an auto body repair shop for documented necessary sublet

services paid out to vendors or incurred by the auto body repair shop, for specialty or unique

services performed in the overall repair process, including costs and labor incurred to research,

coordinate, administrate, or facilitate the necessary sublet service, and an automotive industry

standard markup. Examples of sublet services include, but are not limited to, towing, transportation,

suspension, alignments, electronic calibrations, diagnostic work, mechanical work, and paid

charges to release a vehicle.

     (b)(1) Nothing contained in subsections (a)(19), (a)(20), and (a)(21) of this section shall be

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

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

repair program or any similar program thereto, the provisions of subsections (a)(19), (a)(20), and

(a)(21) of this section shall not apply.

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

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

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

     27-9.1-6. Cease and desist and penalty orders.

     If, after a hearing, the director finds an insurer has engaged in an unfair claims practice, the

director shall reduce the findings to writing and shall issue and cause to be served upon the insurer

charged with the violation a copy of the findings and an order requiring the insurer to cease and

desist from engaging in the act or practice, payment of a monetary penalty of one thousand dollars

($1,000) or treble damages, whichever is greater, for each violation, to the consumer, or consumers,

who filed the complaint which resulted in a finding of a violation, and the director may, at the

director’s discretion, order:

     (1) Payment of a monetary penalty of not more than ten thousand dollars ($10,000) for

each violation, but not to exceed an aggregate penalty of one hundred thousand dollars ($100,000),

unless the violation was committed flagrantly and in conscious disregard of this chapter, in which

case the penalty shall not be more than twenty-five thousand dollars ($25,000) for each violation,

but not to exceed an aggregate penalty of two hundred fifty thousand dollars ($250,000) pursuant

to any hearing; and/or

     (2) Suspension or revocation of the insurer’s license if the insurer knew or reasonably

should have known it was in violation of this chapter.

     27-9.1-7. Penalty for violation of cease and desist orders.

     Any insurer which violates a cease and desist order of the director and, while the order is

in effect, may, after notice and hearing and upon order of the director, be subject, at the discretion

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of the director, to:

     (1) A monetary penalty of not more than twenty-five thousand dollars ($25,000) for each

and every act or violation not to exceed an aggregate of two hundred fifty thousand dollars

($250,000) pursuant to any hearing; and/or

     (2) Suspension or revocation of the insurer’s license; and/or

     (3) Payment of a monetary penalty of one thousand dollars ($1,000) or treble damages,

whichever is greater, for each violation, to the consumer, or consumers, who filed the complaint

which resulted in a finding of a violation of the cease and desist order.

     SECTION 2. Section 27-10.1-6 of the General Laws in Chapter 27-10.1 entitled "Motor

Vehicle Damage Appraisers" is hereby amended to read as follows:

     27-10.1-6. Conduct of motor vehicle damage appraisers.

     (a) Each appraiser, while engaged in appraisal duties, shall carry the license issued to that

appraiser by the department of business regulation and shall display it, upon request, to an owner

whose vehicle is being inspected, to the auto body shop representative involved, or to any

authorized representative of the department of business regulation.

     (b) An insurer's assigned appraiser, or representative, shall promptly schedule an

appointment for appraisal of a damaged vehicle with the auto body repair shop, at an agreed upon

date and time, during normal business hours.

     (b)(c) The appraiser shall leave a legible copy of his or her appraisal with the auto body

shop selected to make the repairs, which appraisal shall contain the name of the insurance company

ordering it, if any, the insurance file number, the number of the appraiser’s license, and the proper

identification number of the vehicle being inspected, and notice in boldface type, reading as

follows:

     “PURSUANT TO RHODE ISLAND LAW, THE CONSUMER HAS THE RIGHT TO

CHOOSE THE REPAIR FACILITY TO COMPLETE REPAIRS TO A MOTOR VEHICLE; AND

AN INSURANCE COMPANY MAY NOT INTERFERE WITH THE CONSUMER’S CHOICE

OF REPAIRER.” All damage unrelated to the incident or accident that occasioned the appraisal of

the vehicle, or old damage, shall be clearly indicated in the appraisal.

     (c)(d) The appraiser shall not obtain a competitive estimate from another auto body shop

unless the owner of that other shop, or his or her authorized agent, has inspected the vehicle. No

competitive estimate shall be obtained by the use of photographs, telephone calls, or in any manner

other than a personal inspection.

     (d)(e) No appraiser shall request that repairs be made in a specified auto body shop.

     (e)(f) Every appraiser shall re-inspect damaged vehicles when supplementary allowances

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are requested by the auto body shops.

     (f)(g) No appraiser shall receive directly or indirectly any gratuity or other consideration

in connection with his or her appraisal services from any person except his or her employer, or, if

self-employed, his or her customers.

     (g)(h) No appraiser shall traffic in automobile salvage if it is obtained in any way as a result

of appraisal services rendered by the appraiser.

     (h)(i) No appraiser shall obtain an estimate from an unlicensed automobile body repair

shop nor shall any appraiser agree on a price for repairing a damaged motor vehicle with an

unlicensed automobile body repair shop. Nothing contained in this section shall be construed to

preclude an appraiser from dealing with any entity not subject to the licensing provisions of § 5-

38-4.

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

adding thereto the following chapter:

CHAPTER 10.4

MOTOR VEHICLE APPRAISAL PROVISION

     27-10.4-1. Motor vehicle appraisal provision.

     (a) When the insurance company and the insured or claimants fail to agree on the amount

of a loss, either has the right to exercise the independent appraisal process outlined in this section.

Agreements by the parties shall be binding. Each shall select a competent Rhode Island licensed

appraiser. The insurer's chosen appraiser shall inspect the damaged motor vehicle within three (3)

business days after the written demand is received; provided, the damaged motor vehicle is on the

premises of the repair shop when the request is made. If the insurer's appraiser fails to inspect the

damaged motor vehicle within the three (3) business days the insurer shall forfeit its right to inspect

the damaged vehicle prior to repairs, and negotiations shall be limited to labor and the price of parts

and shall not, unless objective evidence to the contrary is provided by the insurer, involve disputes

as to the existence of damage or the chosen manner of repair. The time limitations set forth in this

subsection may be extended by mutual agreement between the auto body repair shop and the

insurer.

     (b) If the two (2) appraisers fail to agree on the amount of the loss, the insurer and the

insured or claimant shall select an impartial Rhode Island licensed appraiser as an umpire appraiser.

If the two (2) appraisers are unable to agree upon an umpire within three (3) business days, the

party making the initial demand for the loss to be set by appraisal shall select an umpire. The

appraisers shall then submit their differences to the umpire appraiser. The umpire appraiser shall

render a decision within three (3) business days, and written agreement by any two (2) of the three

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(3) shall set the amount of the loss. The time limitations set forth in this subsection may be extended

by mutual agreement between the auto body repair shop and the insurer;

     (c) The insurer shall not engage in any act or practice of intimidation, coercion, threat, or

misrepresentation of consumer rights, for or against and insured person, claimant, or entity chosen

in this process.

     SECTION 4. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO INSURANCE -- UNFAIR CLAIMS PRACTICES ACT

***

     This act would amend the definition of unfair claims settlement practices by insurers and

motor vehicle damage appraisers, and would create a chapter providing for the appraisal of

damaged motor vehicles, when the insurer and the insured cannot agree on the amount of the loss.

     This act would take effect upon passage.

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