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:

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

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

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

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

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constitutes an unfair claims practice:

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

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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 due

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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 person

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

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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 materially

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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 coverage

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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 of

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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 to

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a longer period;

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

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of 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 shall

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

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

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

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to § 31-5-33;

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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 § 31-5-33. Nothing in this section shall

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

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

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

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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;

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

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

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

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

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

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

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

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

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entirety, including an automotive industry standard markup;

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

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

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

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

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

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     (23)(24) 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). The

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

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

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

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

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

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upon date and time, during normal business hours;

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

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

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

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

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

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

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

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

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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

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repair shop and the insurer;

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

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proportionally to claim delays caused by the insurer.

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

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

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

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

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

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

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

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

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

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was damaged;

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

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

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

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

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the time it was damaged;

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

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

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

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

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

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

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

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

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

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

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dispose of or otherwise retain the salvage;

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

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

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

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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

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

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

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

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

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

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charges to release a vehicle.

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

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construed to interfere with an auto body repair facility’s contract with an insurance 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 (a)(19), (a)(20), and

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(a)(21) of this section 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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     27-9.1-6. Cease and desist and penalty orders.

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

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

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

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

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

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

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director’s discretion, order:

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

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

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

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

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

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to any hearing; and/or

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

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should have known it was in violation of this chapter.

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

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

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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:

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

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

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

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

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

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

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

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

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

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

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

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

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

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authorized representative of the department of business regulation.

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

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

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date and time, during normal business hours.

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

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

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

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

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follows:

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

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

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

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

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

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

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

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

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other than a personal inspection.

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

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

 

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are requested by the auto body shops.

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

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

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self-employed, his or her customers.

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

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of appraisal services rendered by the appraiser.

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

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

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

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

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38-4.

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

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adding thereto the following chapter:

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CHAPTER 10.4

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MOTOR VEHICLE APPRAISAL PROVISION

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     27-10.4-1. Motor vehicle appraisal provision.

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

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

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

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

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

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

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

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

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

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

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

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insurer.

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

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

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

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

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

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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

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

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

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

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in this process.

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     SECTION 4. This act shall take effect upon passage.

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LC001988

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO INSURANCE -- UNFAIR CLAIMS PRACTICES ACT

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

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

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

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     This act would take effect upon passage.

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LC001988

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