40-2404. Unfair methods of competition or unfair and deceptive acts or practices; title insurance agents, requirements; disclosure of nonpublic personal information; rules and regulations.
40-2404
40-2404. Unfair methods of competition or unfair anddeceptive actsor practices; title insurance agents, requirements; disclosure of nonpublicpersonal information; rules andregulations.The following are hereby defined as unfair methods of competition andunfair or deceptive acts or practices in the business of insurance:
(1) Misrepresentations and false advertising of insurancepolicies. Making, issuing, circulating or causing to be made, issuedor circulated, any estimate, illustration, circular, statement, salespresentation, omission or comparison which:
(a) Misrepresents the benefits, advantages, conditions or termsofany insurance policy;
(b) misrepresents the dividends or share of the surplus to bereceived on any insurance policy;
(c) makes any false or misleading statements as to the dividendsorshare of surplus previously paid on any insurance policy;
(d) is misleading or is a misrepresentation as to the financialcondition of any person, or as to the legal reserve system upon whichany life insurer operates;
(e) uses any name or title of any insurance policy or class ofinsurance policies misrepresenting the true nature thereof;
(f) is a misrepresentation for the purpose of inducing ortending toinduce the lapse, forfeiture, exchange, conversion or surrender of anyinsurance policy;
(g) is a misrepresentation for the purpose of effecting a pledgeorassignment of or effecting a loan against any insurance policy; or
(h) misrepresents any insurance policy as being shares of stock.
(2) False information and advertising generally. Making,publishing, disseminating, circulating or placing before the public, orcausing, directly or indirectly, to be made, published, disseminated,circulated or placed before the public, in a newspaper, magazine orother publication, or in the form of a notice, circular, pamphlet,letter or poster, or over any radio or television station, or in anyother way, an advertisement, announcement or statement containing anyassertion, misrepresentation or statement with respect to the business ofinsurance or with respect to any person in the conduct of such person'sinsurance business, which is untrue, deceptive or misleading.
(3) Defamation. Making, publishing, disseminating orcirculating, directly or indirectly, or aiding, abetting or encouragingthe making, publishing, disseminating or circulating of any oral orwritten statement or any pamphlet, circular, article or literature whichis false, or maliciously critical of or derogatory to the financialcondition of any person, and which is calculated to injure such person.
(4) Boycott, coercion and intimidation. Entering into anyagreement to commit, or by any concerted action committing, any act ofboycott, coercion or intimidation resulting in or tending to result inunreasonable restraint of the business of insurance, or by any actof boycott, coercion or intimidation monopolizing or attempting tomonopolize any part of the business of insurance.
(5) False statements and entries. (a) Knowingly filing withanysupervisory or other public official, or knowingly making, publishing,disseminating, circulating or delivering to any person, or placingbefore the public, or knowingly causing directly or indirectly, to bemade, published, disseminated, circulated, delivered to any person, orplaced before the public, any false material statement of fact as to thefinancial condition of a person.
(b) Knowingly making any false entry of a material fact in anybook,report or statement of any person or knowingly omitting to make a trueentry of any material fact pertaining to the business of such person inany book, report or statement of such person.
(6) Stock operations and advisory board contracts. Issuing ordelivering or permitting agents, officers or employees to issue ordeliver, agency company stock or other capital stock, or benefitcertificates or shares in any common-law corporation, or securities orany special or advisory board contracts or other contracts of any kindpromising returns and profits as an inducement to insurance. Nothing hereinshall prohibit the acts permitted by K.S.A. 40-232, and amendments thereto.
(7) Unfair discrimination. (a) Making or permitting anyunfairdiscrimination between individuals of the same class and equalexpectation of life in the rates charged for any contract of lifeinsurance or life annuity or in the dividends or other benefits payablethereon, or in any other of the terms and conditions of such contract.
(b) Making or permitting any unfair discrimination betweenindividualsof the same class and of essentially the same hazard in the amount ofpremium, policy fees or rates charged for any policy or contract ofaccident or health insurance or in the benefits payable thereunder, orin any of the terms or conditions of such contract, or in any othermanner whatever.
(c) Refusing to insure, or refusing to continue to insure, orlimitingthe amount, extent or kind of coverage available to an individual, orcharging an individual a different rate for the same coverage solelybecause of blindness or partial blindness. With respect to all otherconditions, including the underlying cause of the blindness or partialblindness, persons who are blind or partially blind shall be subject to thesame standards of sound actuarial principles or actual or reasonablyanticipatedexperience as are sighted persons. Refusal to insure includes denial by aninsurer of disability insurance coverage on the grounds that the policydefines "disability" as being presumed in the event that the insured losessuch person's eyesight. However, an insurer may exclude from coveragedisabilities consisting solely of blindness or partial blindness when suchcondition existed at the time the policy was issued.
(d) Refusing to insure, or refusing to continue to insure, or limiting theamount, extent or kind of coverage available for accident and health and lifeinsurance to an applicant who is the proposed insured or charge a differentrate for the same coverage or excluding or limiting coverage for losses ordenying a claim incurred by an insured as a result of abuse based on the factthat the applicant who is the proposed insured is, has been, or may be thesubject of domestic abuse, except as provided in subpart (v)."Abuse" as used in this subsection (7)(d) means one or more acts defined insubsection (a) or (b) of K.S.A. 60-3102 and amendments thereto between familymembers, current or former household members, or current or former intimatepartners.
(i) An insurer may not ask an applicant for life or accident and healthinsurance who is the proposed insured if the individual is, has been or may bethe subject of domestic abuse or seeks, has sought or had reason to seekmedical or psychological treatment or counseling specifically for abuse,protection from abuse or shelter from abuse.
(ii) Nothing in this section shall be construed to prohibit a person fromdeclining to issue an insurance policy insuring the life of an individual whois, has been or has the potential to be the subject of abuse if the perpetratorof the abuse is the applicant or would be the owner of the insurance policy.
(iii) No insurer that issues a life or accident and health policy to anindividual who is, has been or may be the subject of domestic abuse shall besubject to civil or criminal liability for the death or any injuries sufferedby that individual as a result of domestic abuse.
(iv) No person shall refuse to insure, refuse to continue to insure, limitthe amount, extent or kind of coverage available to an individual or charge adifferent rate for the same coverage solely because of physical or mentalcondition, except where the refusal, limitation or rate differential is basedon sound actuarial principles.
(v) Nothing in this section shall be construed to prohibit a person fromunderwriting or rating a risk on the basis of a preexisting physical or mentalcondition, even if such condition has been caused by abuse, provided that:
(A) The person routinely underwrites or rates such condition in the samemanner with respect to an insured or an applicant who is not a victim of abuse;
(B) the fact that an individual is, has been or may be the subject of abusemay not be considered a physical or mental condition; and
(C) such underwriting or rating is not used to evade the intent of thissection or any other provision of the Kansas insurance code.
(vi) Any person who underwrites or rates a risk on the basis of preexistingphysical or mental condition as set forth in subsection (7)(d)(v), shall treatsuch underwriting or rating as an adverse underwriting decision pursuant toK.S.A. 40-2,112, and amendments thereto.
(vii) The provisions of subsection (d) shall apply to all policies of lifeand accident and health insurance issued in this state after the effective dateof this act and all existing contracts which are renewed on or after theeffective date of this act.
(8) Rebates. (a) Except as otherwise expressly provided bylaw, knowingly permitting, offering to make or making any contractof lifeinsurance, life annuity or accident and health insurance, or agreementas to such contract other than as plainly expressed in the insurancecontract issued thereon; paying, allowing, givingor offering to pay, allow or give, directly or indirectly, as inducement tosuchinsurance, or annuity, any rebate of premiums payable on the contract, anyspecial favor or advantage in the dividends or other benefitsthereon, or any valuable consideration or inducement whatever notspecified in the contract; or giving, selling, purchasing oroffering to give, sell or purchase as inducement to such insurancecontract or annuity or in connection therewith, any stocks, bonds orother securities of any insurance company or other corporation,association or partnership, or any dividends or profits accruedthereon, or anything of value whatsoever not specified in the contract.
(b) Nothing in subsection (7) or (8)(a) shall be construed as includingwithin the definition of discrimination or rebates any of the followingpractices:
(i) In the case of any contractof life insurance or life annuity, paying bonuses to policyholders orotherwise abating their premiums in whole or in part out of surplusaccumulated from nonparticipating insurance. Anysuch bonuses or abatement of premiums shall be fair and equitable topolicyholders and for the best interests of the company and itspolicyholders;
(ii) in the case of life insurance policies issued on theindustrial debit plan, making allowance to policyholders who havecontinuously for a specified period made premium payments directly to anoffice of the insurer in an amount which fairly represents the saving incollection expenses; or
(iii) readjustment of the rate of premium for agroup insurance policy based on the loss or expense experiencethereunder, at the end of the first or any subsequent policy year ofinsurance thereunder, which may be made retroactive only for such policyyear.
(9) Unfair claim settlement practices.It is an unfair claim settlement practice if anyof the following or any rules and regulations pertaining thereto are: (A)Committed flagrantly and in conscious disregard of such provisions, or (B)committed with such frequency as to indicate a general business practice.
(a) Misrepresenting pertinent facts or insurance policyprovisions relating to coverages at issue;
(b) failing to acknowledge and act reasonably promptly uponcommunications with respect to claims arising under insurance policies;
(c) failing to adopt and implement reasonable standards for theprompt investigation of claims arising under insurance policies;
(d) refusing to pay claims without conducting a reasonableinvestigation based upon all available information;
(e) failing to affirm or deny coverage of claims within areasonabletime after proof of loss statements have been completed;
(f) not attempting in good faith to effectuate prompt, fair andequitable settlements of claims in which liability has become reasonablyclear;
(g) compelling insureds to institute litigation to recoveramountsdue under an insurance policy by offering substantially less than theamounts ultimately recovered in actions brought by such insureds;
(h) attempting to settle a claim for less than the amount towhich areasonable person would have believed that such personwas entitled by reference towritten or printed advertising material accompanying or made part of anapplication;
(i) attempting to settle claims on the basis of an applicationwhich was altered without notice to, or knowledge or consent of the insured;
(j) making claims payments to insureds or beneficiaries notaccompanied by a statement setting forth the coverage under whichpayments are being made;
(k) making known to insureds or claimants a policy of appealingfrom arbitration awards in favor of insureds or claimants for the purpose ofcompelling them to accept settlements or compromises less than theamount awarded in arbitration;
(l) delaying the investigation or payment of claims by requiringan insured, claimant or the physician of either to submit a preliminaryclaim report and then requiring the subsequent submission of formalproof of loss forms, both of which submissions contain substantially thesame information;
(m) failing to promptly settle claims, where liability has becomereasonably clear, under one portion of the insurance policy coverage inorder to influence settlements under other portions of the insurancepolicy coverage; or
(n) failing to promptly provide a reasonable explanation of thebasis in the insurance policy in relation to the facts or applicable lawfor denial of a claim or for the offer of a compromise settlement.
(10) Failure to maintain complaint handling procedures. Failureof any person, who is an insurer on an insurance policy, to maintain acomplete record of all the complaints which it has received since thedate of its last examination under K.S.A. 40-222, and amendments thereto;but no such recordsshall be required for complaints received prior to the effective date ofthis act. The record shall indicate the total number ofcomplaints,their classification by line of insurance, the nature of each complaint,the disposition of the complaints, the date each complaint wasoriginally received by the insurer and the date of final disposition ofeach complaint. For purposes of this subsection, "complaint"meansany written communication primarily expressing a grievance related tothe acts and practices set out in this section.
(11) Misrepresentation in insurance applications. Making falseor fraudulent statements or representations on or relative to anapplication for an insurance policy, for the purpose of obtaining a fee,commission, money or other benefit from any insurer, agent, broker orindividual.
(12) Statutory violations. Any violation of any of theprovisions of K.S.A. 40-216, 40-276a, 40-2,155 or 40-1515 and amendmentsthereto.
(13) Disclosure of information relating to adverse underwritingdecisions and refund of premiums. Failing to comply with the provisionsofK.S.A. 40-2,112, andamendments thereto, within the time prescribedin such section.
(14) Rebates and other inducements in title insurance. (a)No title insurance company or title insurance agent, or any officer, employee,attorney,agent or solicitor thereof, may pay, allow or give, or offer to pay, allowor give, directly or indirectly, as an inducement to obtaining any titleinsurance business, any rebate, reduction or abatement of any rate or chargemade incident to the issuance of such insurance, any special favor or advantagenot generally available to others of the same classification, or any money,thing of value or other consideration or material inducement. The words"charge made incident to the issuance of such insurance" includes, withoutlimitations, escrow, settlement and closing charges.
(b) No insured named in a title insurance policy or contract norany otherperson directly or indirectly connected with the transaction involving theissuance of the policy or contract, including, but not limited to, mortgagelender, real estate broker, builder, attorney or any officer, employee,agent representative or solicitor thereof, or any other person may knowinglyreceive or accept, directly or indirectly, any rebate, reduction or abatementof any charge, or any special favor or advantage or any monetary considerationor inducement referred to in (14)(a).
(c) Nothing in this section shall be construed as prohibiting:
(i) The payment of reasonable fees for services actually rendered to atitle insurance agent in connection with a title insurance transaction;
(ii) the payment of an earned commission to a duly appointed title insuranceagent for services actually performed in the issuance of the policy of titleinsurance; or
(iii) the payment of reasonable entertainment and advertising expenses.
(d) Nothing in this section prohibits the division of rates andchargesbetween or among a title insurance company and its agent, or one or moretitle insurance companies and one or more title insurance agents, if suchdivision of rates and charges does not constitute an unlawful rebate underthe provisions of this section and is not in payment of a forwarding feeor a finder's fee.
(e) As used in paragraphs (e) through (i)(7) of this subpart, unless thecontextotherwiserequires:
(i) "Associate" means any firm, association, organization, partnership,business trust,corporation or other legal entity organized for profit in which a producer oftitle business is adirector, officer or partner thereof, or owner of a financial interest; thespouse or any relative withinthe second degree by blood or marriage of a producer of title business who is anatural person; anydirector, officer or employee of a producer of title business or associate; anylegal entity thatcontrols, is controlled by, or is under common control with a producer of titlebusiness or associate;and any natural person or legal entity with whom a producer of title businessor associate has anyagreement, arrangement or understanding or pursues any course of conduct, thepurpose or effect ofwhich is to evade the provisions of this section.
(ii) "Financial interest" means any direct or indirect interest, legal orbeneficial, where theholder thereof is or will be entitled to 1% or more of the net profits or networth of the entity inwhich such interest is held. Notwithstanding the foregoing, an interest ofless than 1% or any othertype of interest shall constitute a "financial interest" if the primary purposeof the acquisition orretention of that interest is the financial benefit to be obtained as aconsequence of that interest fromthe referral of title business.
(iii) "Person" means any natural person, partnership, association,cooperative, corporation,trust or other legal entity.
(iv) "Producer of title business" or "producer" means any person, includingany officer,director or owner of 5% or more of the equity or capital or both of any person,engaged in this statein the trade, business, occupation or profession of:
(A) Buying or selling interests in real property;
(B) making loans secured by interests in real property; or
(C) acting as broker, agent, representative or attorney for a person who buysor sells anyinterest in real property or who lends or borrows money with such interest assecurity.
(v) "Refer" means to direct or cause to be directed or to exercise any poweror influence overthe direction of title insurance business, whether or not the consent orapproval of any other personis sought or obtained with respect to the referral.
(f) No title insurer or title agent may accept any orderfor, issue atitle insurance policy to, or provide services to, an applicant if it knowsor has reason to believe that the applicant was referred to it by anyproducer of title business or by any associate of such producer, where theproducer, the associate, or both, have a financial interest in the titleinsurer or title agent to which business is referred unless the producerhas disclosed to the buyer, seller and lender the financial interest of theproducer of title business or associate referring the title insurancebusiness.
(g) No title insurer or title agent may accept an order fortitleinsurancebusiness, issue a title insurance policy, or receive or retain any premium,or charge in connection with any transaction if: (i) The title insurer ortitle agent knows or has reason to believe that the transaction willconstitute controlled business for that title insurer or title agent, and(ii) 70% or more of theclosed title orders of that titleinsurer ortitle agent during the 12 full calendar months immediatelypreceding themonth in which the transaction takes place is derived from controlledbusiness. The prohibitions contained in this subparagraph shall not applyto transactions involving real estate located in a county that has apopulation, as shown by the last preceding decennial census, of 10,000 orless.
(h) Within 90 days following the end of each business year, as establishedbythe title insureror title agent, each title insurer or title agent shall file with thedepartment of insurance and any titleinsurer with which the title agent maintains an underwriting agreement, areport executed by the titleinsurer's or title agent's chief executive officer or designee, under penaltyof perjury, stating thepercent of closed title orders originating from controlled business. Thefailure of a title insurer or titleagent to comply with the requirements of this section, at the discretion of thecommissioner, shallbe grounds for the suspension or revocation of a license or other disciplinaryaction, with thecommissioner able to mitigate any such disciplinary action if the title insurer or title agent is foundto be in substantial compliance with competitive behavior as defined by federalhousing and urbandevelopment statement of policy 1996-2.
(i) (1) No title insurer or title agent may accept any title insuranceorder or issue a titleinsurance policy to any person if it knows or has reason to believe that suchperson was referred toit by any producer of title business or by any associate of such producer,where the producer, theassociate, or both, have a financial interest in the title insurer or titleagent to which business isreferred unless the producer has disclosed in writing to the person so referredthe fact that suchproducer or associate has a financial interest in the title insurer or titleagent, the nature of thefinancial interest and a written estimate of the charge or range of chargesgenerally made by the titleinsurer or agent for the title services. Such disclosure shall includelanguage stating that theconsumer is not obligated to use the title insurer or agent in which thereferring producer or associatehas a financial interest and shall include the names and telephone numbers ofnot less than threeother title insurers or agents which operate in the county in which theproperty is located. If fewerthan three insurers or agents operate in that county, the disclosure shallinclude all title insurers oragents operating in that county. Such written disclosure shall be signed bythe person so referred andmust have occurred prior to any commitment having been made to such titleinsurer or agent.
(2) No producer of title business or associate of such producer shallrequire, directly orindirectly, as a condition to selling or furnishing any other person any loanor extension thereof,credit, sale, property, contract, lease or service, that such other personshall purchase title insuranceof any kind through any title agent or title insurer if such producer has afinancial interest in such titleagent or title insurer.
(3) No title insurer or title agent may accept any title insurance order orissue a title insurancepolicy to any person it knows or has reason to believe that the name of thetitle company waspre-printed in the sales contract, prior to the buyer or seller selecting thattitle company.
(4) Nothing in this subpart (i) shall prohibit any producer of title businessorassociate of suchproducer from referring title business to any title insurer or title agent ofsuch producer's orassociate's choice, and, if such producer or associate of such producer has anyfinancial interest inthe title insurer, from receiving income, profits or dividends produced orrealized from such financialinterest, so long as:
(a) Such financial interest is disclosed to the purchaser of the titleinsurance in accordancewith part (i)(1) through (4) of this subpart;
(b) the payment of income, profits or dividends is not in exchange for thereferral ofbusiness; and
(c) the receipt of income, profits or dividends constitutes only a return onthe investment ofthe producer or associate.
(5) Any producer of title business or associate of such producer who violatesthe provisionsof paragraphs (i)(2) through (i)(4), or any title insurer or title agentwho accepts an order fortitle insurance knowing thatit is in violation of paragraphs (i)(2) through (i)(4), in addition to anyother action which maybe taken by thecommissioner of insurance, shall be subject to a fine by the commissioner in anamount equal to fivetimes the premium for the title insurance and, if licensed pursuant to K.S.A.58-3034 et seq., andamendments thereto, shall be deemed to have committed a prohibited act pursuantto K.S.A.58-3602, and amendments thereto, and shall be liable to the purchaser of suchtitle insurance in anamount equal to the premium for the title insurance.
(6) Any title insurer or title agent that is a competitor of any titleinsurer or title agent that,subsequent to the effective date of this act, has violated or is violating theprovisions of subpart (i), shallhave a cause of action against such title insurer or title agent and, uponestablishing the existence ofa violation of any such provision, shall be entitled, in addition to any otherdamages or remedies provided by law, to such equitable or injunctive relief asthe court deems proper. In any suchactionunder this subsection, the court may award to the successful party the courtcosts of the actiontogether with reasonable attorney fees.
(7) The commissioner shall also require each title agent to provide coretitle services asrequired by the real estate settlement procedures act.
(j) The commissioner shall adopt any regulations necessarytocarryout the provisions of this act.
(15) Disclosure of nonpublic personal information. (a) Noperson shall disclose any nonpublic personal information contrary to theprovisions of title V of the Gramm-Leach-Blileyactof 1999 (public law 106-102). The commissioner may adopt rules and regulationsnecessary to carry out this section. Such rules and regulations shall beconsistent with and not more restrictive than the model regulation adoptedonSeptember 26, 2000, by the national association of insurance commissionersentitled "Privacy of consumer financial and health information regulation".
(b) Any rules and regulations adopted by the commissioner which implementarticle V of the model regulation adopted on September 26, 2000, by thenational association of insurance commissioners entitled "Privacy of consumerfinancial and health information regulation" shall become effective on andafter February 1, 2002.
(c) Nothing in this paragraph (15) shall be deemed or construed to authorizethe promulgation or adoption of any regulation which preempts, supersedes oris inconsistent with any provision of Kansas law concerning requirements fornotification of, or obtaining consent from, a parent, guardian or other legalcustodian of a minor relating to any matter pertaining to the health andmedical treatment for such minor.
History: L. 1955, ch. 247, § 4;L. 1972, ch. 189, § 3;L. 1981, ch. 190, § 4;L. 1983, ch. 158, § 1;L. 1987, ch. 171, § 1;L. 1989, ch. 140, § 2;L. 1992, ch. 4, § 1;L. 1994, ch. 302, § 12;L. 1996, ch. 193, § 1;L. 2000, ch. 147, § 46;L. 2001, ch. 202, § 1;L. 2004, ch. 159, § 6;L. 2004, ch. 159, § 18; Jan. 1, 2005.