§ 27-29-4 - Unfair methods of competition and unfair or deceptive acts or practices defined.
SECTION 27-29-4
§ 27-29-4 Unfair methods of competitionand unfair or deceptive acts or practices defined. – The following are defined as unfair methods of competition and unfair anddeceptive acts or practices in the business of insurance:
(1) Misrepresentations and false advertising of policiesor contracts. Making, issuing, circulating, or causing to be made, issued,or circulated, any estimate, illustration, circular, or statement, salespresentation, omission, or comparison misrepresenting the terms of any policyissued or to be issued or the benefits, conditions, or advantages promised byany policy or the dividends or share of the surplus to be received on anypolicy, or making any false or misleading statement as to the dividends orshare of surplus previously paid on any policy, or making any misleadingrepresentation or any misrepresentation as to the financial condition of anyinsurer, or as to the legal reserve system upon which any life insureroperates, or using any name or title of any policy or class of policiesmisrepresenting the true nature of that policy or class of policies, or makingany misrepresentation to any policyholder insured in any company including anyintentional misquote of a premium rate, for the purpose of inducing or tendingto induce the policyholder to lapse, forfeit, or surrender his or herinsurance, or misrepresenting for the purpose of effecting a pledge orassignment of or effecting a loan against any policy, or misrepresenting anypolicy as being share or 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, or otherpublication, or in the form of a notice, circular, pamphlet, letter, or poster,or over any radio or television station, or in any other way, an advertisement,announcement, or statement containing any assertion, representation, orstatement with respect to the business of insurance or with respect to anyperson in the conduct of his or her insurance business which is untrue,deceptive, or misleading;
(3) Defamation. Making, publishing, disseminating, orcirculating, directly or indirectly, or aiding, abetting, or encouraging themaking, publishing, disseminating, or circulating of any oral or writtenstatement or any pamphlet, circular, article of literature which is false ormaliciously critical of or derogatory to the financial condition of an insurer,and which is calculated to injure any person engaged in the business ofinsurance;
(4) Boycott, coercion, and intimidation. Entering intoany agreement to commit, or by any concerted action committing, any act ofboycott, coercion, or intimidation resulting in or tending to result inunreasonable restraint of, or monopoly in, the business of insurance;
(5) False financial statements. Knowingly filing withany supervisory or other public official, or knowingly making, publishing,disseminating, circulating, or delivering to any person, or placing before thepublic or causing directly or indirectly, to be made, published, disseminated,circulated, delivered to any person, or placed before the public any falsematerial statement of financial condition of an insurer; or
(ii) Knowingly making any false entry of a material fact inany book, report, or statement of any insurer or knowingly omitting to make atrue entry of any material fact pertaining to the business of the insurer inany book, report, or statement of the insurer;
(6) Stock operations and advisory board contracts.Issuing or delivering or permitting agents, officers, or employees to issue ordeliver agency company stock or other capital stock, or benefit certificates orshares in any common law corporation, or securities of any special or advisoryboard contracts or other contracts of any kind promising returns and profits asan inducement to insurance;
(7) Unfair discrimination. Making or permitting anyunfair discrimination between individuals of the same class and equalexpectation of life in the rates charged for any policy of life insurance or oflife annuity or in the dividends or other benefits payable on any such policyor life annuity, or in any other of the terms and conditions of the policy; or
(ii) Making or permitting any unfair discrimination betweenindividuals of the same class and of essentially the same hazard in the amountof premium, policy fees, or rates charged for any policy or contract ofaccident or health insurance or in the benefits payable under any policy orcontract, or in any of the terms or conditions of that policy, or in any othermanner;
(iii) Making or permitting any unfair discrimination betweenindividuals or risks of the same class and of essentially the same hazards byrefusing to issue, refusing to renew, canceling, or limiting the amount ofinsurance coverage on a property or casualty risk because of the geographiclocation of the risk, unless:
(A) The refusal, cancellation, or limitation is for abusiness purpose that is not a pretext for unfair discrimination; or
(B) The refusal, cancellation, or limitation is required bylaw or regulation;
(iv) Making or permitting any unfair discrimination betweenindividuals or risks of the same class and of essentially the same hazards byrefusing to issue, refusing to renew, canceling, or limiting the amount ofinsurance coverage on a residential property risk, or the personal propertycontained in the residential property risk, because of the age of theresidential property, unless:
(A) The refusal, cancellation, or limitation is for abusiness purpose that is not a pretext for unfair discrimination; or
(B) The refusal, cancellation, or limitation is required bylaw or regulation;
(v) Refusing to insure, refusing to continue to insure, orlimiting the amount of coverage available to an individual because of the sexor marital status of the individual; nothing in this subsection shall prohibitan insurer from taking marital status into account for the purpose of definingpersons eligible for dependent benefits; or
(vi) To terminate, or to modify coverage, or to refuse toissue or refuse to renew any property or casualty policy solely because theapplicant or insured or any employee of either is mentally or physicallyimpaired; provided, that this subsection shall not apply to accident and healthinsurance sold by a casualty insurer and, provided that this subsection shallnot be interpreted to modify any other provision of law relating to thetermination, modification, issuance or renewal of any insurance policy orcontract;
(8) Rebates. Except as otherwise expressly provided bylaw, knowingly permitting or offering to make or making any policy or agreementas to the policy other than as plainly expressed in the policy issued on it, orpaying or allowing or giving or offering to pay, allow, or give, directly orindirectly, as inducement to the policy, any rebate of premiums payable on thepolicy, or any special favor or advantage in the dividends or other benefits onthe policy, or any valuable consideration or inducement not specified in thepolicy, or giving, selling, or purchasing or offering to give, sell, orpurchase as inducement to the policy, or in connection with the policy, anystocks, bonds, or other securities of any insurance company or othercorporation, association, or partnership, or any dividends or profits accruedon the security, or anything of value not specified in the policy;
(ii) Nothing in subdivision (7) of this section or paragraph(i) of this subdivision shall be construed as including within the definitionof discrimination or rebates any of the following practices:
(A) In the case of any contract of life insurance policies orlife annuity, annuities paying bonuses to policyholders or abating theirpremiums in whole or in part out of surplus accumulated from nonparticipatinginsurance; provided, that any bonuses or abatement of premiums shall be fairand equitable to policyholders and for the best interests of the company andits policyholders;
(B) In the case of life insurance policies issued on theindustrial debit plan, making allowance to policyholders who have continuouslyfor a specified period made premium payments directly to an office of theinsurer in an amount which fairly represents the saving in collection expenses;and
(C) Readjustment of the rate of premium for a group insurancepolicy based on the loss or expense experience under it, at the end of thefirst or any subsequent policy year of insurance under the policy, which may bemade retroactive only for the policy year;
(9) Free choice of insurance producer or insurer. Whenany person, firm, or corporation engaged in the business of lending money onthe security of real or personal property, or in the business of negotiating,purchasing, selling, or holding loans on the security of real property, or inthe business of building, selling, or financing the sale or purchase of realproperty, or any trustee, director, officer, agent, or other employee of thatperson, firm, or corporation, requires that property insurance be procured forthe property, the borrower, debtor, or purchaser shall have free choice ofinsurance producer and insurer through or by which the insurance is to beplaced or written, subject only to the right of the builder, creditor, lender,or seller:
(A) To require evidence, to be produced at a reasonable timeprior to commencement or renewal of risk, that the insurance providingreasonable coverage has been obtained in an amount equal to the amount requiredby the builder, creditor, lender, or seller;
(B) To require insurance in an insurer authorized to dobusiness and having a licensed resident insurance producer agent in this state;and
(C) To refuse to accept insurance in a particular insurer onreasonable grounds related to solvency;
(ii) When any contractor or subcontractor is required toprocure a surety bond or policy of insurance with respect to any building orconstruction contract which is about to be, or which has been bid or enteredinto, the contractor or subcontractor shall have free choice of insuranceproducer and insurer through or by which the surety bond or insurance is to bewritten; provided, that the owner or contractor shall have the right: (A) torequire evidence, to be produced at a reasonable time prior to commencement orrenewal of risk, that the insurance providing reasonable coverage has beenobtained in an amount equal to the amount required by the builder, creditor,lender, or seller; (B) to require insurance in an insurer authorized to dobusiness and having a licensed resident insurance producer in this state; and(C) to refuse to accept insurance in a particular insurer on reasonable groundsrelated to solvency; provided, that the owner or contractor shall have theright to approve the form, sufficiency, or manner of execution of the suretybond or policy or insurance furnished by the insurance company or insuranceproducer selected by the contractor or subcontractor;
(iii) No person who lends money or extends credit may:
(A) Solicit insurance for the protection of real propertyafter a person indicates interest in securing a first mortgage credit extensionuntil that person has received a commitment in writing from the lender as to aloan or credit extension;
(B) Unreasonably reject a policy furnished by the borrowerfor the protection of the property securing the creditor lien. A rejectionshall not be deemed unreasonable if it is based on reasonable standards,uniformly applied, relating to the extent of coverage required and thefinancial soundness and the services of an insurer. The standards shall notdiscriminate against any particular type of insurer, nor shall the standardscall for rejection of a policy because it contains coverage in addition to thatrequired in the credit transaction;
(C) Require that any borrower, mortgagor, purchaser, insurer,or insurance producer pay a separate charge, in connection with the handling ofany policy required as security for a loan on real estate, or pay a separatecharge to substitute the policy of one insurer for that of another. Thissubsection does not include the interest that may be charged on premium loansor premium advancements in accordance with the terms of the loan or creditdocument;
(D) Use or disclose, without the prior written consent of theborrower, mortgagor, or purchaser taken at a time other than the making of theloan or extension of credit, information relative to a policy which is requiredby the credit transaction, for the purpose of replacing the insurance; or
(E) Require any procedures or conditions of duly licensedinsurance producers or insurers not customarily required of those insuranceproducers or insurers affiliated or in any way connected with the person wholends money or extends credit;
(iv) Every person who lends money or extends credit and whosolicits insurance on real and personal property subject to paragraph (iii) ofthis subdivision shall explain to the borrower in writing that the insurancerelated to the credit extension may be purchased from an insurer or insuranceproducer of the borrower's choice, subject only to the lender's right to rejecta given insurer or insurance producer as provided in paragraph (iii)(B) of thissubdivision. Compliance with disclosures as to insurance required by truth inlending laws or comparable state laws shall be compliance with this subsection;
(v) This requirement for a commitment shall not apply incases where the premium for the required insurance is to be financed as part ofthe loan or extension of credit involving personal property transactions;
(vi) The commissioner shall have the power to examine andinvestigate those insurance related activities of any person or insurer thatthe commissioner believes may be in violation of this section. Any affectedperson may submit to the commissioner a complaint or material pertinent to theenforcement of this section;
(vii) Nothing in this section shall prevent a person wholends money or extends credit from placing insurance on real or personalproperty in the event the mortgagor, borrower, or purchaser has failed toprovide required insurance in accordance with the terms of the loan or creditdocument;
(viii) Nothing contained in this section shall apply tocredit life or credit accident and health insurance.
(10) Notice of free choice of insurance producer orinsurer. Every debtor, borrower, or purchaser of property with respect towhich insurance of any kind on the property is required in connection with adebt or loan secured by the property or in connection with the sale of theproperty, shall be informed in writing by the builder, creditor, lender, orseller, of his or her right of free choice in the selection of the insuranceproducer and insurer through or by which the insurance is to be placed. Thereshall be no interference, either directly or indirectly, with the borrower's,debtor's, or purchaser's free choice of an insurance procedure and of aninsurer which complies with the requirements of this section, and the builder,creditor, lender, seller, owner, or contractor shall not refuse the policytendered by the borrower, debtor, purchaser, contractor, or subcontractor. Uponnotice of any refusal of the tendered policy, the insurance commissioner shallorder the builder, creditor, lender, seller, owner, or contractor to accept thetendered policy, if the commissioner determines that the refusal is not inaccordance with the requirements of this section. Failure to comply with anorder of the insurance commissioner shall be deemed a violation of this section;
(11) Using insurance information to detriment ofanother. Whenever the instrument requires that the purchaser, mortgagor, orborrower furnish insurance of any kind on real property being conveyed or iscollateral security to a loan, the mortgagee, vendor, or lender shall refrainfrom disclosing or using any and all insurance information to his or her or itsown advantage and to the detriment of either the borrower, purchaser,mortgagor, insurance company, or agency complying with the requirementsrelating to insurance;
(12) Prohibited group enrollments. No insurer shalloffer more than one group policy of insurance through any person unless thatperson is licensed, at a minimum, as an insurance producer. This prohibitionshall not apply to employer-employee relationships, or to any of theseenrollments;
(13) Failure to maintain complaint handlingprocedures. No insurer shall fail to maintain a complete record of all thecomplaints it received since the date of its last examination pursuant to thegeneral laws providing for examination of insurers. This record shall indicatethe total number of complaints, their classification by line of insurance, thenature of each complaint, the disposition of each complaint, and the time ittook to process each complaint. For the purposes of this subsection,"complaint" means any written communication primarily expressing a grievance;
(14) Misrepresentation in insurance applications.Making false or fraudulent statements or representations on or relative to anapplication for a policy, for the purpose of obtaining a fee, commission,money, or other benefit from any insurers, insurance producer, or individualperson; and
(15) Requiring that repairs be made to an automobile at aspecified auto body repair shop or interfering with the insured's or claimant'sfree choice of repair facility. The insured or claimant shall be promptlyinformed by the insurer of his or her free choice in the selection of an autobody repair shop. Once the insured or claimant has advised the insurer that anauto body repair shop has been selected, the insurer may not recommend that adifferent auto body repair shop be selected to repair the automobile. An autobody repair shop may file a complaint with the department of businessregulation alleging a violation of this subdivision (15). Whenever thedepartment of business regulation has reason to believe that an insurer hasviolated this subdivision (15), the department shall conduct an investigationand may convene a hearing. A complaint filed by an auto body repair shop mustbe accompanied by a statement written and signed by the insured or claimantsetting forth the factual basis of the complaint, and the insured or claimantmust voluntarily appear and testify at any administrative proceedings on thecomplaint.