Nevada’s Unfair Claims Settlement Practices ActA Primer on NRS 686A.310

Do You Want Others Imposing Their Standards On You?

Examples Of Industry Attempts At Self Regulation

•Banking & Lending▫Uniform Commercial Code

•Corporate Financing & Investment▫Uniform Securities Act

•Business▫Uniform Trade Secrets Act

Where Does Insurance Industry Turn For Regulatory Leadership?

NAIC Model Law:Unfair Claims Settlement Practice Act•Every State In The Nation Has Some Sort

of Insurance Claims Regulation Act•Nevada Adopted A Version Of The Act In

1975•Title of Nevada’s Law “Unfair Practices In

Settling Claims•Found at NRS 686A.310

UCSPA Violation ≠ Bad Faith“The Nevada Unfair Practices Act focuses upon different conduct than does the common law tort of bad faith. The statute proscribes specific actions taken by an insurer which Nevada has deemed to be unfair whether or not they are related to a denial of insurance benefits. . . . While the statute and the common law may overlap to a limited extent, the statute reaches different conduct than that which is contemplated by the common law tort.”

Hart v. Prudential Prop & Cas. Ins. Co., 848 F. Supp 990 (D. Nev. 1994)

Nevada’s UCSPA Creates A Private Right Of Action

NAIC Model Act Nevada’s UCSPA

•In Section 1:The purpose of this Act is to set forth standards for the investigation and disposition of claims arising under policies or certificates of insurance issued to residents of [insert state]. . . . Nothing herein shall be construed to create or imply a private cause of action for violation of this Act.

• NRS 686A.310 (2)2. In addition to any rights

or remedies available to the Commissioner, an insurer is liable to its insured for any damages sustained by the insured as a result of the commission of any act set forth in subsection 1 as an unfair practice.

To Whom Does The Law Apply?

NRS 686A.310(2) says that an “insurer” is liable to its insured for any damages sustained by the insured as a result of the commission of any act set forth in subsection 1 as an unfair practice.

NRS 679A.100 “Insurer” defined. “Insurer” includes every person engaged as principal and as indemnitor, surety or contractor in the business of entering into contracts of insurance.

But Independent Insurance Adjusters May Also Be Liable

NRS 684A.035 Applicability of other provisions of NRS

1. The provisions of NRS 683A.341 and 686A.310 apply to adjusters and associate adjusters.

2. . . .[A]ny reference in those sections to “producer of insurance” or “insurer” must be replaced by a reference to “adjuster” or “associate adjuster.”

Nevada’s Rule:One Strike And You’re Out!NAIC’s Model Act Nevada’s UCSPA

“It is an improper claims practice for a domestic, foreign or alien insurer transacting business in this state to commit an act defined in Section 4 of this Act if:A. It is committed flagrantly and in conscious disregard of this Act or any rules promulgated hereunder; orB. It has been committed with such frequency to indicate a general business practice to engage in that type of conduct.”

•NRS 686A.310(1)Engaging in any of the following activities is considered to be an unfair practice:

One Strike Modifiers!NRS 686A.270 NRS 686A.310

• The insurance company is not guilty of a violation of the act if the act was done by an agent, solicitor or employee and an officer, director or department head did not permit the act or had no prior knowledge of it.

• Many of the subsections use plural and not singular references (claims or insureds) to define the prohibited acts. If that is the case for the subsection alleged, then it can be argued that there has to be proof of more than one act to constitute a violation.

List Of The Prohibited Acts Skew In Favor Of ClaimantsNAIC’s Model Act Nevada’s UCSPA

A. Knowingly misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue;

(a) Misrepresenting to insureds or claimants pertinent facts or insurance policy provisions relating to any coverage at issue.

List Of The Prohibited Acts Skew In Favor Of Claimants (cont.)NAIC’s Model Act Nevada’s UCSPA

D. Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear;

(e) Failing to effectuate prompt, fair and equitable settlements of claims in which liability of the insurer has become reasonably clear.

List Of The Prohibited Acts Skew In Favor Of Claimants (cont.)NAIC’s Model Act Nevada’s UCSPA

K. 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;

(k) Delaying the investigation or payment of claims by requiring an insured or a claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.

List Of The Prohibited Acts Skew In Favor Of Claimants (cont.)NAIC’s Model Act Nevada’s UCSPA

L. Failing in the case of claims denials or offers of compromise settlement to promptly provide a reasonable and accurate explanation of the basis for such actions;

(n) Failing to provide promptly to an insured a reasonable explanation of the basis in the insurance policy, with respect to the facts of the insured's claim and the applicable law, for the denial of the claim or for an offer to settle or compromise the claim

Additional Prohibited Acts Found In Nevada’s USCPA(l) Failing to settle claims promptly, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.(m) Failing to comply with the provisions of NRS 687B.310 to 687B.390, inclusive, or 687B.410

Additional Prohibited Acts Found In Nevada’s UCSPA (cont.)(o) Advising an insured or claimant not to seek legal counsel.(p) Misleading an insured or claimant concerning any applicable statute of limitations.

What Damages Are Possible?•An insurer is liable to its insured for any

damages sustained by the insured as a result of the commission of any act set forth in subsection 1 as an unfair practice.▫Misrepresented policy provision?▫Investigation Delays?▫Failure to Affect Fair Settlements?▫Failure to Provide Reasonable Settlement?▫Telling someone they don’t need attorney?▫Misrepresented SOL?

Regulatory Violations Treated Differently

•NAC 686A.600 Scope and applicability. 1. NAC 686A.600 to 686A.680, inclusive, define certain minimum standards, violations of which, with a frequency which indicates a general business practice, will be deemed to constitute unfair claims settlement practices.

Compare the Regulation’s Language to the Model Act’s LanguageNAIC’s Model Act Nevada’s Regulation

It has been committed with such frequency to indicate a general business practice to engage in that type of conduct

violations of which, with a frequency which indicates a general business practice, will be deemed to constitute unfair claims settlement practices

No “One Strike” Rule Where A RegulatoryViolation Is Involved

What Are Those Corresponding Regulations About?•Unfair Claims Regulations

NAC 686A.600 to 686A.680•Topics Considered:

▫NAC 686A.660 Misrepresenting Policy Provisions

▫NAC 686A.665 Timely Acknowledgment of Claim

▫NAC 686A.670 Investigation of Claim▫NAC 686A.675 Standards Applicable to All

Claims▫NAC 686A.680 Standards Applicable to

Auto Carriers

Conclusion•Nevada’s UCSPA is modeled after the

NAIC’s Unfair Claims Settlement Practices Act.

•Nevada’s UCSPA is different because it creates a Private Right of Action for policyholders.

•Nevada’s UCSPA is unique because it is a “one-strike-you’re-out” rule.

•Nevada has additional prohibited acts not listed in NAIC’s list.

•Regulatory violations must be frequent.

Nevada’s Unfair Claims Settlement Practices ActA Primer on NRS 686A.310(1)