Transcript Coverage Issues: Pennsylvania Unfair Insurance Practices

Coverage Issues:
Pennsylvania Unfair Insurance Practices
Act, Unfair Claims Settlement Practices
Regulations, Reservation of Rights Letters
and Non-Waiver Agreements and Excess
Verdict Issues
Presented to:
PAMIC – APRIL 5, 2006
Krista F. Fiore, Esquire
Michael S. Saltzman, Esquire
FINEMAN, KREKSTEIN & HARRIS, P.C.
www.finemanlawfirm.com
PART 1:
UNFAIR CLAIMS SETTLEMENT PRACTICES
(REGULATIONS)
Section 146.1 Scope Of The Act
Section 146.2 Definitions
Section 146.3 File And Record
Documentation
Section 146.4 Misrepresentation
Of Policy Provision
TIME LIMITATIONS
UNDER THE REGULATIONS
Section 146.5 Failure To Acknowledge
Pertinent Communications - Time Limits
 Ten working days - notification of claim
 Fifteen working days - insurance
department inquiry
 Ten working days - reply period
 Ten working days - reply period for
first-party claims
TIME LIMITATIONS UNDER
THE REGULATIONS
Section 146.6
Standards For Prompt
Investigation Of Claims Time Limits
Investigation complete
within 30 days, or if not
complete, report to
insured every 45 days
thereafter
TIME LIMITATIONS UNDER
THE REGULATIONS
Section 146.7 Standards For Prompt, Fair
And Equitable Settlements Applicable To
Insurers
 Acceptance or denial of claim - first-party
claims
• Fifteen working days
• Fraud exception - reasonable time
The forty-five day cycle - first-party
claims
 Unrepresented claimants - Statute of
Limitations

OTHER CONSIDERATIONS
Section 146.8 Standards For Prompt, Fair
And Equitable Settlements Applicable To
Automobile Insurance
 Section 146.9 Comparative Negligence

PART 2:
Unfair Insurance
Practices Act
40 P.S. § 1171.1 (2005)
Regulation of insurance
business and definitions of
unfair methods of
competition and unfair or
deceptive acts
UNFAIR METHOD OF
COMPETITION OR UNFAIR OR
DECEPTIVE ACTS OR PRACTICES

Connection with Unfair Insurance
Practices Act Regulations
 Investigation
 Determination of coverage
 Settlements
 Failure to settle
 Inducement to settle
PROCEDURES

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

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Investigation by
commissioner
Administrative hearing
Administrative penalty
Injunction
Civil penalties
PART 3:
Examples Of How The Unfair Insurance
Practices Act And Unfair Claims Settlement
Practices Regulations Have Been Used In
Bad Faith Litigation
BAD FAITH ISSUES
No private cause of action under the UIPA
or UCSP
 Insurance Commissioner, exclusive
jurisdiction
 Allegations of violations do not amount to
bad faith
 Violations will be considered in
determining bad faith, and breaches of
covenant of good and fair dealing

BAD FAITH ISSUES
An insurer can be liable for
bad faith if it fails to conduct
a good faith investigation
and/or neglects to
communicate promptly with
the insured
 Cases have held that
technical violations do not
constitute bad faith
 Better to be safe than sorry

THE IMPACT OF UIPA AND
UCSP ON DISCOVERY
Plaintiffs can ascertain procedures for
implementing standards of UIPA and UCSP
 Can an expert testify to standards?

IMPACT OF UIPA AND UCSP
ON DAMAGES
CLOSING THOUGHTS
PART 4:
Non-waiver Agreements
And Reservation Of
Rights Letters
Notifying the insured of
coverage issues
REQUIREMENTS
Communicated to the
insured
 Fairly inform the insured
of the insurer's position
 Timeliness

COMMUNICATED TO THE INSURED

Send to individual
insured or president of
corporation

Trustee in bankruptcy
also effective
FAIRLY INFORM THE INSURED
OF THE INSURER'S POSITION
Identify the potential coverage disputes
• Inform the insured that there is the
potential that it could incur liability for
any non-covered claim
• Acknowledge that the company is
investigating and/or defending the claim
without surrendering its right to disclaim
coverage for any non-covered claim
•
TIMELINESS
Insurers should
issue letter
promptly
 Insured must
establish prejudice
by failing to timely
issue letter
 Test of timeliness
is reasonableness

CONCLUSION
Reservation of rights and non-waiver
agreements are useful tools
 Permits insurer to investigate while
underlying case proceeds
 Courts will enforce them

PART 5:
EXCESS VERDICT ISSUES
AVOIDING BAD FAITH
Risk of liability
 Range of adverse verdict
 Strengths and weaknesses
of evidence
 History of cases in
geographic area
 Appearances of all parties

RELATIONSHIP BETWEEN EXCESS
INSURER AND PRIMARY INSURER
No direct contract with each other
 Doctrine of equitable subrogation

DUTIES OF PRIMARY CARRIER
IN EXCESS CASES
Notify insured
 Notify excess carrier
 Notify both insured and
excess carrier of
underlying case
