ENGROSSED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 418
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
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[Originating in the Committee on Finance;
reported March 21, 2005.]
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A BILL to amend and reenact §33-2-16 and §33-2-17 of the Code of West Virginia, 1931, as amended; to amend said code by adding thereto a new section, designated §33-11-4a; to amend and reenact §33-11-6 of said code; and to amend said code by adding thereto a new section, designated §33-20-4a, all relating generally to the regulation of insurance; providing that the Director of Consumer Advocacy shall be appointed by the Governor; expanding the authority of the Office of Consumer Advocacy; eliminating a cause of action for unfair claims settlement practices by third parties; establishing procedures for the filing, investigation and processing of administrative complaints by third-party claimants; providing for penalties for engaging in unfair claims settlement practices; and establishing that certain insurers shall submit rate filings biannually.

Be it enacted by the Legislature of West Virginia:
That §33-2-16 and §33-2-17 of the Code of West Virginia, 1931, as amended, be amended and reenacted; that said code be amended by adding thereto a new section, designated §33-11-4a; that §33-11-6 of said code be amended and reenacted; and that said code be amended by adding thereto a new section, designated §33-20-4a, all to read as follows:
ARTICLE 2. INSURANCE COMMISSIONER.

§33-2-16. Office of consumer advocacy established; director of consumer advocacy; promulgation of rules and regulations.

(a) There is hereby created within the agency of the Insurance Commissioner the Office of Consumer Advocacy. The position of Director of the Office of Consumer Advocacy shall be is a full-time position. and The Director shall be appointed by the commissioner Governor for a term of four years to coincide with the term of the Governor and may be discharged only for failure to carry out the duties of the office or for other good and sufficient cause: Provided, That the current Director of the Office of Consumer Advocacy or other appointee of the Commissioner shall continue in the position until the Governor appoints a new Director.
(b) The Insurance Commissioner shall provide office space, equipment and supplies for the office.
(c) The Director shall may promulgate rules pursuant to article three, chapter twenty-nine-a of this code in order to effect the purposes of this section and sections seventeen and section eighteen of this article.
(d) On or before the first day of each regular session of the Legislature, the Director shall file with the Governor, the Clerk of the Senate and the Clerk of the House of Delegates a report detailing the actions taken by the division in the preceding calendar year.

§33-2-17. Authority of Office of Consumer Advocacy; retroactive effect of authority prohibited.

(a) In addition to the authority established under the rules promulgated by the Director, the Office of Consumer Advocacy is authorized to:
(1) Institute, intervene in or otherwise participate in, as an advocate for the public interest and the interests of insurance consumers, proceedings in state and federal courts, before administrative agencies, or before the Health Care Cost Review Authority, concerning applications or proceedings before the Health Care Cost Review Authority or the review of any act, failure to act or order of the Health Care Cost Review Authority;
(2) At the request of one or more policyholders, or whenever the public interest is served, to advocate the interests of those policyholders in proceedings arising out of any filing made with the Insurance Commissioner by any insurance company or relating to any complaint alleging an unfair or deceptive act or practice in the business of insurance;
(3) Institute, intervene in or otherwise participate in, as an advocate for the public interest and the interests of insurance consumers, proceedings in state and federal courts, before administrative agencies, or before the Insurance Commissioner, concerning applications or proceedings before the Commissioner or the review of any act, failure to act or order of the Insurance Commissioner;
(4) Review and compile information, data and studies of the reasonable and customary rate schedules of health care providers and health insurers for the purposes of reviewing, establishing, investigating, or supporting any policy regarding health care insurance rates;
(5) Exercise all the same rights and powers regarding examination and cross-examination of witnesses, presentation of evidence, rights of appeal and other matters as any party in interest appearing before the Insurance Commissioner or the Health Care Cost Review Authority;
(6) Hire consultants, experts, lawyers, actuaries, economists, statisticians, accountants, clerks, stenographers, support staff, assistants and other personnel necessary to carry out the provisions of this section and sections sixteen and eighteen of this article, which personnel shall be paid from special revenue funds appropriated for the use of the office;
(7) Contract for the services of technically qualified persons in the area of insurance matters to assist in the preparation and presentation of matters before the courts, the Insurance Commissioner, administrative agencies or the Health Care Cost Review Authority, which persons shall be paid from special revenue funds appropriated for the use of the office;
(8) Make recommendations to the Legislature concerning legislation to assist the office in the performance of its duties;
(9) Communicate and exchange data and information with other federal or state agencies, divisions, departments, or officers and with other interested parties, including, but not limited to, health care providers, insurance companies, consumers or other interested parties; and
(10) Perform other duties to effect the purposes of the office.
(b) The provisions of this section do not apply to any filing made by an insurance company, or act or order performed or issued by the Commissioner, or complaint filed by a policyholder with the Commissioner prior to the thirtieth day of June, one thousand nine hundred ninety-one. All proceedings and orders in connection with these prior matters shall be governed by the law in effect at the time of the filing, or performance or issuance of the act or order.
(c) The scope of authority granted under this section and section sixteen of this article is restricted to matters related to health care costs and health insurance policies, subscriber contracts issued by organizations under article twenty-four of this chapter, health care corporations under article twenty-five of this chapter, health maintenance organizations under article twenty-five-a of this chapter, contracts supplemental to health insurance policies, and other matters related to health insurance issues identified by rules of the commissioner promulgated under section one of this article and chapter twenty-nine-a of this code.
ARTICLE 11. UNFAIR TRADE PRACTICES.

§33-11-4a. Complaints by third-party claimants; elimination of private cause of action.

(a) A third-party claimant may not bring a private cause of action or any other action against any person for an unfair claims settlement practice, except as otherwise set forth in this section. A third-party claimant's sole remedy against a person for an unfair claims settlement practice or the bad faith settlement of a claim is the filing of an administrative complaint with the Commissioner in accordance with subsection (b) of this section.
(b) A third-party claimant may file an administrative complaint against a person for an alleged unfair claims settlement practice with the Commissioner. The administrative complaint shall be filed as soon as practicable but in no event later than one year following the actual or implied discovery of the alleged unfair claims settlement practice.
(1) The administrative complaint shall be on a form provided by the Commissioner and shall state with specificity the following information and such other information as the Commissioner may require:
(A) The statutory provision, if known, which the person allegedly violated;
(B) The facts and circumstances giving rise to the violation;
(C) The name of any individual or other entity involved in the violation; and
(D) Reference to specific policy language that is relevant to the violation, if known.
(2) If the administrative complaint is deficient, the Commissioner shall contact the third-party claimant within fifteen days of receipt of the complaint to obtain the necessary information.
(3) Upon receipt of a sufficiently complete administrative complaint, the Commissioner must provide the person against whom the administrative complaint is filed written notice of the alleged violation.
(4) If the person against whom the administrative complaint was filed substantially corrects the circumstances giving rise to the violation within sixty days after receiving the notice from the Commissioner pursuant to subdivision (3) of this subsection, the Commissioner shall close the complaint and no further action shall lie on the matter, either by the Commissioner or by the third party.
(5) The person that is the recipient of a notice from the Commissioner pursuant to subdivision (3) of this subsection shall report to the Commissioner on the disposition of the alleged violation within fifteen days of the disposition but no later than sixty days from receipt of notice of the complaint from the Commissioner.
(6) If the third-party claim is not resolved within the sixty- day period described in subdivision (4) of this subsection through either the person's substantial correction of the circumstances giving rise to the alleged violation or an offer from the person to resolve the administrative complaint that is found to be reasonable by the Commissioner, the Commissioner shall conduct any investigation he or she considers necessary to determine whether the allegations contained in the administrative complaint are meritorious. In the event that the Commissioner finds that the allegations contained in the administrative complaint are meritorious, after providing the person with a right to a hearing, the Commissioner may proceed, in his or her discretion, to take any administrative action he or she considers appropriate in accordance with section six of this article or as otherwise set forth in this chapter.
(7) If the Commissioner finds the administrative complaint to be meritorious, the Commissioner, in his or her discretion, may conduct a further investigation to determine if the person has committed an unfair claims settlement practice with such frequency as to constitute a general business practice. The Commissioner shall only proceed if a determination is made by the Commissioner pursuant to this subsection that the complaint is meritorious. If the Commissioner finds that the person has committed the unfair claim settlement practice with such frequency as to constitute a general business practice, the Commissioner may proceed to take administrative action he or she considers appropriate in accordance with section six of this article or as otherwise provided in this chapter. The person is entitled to notice and hearing in connection with the administrative proceeding, which may be combined with the notice and hearing provided in subdivision (6) of this subsection.
(c) A finding by the Commissioner that the actions of a person constitute a general business practice may only be based on the existence of substantially similar violations in a number of separate claims or causes of action.
(d) A good faith disagreement over the value of an action or claim or the liability of any party to any action or claim is not an unfair claims settlement practice.
(e) A third-party claimant may not include allegations of unfair claims settlement practices in his or her underlying litigation against an insurer.
(f) The Commissioner, pursuant to article three, chapter twenty-nine-a of this code, may promulgate by emergency rule standards for subsection (9), section four of this article.
(g) Nothing in this section in any way limits the rights of the Commissioner to investigate and take action against a person which the Commissioner has reason to believe has committed an unfair claims settlement practice or has consistently resolved administrative complaints by third-party claimants within the sixty-day period set forth in subdivision (4), subsection (b) of this section.
(h) Definitions:
(1) "Third-party claimant" means any individual, corporation, association, partnership or any other legal entity asserting a claim against any individual, corporation, association, partnership or other legal entity insured under an insurance policy or insurance contract for the claim in question.
(2) "Unfair claims settlement practice" means a violation of subsection (9), section four of this article.
(3) "Underlying litigation" means a third-party claimant's lawsuit involving a claim against an insured.
(4) "Underlying claim" means the claim by a third-party claimant against an insured.

§33-11-6. Violations, cease and desist and penalty orders and modifications thereof.

If, after notice and hearing, the Commissioner determines that any person has engaged in or is engaging in any method of competition, act or practice in violation of the provisions of this article or any rules or regulations promulgated by the Commissioner thereunder, the Commissioner shall issue an order directing such the person to cease and desist from engaging in such the method of competition, act or practice and, in addition thereto, the Commissioner may at his or her discretion order any one or more of the following:
(a) Require the payment to the State of West Virginia of a penalty in a sum not exceeding one thousand dollars for each and every act or violation, but not to exceed an aggregate penalty of ten thousand dollars, unless the person knew or reasonably should have known he or she was in violation of this article, in which case the penalty shall be not more than exceed five thousand dollars for each and every act or violation, but not to exceed an aggregate penalty of fifty one hundred thousand dollars in any six- month period.
(b) In the event the act involves an intentional violation of subdivision (9), section four of this article, and even though it has not been established that the person engaged in a general business practice, require the payment to the State of West Virginia of a penalty in a sum not to exceed ten thousand dollars.
(c) Require the payment to the State of West Virginia of a penalty in a sum not exceeding two hundred fifty thousand dollars if the Commissioner finds that the insurer committed or performed unfair claims settlement practices with such frequency as to indicate a general business practice.
(b) (d) Revoke or suspend the license of such any person if he or she knew, or reasonably should have known, that he or she was in violation of this article.
(e) Any person aggrieved by an order of the Commission under this article may seek judicial review of the order as provided in section fourteen, article two of this chapter.
(c) (f) No order of the Commissioner pursuant to this article or order of any court to enforce it, or holding of a hearing, shall in any manner relieve or absolve any person affected by such the order or hearing from any other liability, penalty or forfeiture under law.

ARTICLE 20. RATES AND RATING ORGANIZATIONS.

§33-20-4a. Biannual rate filings for certain insurance lines.
On or before the first day of July, two thousand five, the Commissioner shall promulgate legislative rules pursuant to article three, chapter twenty-nine-a of this code establishing procedures whereby each insurer providing five percent or more of insurance coverage in this state for private passenger automobile insurance and property insurance obtained for personal or family needs shall biannually submit rate filings required under this section: Provided, That the requirements under this subsection shall terminate on the first day of July, two thousand nine.