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Introduced Version Senate Bill 418 History

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sb418 intr
Senate Bill No. 418

(By Senators Tomblin, Mr. President, and Sprouse,

By Request of the Executive)

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[Introduced March 1, 2005; referred to the Committee

on Banking and Insurance; then to the Committee on the Judiciary; and then to the Committee on Finance.]

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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 and reenact §33-20-4 of said code, 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 §33-20-4 of said code be amended and reenacted, 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 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, section 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) No further action shall lie, either by the Commissioner or by the third party claimant if, within sixty days after receiving notice from the Commissioner pursuant to subdivision (3) of this subsection, the person has substantially corrected the circumstances giving rise to the violation.
(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 section 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 such investigation as 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 such administrative action as he or she deems 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 such 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 subsection (b) of this section that the complaint filed under such section 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 such administrative action as he or she considers appropriate in accordance with section six of this article or as otherwise provided in this chapter. Such 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 an 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 person to cease and desist from engaging in such 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 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 such unfair claims settlement practices with such frequency as to indicate a general business practice.
(b) (d) Revoke or suspend the license of such 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 such order as is provided in section fourteen, article two of this chapter.
(c) (f) No order of the Commissioner pursuant to this article or order of court to enforce it, or holding of a hearing, shall in any manner relieve or absolve any person affected by such order or hearing from any other liability, penalty or forfeiture under law. §33-20-4. Rate filings.
(a) 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.
(a) (b) (1) Every insurer shall file with the Commissioner every manual of classifications, territorial rate areas established pursuant to subdivision (2), subsection (c), section three of this article, rules and rates, every rating plan and every modification of any of the foregoing which it proposes to use for casualty insurance to which this article applies.
(2) Every insurer shall file with the Commissioner, except as to inland marine risks which by general custom of the business are not written according to manual rates or rating plans, every manual, minimum, class rate, rating schedule or rating plan and every other rating rule and every modification of any of the foregoing which it proposes to use for fire and marine insurance to which this article applies. Specific inland marine rates on risks specially rated, made by a rating organization, shall be filed with the Commissioner.
(b) (c) Every such filing shall state the proposed effective date thereof and shall indicate the character and extent of the coverage contemplated. When a filing is not accompanied by the information upon which the insurer supports such filing, and the Commissioner does not have sufficient information to determine whether such filing meets the requirements of this article, he shall require such insurer to furnish the information upon which it supports such filing and in such event the waiting period shall commence as of the date such information is furnished. The information furnished in support of a filing may include: (1) The experience or judgment of the insurer or rating organization making the filing; (2) the experience or judgment of the insurer or rating organization in the territorial rate areas established by subdivision (2), subsection (c), section three of this article; (3) its interpretation of any statistical data it relies upon; (4) the experience of other insurers or rating organizations; or (5) any other relevant factors. A filing and any supporting information shall be open to public inspection as soon as the filing is received by the Commissioner. Any interested party may file a brief with the Commissioner supporting his position concerning the filing. Any person or organization may file with the Commissioner a signed statement declaring and supporting his or its position concerning the filing. Upon receipt of such statement prior to the effective date of the filing, the Commissioner shall mail or deliver a copy of such statement to the filer, which may file such reply as it may desire to make. This section shall not be applicable to any memorandum or statement of any kind by any employee of the Commissioner.
(c) (d) An insurer may satisfy its obligation to make such filing by becoming a member of, or a subscriber to, a licensed rating organization which makes such filings, and by authorizing the Commissioner to accept such filings on its behalf: Provided, That nothing contained in this article shall be construed as requiring any insurer to become a member of or a subscriber to any rating organization.
(d) (e) The Commissioner shall review filings as soon as reasonably possible after they have been made in order to determine whether they meet the requirements of this article.
(e) (f) Subject to the exceptions specified in subsections (f) (g) and (g) (h) of this section, each filing shall be on file for a waiting period of sixty days before it becomes effective. Upon written application by such insurer or rating organization, the
Commissioner may authorize a filing which he or she has reviewed to become effective before the expiration of the waiting period. A filing shall be deemed to meet the requirements of this article unless disapproved by the Commissioner within the waiting period.
(f) (g) Any special filing with respect to a surety bond required by law or by court or executive order or by order, rule or regulation of a public body, not covered by a previous filing, shall become effective when filed and shall be deemed to meet the requirements of this article until such time as the Commissioner reviews the filing and so long thereafter as the filing remains in effect.
(g) (h) Specific inland marine rates on risks specially rated by a rating organization shall become effective when filed and shall be deemed to meet the requirements of this article until such time as the Commissioner reviews the filing and so long thereafter as the filing remains in effect.
(h) (i) Under such rules and regulations as he or she shall adopt, the Commissioner may, by written order, suspend or modify the requirement of filing as to any kind of insurance, subdivision or combination thereof, or as to classes of risks, the rates for which cannot practicably be filed before they are used. Such orders, rules and regulations shall be made known to insurers and rating organizations affected thereby. The Commissioner may make such examination as he may deem advisable to ascertain whether any rates affected by such order meet the standards set forth in subsection (b), section three of this article.
( i) (j) Upon the written application of the insured, stating his reasons therefor, filed with and approved by the Commissioner, a rate in excess of that provided by a filing otherwise applicable may be used on any specific risks.
(j) (k) No insurer shall make or issue a contract or policy except in accordance with the filings which are in effect for said insurer as provided in this article or in accordance with subsection (h) (i) or (i) (j) of this section. This subsection shall not apply to contracts or policies for inland marine risks as to which filings are not required.
(k) (l) In instances when an insurer files a request for an increase of automobile liability insurance rates in the amount of fifteen percent or more, the Insurance Commissioner shall provide notice of such increase with the office of the Secretary of State to be filed in the State Register and shall provide interested persons the opportunity to comment on such request up to the time the Commissioner approves or disapproves such rate increase.



NOTE: The purpose of this bill is to provide for insurance reform by expanding and providing for funding, and expanded powers for the office of consumer advocacy; to eliminate a cause of action for an unfair claims settlement practice by third parties; to provide administrative remedies for such third parties and provide for greater administrative penalties for unfair claims settlement practices; to provide for biannual rate filings by certain insurers; and to limit an insurer from including certain expenses in a rate base.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.

§33-11-4a is new; therefore, strike-throughs and underscoring have been omitted.
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