H. B. 2820
(By Mr. Speaker, Mr. Kiss, and Delegate Trump)
[By Request of the Executive]
[Introduced March 1, 2005; referred to the
Committee on Banking and Insurance then the Judiciary.]
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.