Every state has laws that prohibit unfair, discriminatory, or deceptive insurance practices. These regulations are normally encompassed as statutes or regulations enacted to protect insurance consumers. Pennsylvania has a statute enacted called the “Unfair Insurance Practices Act,”1 This law gives the consumer the right to file complaints against their insurance company to be investigated by the Insurance Department. However, this statute specifically prohibits a private cause of action against insurance companies by the public.
Under the Pennsylvania Unfair Insurance Practices Act, an Insurer must not use “unfair methods of competition” and/or “unfair or deceptive acts or practices” when handling or adjusting claims. The list of regulations an insurance company must follow is long. Some of the more interesting ones are that an insurance company must not:
- Misrepresent the benefits, advantages, conditions or terms of any insurance policy;
- Misrepresent pertinent facts or policy or contract provisions relating to coverages at issue;
- Fail to acknowledge and act promptly upon written or oral communications with respect to claims arising under insurance policies;
- Refuse to pay claims without conducting a reasonable investigation based upon all available information;
- Fail to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed and communicated to the company or its representative;
- Not attempt in good faith to effectuate prompt, fair and equitable settlements of claims in which the company’s liability under the policy has become reasonably clear;
- Compel persons to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts due and ultimately recovered in actions brought by such persons;
- Attempt to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application.2
These are just some of the defined unfair or deceptive acts or practices an insurance company must not engage in during the claims process. Unfortunately, many insurance companies employ some of the very defined terms that are prohibited by the statute in the claims handling process. The shortfall with the statute is that it gives wide authority only to the Insurance Department to investigate and prosecute violations, thereby rarely resulting in actual findings and fines against insurance companies.
Recently, however, the Commonwealth Court of Pennsylvania addressed whether an insurer violated the Unfair Insurance Practices Act by cancelling the insured’s homeowners insurance policy due to her failure to make repairs to a chimney shared with an adjoining home. The court held that the cancellation violated the Act because the insured attempted to make the repairs—and did make the repairs to the portion of the chimney on her property—but she was unable to repair the entire chimney because her neighbor refused to cooperate, making the repair an impossible task. The Commonwealth Court affirmed the Insurance Department’s Order forcing the insurer to reinstate the insured’s homeowner policy.3
If you believe your claim is being unfairly or deceptively handled by your insurance company, you can read a read recent blog post by fellow Merlin Law Group attorney Dan Ballard on, How To File A Complaint With The Pennsylvania Department of Insurance About Your Delaying, Denying and Bad Treating Insurance Company.
1 40 P.S. Section 1171.1 et seq.
2 40 P.S. Insurance § 1171.5.
3 Frederick Mutual Ins. Co., v. Pennsylvania Insurance Department, No. 1528 C.D. 2018 (Pa. Cmwlth. June 21, 2019).