Insurance companies have a legal obligation to provide services in good faith and fulfill contractual obligations with basic standards of honesty and fair dealing.
What is the Unfair Claims Settlement Practices Act?
The Unfair Claims Settlement Practices Act (UCSPA) was established to protect insurance buyers from unfair claim settlements. The National Association of Insurance Commissioners created the act to provide guidance for states to regulate insurance carriers and protect consumers. The UCSPA sets standards and regulations for investigation and disposition of claims related to insurance policies and certificates. The act has been adopted in most states, although specifics may vary between states.
The UCSPA regulates insurance carriers’ actions related to three separate categories – claims investigations, claims responses, and bad faith practices.
Claims Investigations
Insurance carriers are required to establish and implement reasonable standards for prompt investigation of all insurance claims. Insurers are prohibited from denying claims and payments without performing an investigation into the claims request.
Claims Responses
Under the ACSPA, insurance carriers are required to act promptly when a policyholder presents a claim. An insurer must provide necessary forms for a claim recovery request within 15 days of the request. All claims must be either accepted or denied within a reasonable time period since insurers are prohibited from delaying claim investigations and payments. If an insurer denies a claim or offers a settlement, they must give valid explanations for their actions based on the policy holder’s contractual agreement that outlines coverage.
Bad Faith Practices
The UCSPA prohibits insurance carriers from the following actions:
- Materially altering claim requests
- Misrepresenting facts or insurance policy provisions
- Attempting to settle claims for less than a reasonable amount
- Offering unfair settlement amounts to force litigation
- Denying claims or settling claims when liability is clear
The UCSPA was first adopted in Nevada in 1975. Since then, it has had several amendments that impact state laws. The Nevada Unfair Claims Settlement Practices Act is unique because it grants first-party claimants a private right of action to enforce violations and recover damages that arise from unfair actions. Victims of insurance bad faith actions may be able to recover monetary damages through a lawsuit with an insurance claim lawyer. Damages may include financial loss or distress, emotional distress, and loss of insurance benefits caused by wrongful claim denial. Nevada is one of only 10 states that allows a private right of action for violations of the UCSPA.