The Washington insurance commissioner has overhauled minimum standards for insurance company claims handling by adopting a new rule. 

The changes, effective Oct. 18, are extensive and include tightening timelines, along with estimating and short-payment disclosures. 

“While the state’s total number of automobile and homeowners’ insurance claims has remained consistent over the past six years, the insurance commissioner has received an increase in consumer complaints and Insurance Fair Conduct Act notices, which indicate a consumer’s intent to sue their insurer,” the Washington Office of the Insurance Commissioner states on its website regarding the rule revision. “The spike in consumer complaints and lawsuits against insurers indicates potential insurance code violations.”

The rulemaking updates and clarifies requirements needed to maintain a fair claims environment for consumers that will provide transparency, the website states. 

Rule changes clarify that a reasonable investigation may not rely solely on database use, including, but not limited to, estimating software and benchmarks gathered from one or multiple databases.

It also states that a claimant cannot be treated differently because they are represented by a public adjuster, adding that this includes, but is not limited to, failure to recognize a public adjuster as the legal representative of the insured, or failure to timely provide the requested pertinent claim information and insurance policy to either the insured, the public adjuster, or both.

Insurance companies also would be restricted from requiring an appraiser, functioning under the appraisal clause, to adjust their actual cash value, valuation of loss, or both, at any time during the appraisal process. 

When it comes to transparency, consumers would have the right to request and receive any portion of their first-party claim file at reasonable intervals, and the insurance company would be required to respond within 15 business days of receipt, the rule states. 

The rule provides extensive examples of what parts of the file consumers can request, including all written reports, claim notes, estimates, bids, plans, measurements, drawings, engineer reports, contractor reports, statements, photographs, video recordings, or any other documents or communications.

If the insurance company determines a request is unreasonable, it must provide written notice to the consumer, the rule states. 

Insurance companies will also be required to notify a consumer in writing if they cannot complete a claim within 30 days and every 30 days after. The notification should include the reasons the company cannot complete the claim. 

Any additional notice after the first 30 days must include a summary of any decisions or actions, including the amount of loss, retention of consultation of service, each item the insurer is waiting for to complete its investigation, and if a new adjuster has been assigned since the last notice. 

The rule restricts insurance companies from failing to make a good-faith effort to inspect a damaged vehicle and reasonably communicate with the consumer and the repair facility chosen by the claimant about the damage and needed repairs. 

It also restricts insurance companies from requiring consumers to agree to only photo-based evaluations. If an insurer cannot document damage in a submitted photograph, it must make reasonable efforts to request additional documentation before rejecting coverage of the submitted damage. 

If a virtual inspection is used and there is a disagreement on the amount of loss, an insurance company must accept a consumer’s request for an in-person inspection, it adds. The inspection must be completed within five business days. 

Insurance companies must also disclose to the consumer that they can request an in-person inspection from an insurance adjuster or chosen repair expert, the rule states. 

Any repair costs in repair estimates that are not covered under the policy must be documented in writing with relevant policy language cited. Consumers must also be provided additional information upon request, including how labor and material costs and the repair process were determined under policy language. 

When an insurance company receives a supplemental damage estimate and final invoice, the company must respond in writing to the consumer and repair facility within five days regarding the determination of amounts covered, the rule states. If any part of the supplemental estimate and final invoice is rejected, the insurer must cite the applicable policy language, it adds. 

Insurance companies must also include the consumer in all communication with the repair facility regarding the original or supplemental estimates and changes to covered items, when requested, the rule states. 

Consumers must be notified in writing within five days of the claim notification about how applicable storage and towing fees are covered under the policy. 

If the insurance company pays less than the estimate from the consumer’s chosen repair facility, the insurance company must “promptly and fully” disclose all reasons it paid less to reject the consumer’s repair estimate or invoice, the rule states. 

Regarding rental coverage, the insurance company shall not limit the ability to use the coverage for the lesser of seven calendar days after payment is sent to the consumer or until the rental coverage is exhausted, if there is an agreed amount of loss and the first-party claimant has rental coverage available. 

If the insurer used the condition of another comparable motor vehicle to reduce the payment to the consumer, the insurance company must provide supporting photographs and documentation to demonstrate its determination, upon request from the consumer. 

If the insurance company makes a deduction of value of the loss vehicle’s condition, it must also provide to the consumer supporting photographs and documentation to demonstrate its determination of the condition. 

Insurance companies must also take several steps before denying a consumer coverage of storage or towing costs. This includes advising the consumer by phone or writing before it stops payment and providing reasonable time for the consumer to move the loss vehicle and pay all reasonable towing charges unless otherwise provided in the applicable insurance policy.

Images

Featured image: Screenshot of Washington Insurance Commissioner Patty Kuderer testifying during a Washington House Consumer Protection and Business Committee meeting.

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