Order
Regulations 81, Prompt Payment of Settled Claims
On October 1, 2000, proposed regulation 81 was published in the Register of Regulations in accordance with 29 Del. C. chapters 11 and 101. Additionally, in accordance with 29 Del. C. chapter 101, notices of the public hearing were published throughout the state in two newspapers of general circulation at least twenty days prior to the hearing. A public hearing was held on November 15, 2000 before the hearing officer, William E. Molchen, II. Present at the November 15 hearing were numerous individuals representing healthcare providers, the insurance industry, and the trial bar. The record was left open until November 30, 2000, to allow for the submission of additional comments and/or exhibits by interested parties.
Summary of the Evidence and the Information Submitted
The evidence in this matter consisted of the oral testimony of five individuals, Kathy S. Gravell, on behalf of the Department of Insurance; Joseph W. Weik, representing the Delaware State Bar Association’s Section on Worker’s Compensation; Lars Kristiansen, Director of Legislative Affairs for Nationwide Insurance; Bryan Cochran, Legislative Liaison and Claims Attorney for State Farm Insurance Company; and W. Christopher Componovo, representing the Delaware Trial Lawyers Association. Written comments were received from Nationwide Insurance, State Farm Insurance, Campbell Consulting, Inc. on behalf of Coventry Health Care, and Reed & Smith, LLP on behalf of the Health Insurance Association of America. There was support expressed by those who testified at the hearing for the notion of setting a bright-line standard for the timely payment of settled claims and final judgments. As stated in the proposed regulation, the focus is on the payment of claims upon which there are agreements or court orders as to liability and the amount of money to be paid thereon. Criticisms of the proposed Regulation included, but were not limited to: difficulty in determining when a settlement has occurred or liability is reasonably clear (citing examples of settlements with minors and certain types of fatality claims where a search has to be made for beneficiaries), a failure to include a definition of “bad faith” in the regulation, reconciliation with the provisions of Regulation 80, and that the general business practice standard of three failures to pay claims during any thirty-six (36) month period is too onerous and unreasonable;
Findings of Fact with Respect to the Evidence and Information
Based upon the evidence received in this matter both oral and written, I find that the failure of insurance companies to timely pay claims settled by mutual agreement and court ordered judgments (whether by verdict, stipulation, unappealed arbitration awards, etc.) constitutes a serious problem that adversely affects consumers. I find that concern over determining when a settlement has occurred is unwarranted. This regulation does not address the routine claims procedures of any insurance company. It relates only to situations where the insurer has agreed to liability and amount or is subject to a final court order to pay a claim. In either case, the claim becomes finite and enforceable. The thirty day time limit in which to pay the claim becomes fixed and the obligation of the insurer to make payment in good faith under 18 Del. C. Chapter 23 is clear. If there are questions relating to minors, beneficiaries or other similar circumstances, an insurer has the ability to include such concerns as part of an agreement or may seek appropriate relief in any post-judgment proceeding that may be allowed by the court
Objections based on a failure to define bad faith are not persuasive. The proposed regulation incorporates the good faith standard of 18 Del.C. § 2304(16)(f). Additionally, I have concluded that it should be expressly stated that a violation of this regulation only creates a rebuttable presumption which the insurer may address in any hearing required under 18 Del. C. §§ 2307, 8.
There are several technical, non-substantive revisions to clarify the proposed regulation that do not require re-publication or re-hearing which I incorporate into the final regulation appended hereto.
Decision and Effective Date
I hereby adopt Regulation 81 as modified by the changes appended hereto to be effective thirty days following final publication in the Register of Regulations.
Text and Citation
The text of Regulation 81 appears in the Register of Regulations Vol. 4, Issue 4, October 1, 2000 as modified by the changes of authority in Section 1, the further definition of agreement or order in Sections 4 and 5, the clarification of statutory authority to impose penalties under Title 18, Chapter 5 in Section 6, the inclusion of a rebuttable presumption standard in Section 7 and minor semantic changes elsewhere in the regulation.
DATED: August 2001
Donna Lee H. Williams, Insurance Commissioner
Regulation No. 81
Prompt Payment of Settled Claims
1.0 Authority
2.0 Scope
3.0 Purpose
4.0 Prompt Payment
5.0 Settlement of Claims
6.0 Procedure and Penalties
7.0 General Business Practice
8.0 Separability
9.0 Causes of Action and Defenses
10.0 Effective Date
1.0 Authority. This regulation is adopted by the Commissioner pursuant to the authority granted by 18 Del. C. §§ 311[, 520, 2304(16),] and 2312, and promulgated in accordance with the Delaware Administrative Procedures Act, Title 29 Del. C. Chapter 101.
2.0 Scope. This regulation will apply to all insurers that settle claims either pursuant to a legal action or otherwise.
3.0 Purpose. The purpose of this regulation is to ensure prompt payment of claims pursuant to the settlement of claims by insurance carriers as required by 18 Del. C. § 2304(16)(f).
4.0 Prompt Payment. For the purpose of this regulation prompt payment is defined as remittance of the check within [thirty (]30[)] days from[:] the date of agreement[, memorialized in writing; or] final order by the court[; or unappealed arbitration award.]
5.0 Settlement of Claims 5.1 The language in 18 Del. C. § 2304 (16)(f) requires good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. The aforementioned section also applies in those instances where a case is settled prior to a hearing but pursuant to an action filed in court. Once liability has been resolved and an amount agreed upon, or ordered by the court[, or awarded by an arbitration panel,] the carrier is required to make prompt payment.
6.0 Procedure and Penalties
6.1 In the event that a[n insurance] carrier does not remit prompt payment pursuant to th[e is regulation] [settlement of a claim] and the Department has determined that [the said] carrier has done so in bad faith and with such frequency as to indicate a general business practice, the Department shall file an action against the carrier pursuant to the Administrative Procedures Act. The commissioner may take all of the following actions:
6.1.1 Award interest on the amount of the claim from the date the claim was settled or ordered, in an amount equal to the prime rate of interest plus 3%.
6.1.2 Fine the insurer according to the provisions outlined in 18 Del. C. § 329[, and impose other such penalties as provided in 18 Del. C. § 520.]
6.1.3 Fine any person(s) involved with the claim and/or settlement according to the provisions outline[d] in 18 Del. C. § 2308(a)(1).
7.0 General Business Practice
7.1 Within a 36 month period, three instances of a carrier’s failure to [pay a claim or bill for services promptly make prompt payment,] as defined in section [24] above, shall give rise to a rebuttable presumption that the insurer is in violation of 18 Del. C. § 2304 (16)(f).
7.2 The 36 month period established in paragraph [“a. 7.1 ”] above shall be measured [based upon from] the date the amount was agreed upon[, or] ordered by the court[, or awarded by arbitration].
8.0 Separability
8.1 If any provision of this Regulation or the application of any such provision to any person or circumstance shall be held invalid the remainder of such provisions, and the application of such provision to any person or circumstance other than those as to which it is held invalid, shall not be affected.
9.0 Causes of Action and Defenses. This regulation shall not create a cause of action for any person or entity, other than the Delaware Insurance Commissioner, against an insurer or its representative based upon a violation of 18 Del. C. § 2304(16). In the same manner, nothing in this regulation shall establish a defense for any party to any cause of action based upon a violation of 18 Del. C. § 2304(16).
10.0 Effective Date. This regulation shall become effective 30 days after [the Commissioner’s signature publication
in the Delaware Register of Regulations.]