# COMAR Title 31 — Maryland Insurance Administration

## Subtitle 15 — Unfair Trade Practices

### Chapter 08 — Payment of Claims Under Life and Health Policies and Annuity Contracts

**Authority:** Health-General Article, §19-706(g); Insurance Article, §§1-301, 2-109, 2-205, 2-207, 4-113, 4-114, 10-102, 10-103, 10-126, 10-131, 10-401—10-406, 10-410, 14-112, 14-407, 14-408, 14-409, 15-1005, 27-102, Title 15, Subtitle 7, and Title 27, Subtitle 3, Annotated Code of Maryland

**Administrative History:** Effective date: September 4, 1989 (16:17 Md. R. 1884)

**Administrative History:** Regulation .03B amended effective September 13, 1993 (20:18 Md. R. 1429)

**Administrative History:** Chapter recodified from COMAR 09.30.76 to COMAR 31.15.08 effective September 7, 1998 (25:18 Md. R. 1439)

**Administrative History:** Regulation .01 amended effective October 1, 2012 (39:19 Md. R. 1238)

**Administrative History:** Regulation .02B amended effective October 1, 2012 (39:19 Md. R. 1238)

**Administrative History:** Regulation .03B amended effective January 26, 2009 (36:2 Md. R. 103)

**Administrative History:** Regulation .06A amended effective October 13, 2014 (41:20 Md. R. 1114)

#### Regulation .01 Scope.

*COMAR 31.15.08.01*

These regulations are applicable to all life, health, and annuity insurers, including nonprofit health service plans, fraternal benefit societies, health maintenance organizations, and dental plan organizations, issuing life and health policies and annuity contracts.

#### Regulation .02 Definitions.

*COMAR 31.15.08.02*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Agent” means any person authorized to represent an insurer with respect to a claim, and includes a licensed agent.

  (2) “Claimant” means the insured or a beneficiary under an insurance policy or contract, or an assignee of the insured or the beneficiary, and includes the claimant's designated legal representative and members of the immediate family of the insured or beneficiary designated by the claimant.

  (3) “Insurer” means a person licensed to issue, or who issues, any insurance policy in this State, including a nonprofit health service plan, fraternal benefit society, health maintenance organization, or dental plan organization.

  (4) “Investigation” means all activities of an insurer directly or indirectly related to the determination of the insurer's liabilities under coverage afforded by an insurance policy.

  (5) “Licensed agent” means a person licensed in accordance with the provisions of Insurance Article, Title 8, Subtitle 4, or Title 10, Subtitle 1, Annotated Code of Maryland.

  (6) “Notification of a claim” means notification by a claimant, to an insurer or its agent, in writing or by other means acceptable under the terms of the policy, which reasonably apprises the insurer of the facts pertinent to the claim.

  (7) “Policy” means an individual or group policy, contract, or certificate issued by an insurer.

#### Regulation .03 Unfair Claim Settlement Practices.

*COMAR 31.15.08.03*

A. A prohibited unfair claim settlement practice occurs if an insurer commits any of the following acts:

  (1) Misrepresents or provides incomplete or misleading disclosures of pertinent facts or policy provisions relating to the claim at issue;

  (2) Conceals benefits, coverages, or other provisions of a policy when those benefits, coverages, or other provisions are pertinent to a claim;

  (3) Attempts to settle a claim on the basis of an application which has been altered without notice to, or the knowledge or consent of, the insured;

  (4) Refuses to satisfy a claim for an arbitrary or capricious reason based on all available information;

  (5) Fails to include, in any claim paid to an insured or beneficiary, a statement setting forth the coverage under which the payment is made;

  (6) Fails to settle a claim promptly whenever liability is reasonably clear under one portion of a policy in order to influence settlements under other portions of the policy; or

  (7) Fails to promptly provide a reasonable explanation of the basis for denial of a claim when requested to do so.

B. A prohibited unfair claim settlement practice occurs if an insurer commits any of the following acts with such frequency as to indicate a general business practice:

  (1) Misrepresents or provides incomplete or misleading disclosure of pertinent facts or policy provisions relating to the coverages at issue;

  (2) Fails to include, in claims paid to insureds or beneficiaries, statements setting forth the coverage under which the payments are made;

  (3) Fails to promptly provide reasonable explanations of the basis for denial of claims or the offer of compromise settlements;

  (4) Fails to adopt and implement reasonable standards for the prompt investigation of claims arising under policies;

  (5) Refuses to pay claims without conducting reasonable investigations based on all available information;

  (6) Fails to make good faith attempts to settle claims promptly, fairly, and equitably once liability has become reasonably clear;

  (7) Compels claimants to institute litigation to recover amounts due them under policies by offering substantially less than the amounts ultimately recovered in actions brought by the claimants;

  (8) Attempts to settle claims for less than the amount to which a reasonable person would expect to be entitled after studying written or printed advertising material accompanying, or made a part of, applications or solicitations for insurance;

  (9) Attempts to settle claims on the basis of applications which have been altered without notice to, or the knowledge or consent of, insureds;

  (10) Fails to settle claims promptly whenever liability is reasonably clear under one portion of a policy in order to influence settlements under other portions of the policy;

  (11) Delays investigations or payments of claims by requiring claimants, or claimants' licensed health care providers, to submit formal claims reports if all necessary information has been provided to the insurer in preliminary claims reports;

  (12) Fails, within 30 days after receipt of a claim that contains all necessary information and documentation, to:

    (a) Make payment of the claim,

    (b) Notify the claimant that reimbursement for the claim, or a portion of the claim, is refused, providing specific reasons for the refusal, or

    (c) Inform the claimant of the reason it was not reasonably practicable to process the claim within that period, stating what specific additional information is needed before a decision on the claim can be made;

  (13) Fails, upon receipt of inquiries from state insurance departments regarding claims, to furnish the departments with adequate responses to the inquiries within 10 working days or within the time period specified by the Maryland Insurance Administration in correspondence to the insurer, whichever is greater;

  (14) Induces or requires claimants to surrender policies as a condition of paying claims if the policies would normally continue in force beyond the date of payment of the claim; or

  (15) Fails to provide claimants, within 10 working days after receiving notification of claims, with any necessary claim forms, instructions, and reasonable assistance in order that claimants can comply with the policy conditions and the insurer's reasonable requirements for filing claims.

C. The provision of any necessary claim forms and reasonable assistance in order that claimants can comply with the policy provisions and the insurer's reasonable requirements for filing claims shall satisfy the requirement that insurers acknowledge receipt of notification of claims, or pay claims, within 10 working days.

#### Regulation .04 Computation of Time.

*COMAR 31.15.08.04*

If an insurer requires additional information in order to properly consider a claim, the number of days which elapse between the date the insurer mails a request for additional information and the date the insurer receives a response to the request may not be counted whenever these regulations require action by an insurer within a stated period of time.

#### Regulation .05 Claims Registers.

*COMAR 31.15.08.05*

A. Each insurer shall maintain claims registers separated for:

  (1) Annuity contracts and life insurance policies, excluding credit life insurance;

  (2) Health insurance policies, excluding credit health insurance; and

  (3) Credit life insurance and credit health insurance policies.

B. Claims registers may be maintained manually or on computer-generated tapes from which hard copy can be supplied.

C. Claims registers shall list each claim received, showing the:

  (1) Date of receipt;

  (2) Policy or contract number;

  (3) Name of the insured;

  (4) General nature of the claim; and

  (5) State of residence of the claimant.

D. Each claim shall be assigned a unique claim number.

E. If a claim is closed but subsequently reopened, the original claim number shall continue to be used.

F. Each claim shall be considered a single claim regardless of the number of times it has been closed and reopened.

G. Payments made to a claimant on an ongoing basis shall be recorded under the original claim number and considered a single claim for purposes of these regulations.

H. The Commissioner may grant permission to an insurer to use an alternate claim numbering system upon submission by the insurer of proof satisfactory to the Commissioner that the requirements of §§E, F, and G of this regulation are impracticable or unduly burdensome to the insured.

I. Claims registers, in original form or reproduced from computer data, shall be available for inspection by the Insurance Commissioner or by persons designated by the Commissioner for a period of at least 5 years following the date of filing of a claim.

#### Regulation .06 General Business Practices.

*COMAR 31.15.08.06*

A. The methodology of §B of this regulation shall be used to determine whether an insurer, nonprofit health service plan, or health maintenance organization has engaged in unfair claim settlement practices with such frequency as to constitute a general business practice within the meaning of Insurance Article, §27-304, Annotated Code of Maryland.

B. Engaging in unfair claim settlement practices shall be regarded as prima facie evidence of a general business practice if, in any 12-month period, it is found that the number of unfair claim settlement practices with respect to claims handling by foreign insurers of claims by Maryland residents, or by domestic insurers of all claims of the insurer, equals or exceeds the following:

  (1) If the total number of annuity and life insurance claims, excluding credit life insurance claims, during any 12-month period is:

    (a) Less than 100, five claims;

    (b) At least 100, but less than 10,000, five claims out of a sampling of 100 claims;

    (c) At least 10,000, but less than 50,000, ten claims out of a sampling of 200 claims; or

    (d) 50,000 or more, 15 claims out of a sampling of 300 claims;

  (2) If the total number of health insurance claims, excluding credit health insurance claims, during any 12-month period is:

    (a) Less than 100, ten claims;

    (b) At least 100, but less than 10,000, ten claims out of a sampling of 100 claims;

    (c) At least 10,000, but less than 50,000, 15 claims out of a sampling of 200 claims; or

    (d) 50,000 or more, 20 claims out of a sampling of 300 claims.

#### Regulation .07 Penalties.

*COMAR 31.15.08.07*

A. For each violation of Regulation .03A of this chapter, the Commissioner may impose a penalty of up to $500.

B. For each violation of Regulation .03B of this chapter, the Commissioner may impose a penalty, or require restitution, as provided in Insurance Article, §1-301, 4-113, 4-114, or 27-103, Annotated Code of Maryland, as may be appropriate under the circumstances.

C. The penalties prescribed in these regulations are not exclusive, and are in addition to any other powers afforded the Commissioner under Insurance Article, Annotated Code of Maryland.