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Unfair and Deceptive Acts and Practices: 9.4.5 Living Trusts

A living trust is a legitimate estate planning device that is established when a consumer is alive. In appropriate situations and when properly implemented, it can enable the consumer to control and protect her assets. The living trust, more formally known as an inter vivos trust, is a written agreement between the individual creating the trust and the person or institution that manages the assets held in trust.

Unfair and Deceptive Acts and Practices: 9.4.6 Trustees, Escrow Agents, Other Fiduciaries

It is unfair for a bank to allow a trustee to use trust assets for personal purposes.383 A bank acting as an escrow agent violated the state UDAP statute by failing to answer inquiries, pay interest as required, or account for the money, in intentional disregard of its fiduciary status.384 Similarly, it is unconscionable for an escrow company to pay out money to the wrong party based on questionable documentation and to refuse to pay out the required amount to the correct party.

Unfair and Deceptive Acts and Practices: 9.4.7 Investigators and Other “Finders”

The FTC has sued many ingenious telemarketers who falsely promised, for a fee, to obtain relief for past victims of telemarketing fraud, particularly in obtaining free gifts that were never delivered.389 When such a service is sold by telephone, the FTC’s Telemarketing Sales Rule prohibits the seller from requesting or receiving any payment from the consumer until seven business days after recovering the money or property.390

Unfair and Deceptive Acts and Practices: 9.4.8 Accountants

An accountant may violate a UDAP statute by certifying financial statements that contain material misstatements and omissions.393 In general, the lack of privity between the consumer and the accountant does not prevent the UDAP claim.394 The public must be able to reasonably rely on financial statements certified by public accounting firms.395 It is a UDAP violation to hold oneself out as an accountant if not certified.

Unfair and Deceptive Acts and Practices: 9.5.1 Introduction

The complexity of UDAP application to insurance practices stems in a large degree from state unfair insurance practices legislation that exists side by side with the UDAP statute. Does the state insurance legislation displace the UDAP statute, does it provide an alternative private remedy, or does it offer a guide to using the UDAP statute to challenge insurance practices? Other issues include whether private remedies apply only to the insured or also to accident victims who want to collect under the policy.

Unfair and Deceptive Acts and Practices: 9.5.2.1 UNIP Legislation Described

Every state has adopted legislation defining and prohibiting unfair methods of competition and unfair or deceptive acts and practices in the business of insurance.397 This “unfair insurance practices” (UNIP) legislation applies broadly to all lines of insurance and is patterned after a model statute promulgated by the National Association of Insurance Commissioners (NAIC).398

Unfair and Deceptive Acts and Practices: 9.5.2.2.2 Advantages and disadvantages of a private UNIP claim

In the few states that offer an explicit private cause of action to enforce the UNIP statute, the remedies may include attorney fees and treble damages.444 In these states, a UNIP claim may have advantages over a UDAP claim. The remedies may be as strong or stronger, there will be no question of coverage of insurance transactions, and the consumer will not need to comply with any preconditions to suit set by the UDAP statute.

Unfair and Deceptive Acts and Practices: 9.5.3.2 Refusal to Pay

It is unfair for an insurance company to unreasonably refuse to pay policy benefits or to attempt to persuade policyholders to settle for less than they are entitled to.472 It is a UDAP violation to deny payment when the insurer knew or should have known that its liability was reasonably clear.473 In determining whether liability has become “reasonably clear,” the insurer must make an objective inquiry into the facts and the law.

Unfair and Deceptive Acts and Practices: 9.5.3.4 Vexatious Litigation

Bad faith litigation by an insurer or its counsel is a UDAP violation. The insurer’s duty to litigate in good faith precludes it from asserting legal arguments which it knows to be invalid or unsupported by evidence, obtaining expert reports which it knows to be biased, or appealing decisions in order to “grind down” the insured.502 Where an insurer learns that its basis for litigation is without legal or factual support, it is a bad faith violation to continue litigation on that basis.503

Unfair and Deceptive Acts and Practices: 9.5.3.5 Nondisclosure and Deception in the Claims Settlement Process

The failure of an agent to notify or inform the insured that settlement with an uninsured carrier would bar recovery under the insured’s own policy is a UDAP violation.504 Failing to inform insureds of their right to select independent defense counsel at the insurer’s expense is deceptive.505 Failing to disclose the existence of underinsured motorist coverage that might cover an insured’s loss506 or refusing to tell an insured what portion of the c

Unfair and Deceptive Acts and Practices: 9.5.3.6 Requiring Consumer to Sign Waiver or Release As UDAP Violation

It can be unfair coercion if an insurer refuses to pay an insurance settlement rightfully owed the consumer unless the consumer signs a waiver.515 It is also unfair to obtain a release where the consumer cannot read, reason, or investigate the claim independently.516 Using misleading statements to obtain the injured party’s signature on a medical release is deceptive.517 But an insurer did not commit a UDAP violation by sending the insured a partia

Unfair and Deceptive Acts and Practices: 9.5.4.1 Misrepresentation Concerning Policy Coverage and Features

Even where an insurer’s refusal to pay a claim is justified by the insurance policy language, UDAP statutes can challenge misrepresentations about the scope of policy coverage the insurer or its agent made at the time the policy was written. As an initial matter, an insurer may not provide “illusory coverage,” or a policy where no set of facts triggers coverage and the insurer assumes no obligation on behalf of the insured.521

Unfair and Deceptive Acts and Practices: 9.5.4.2 Misrepresentations Concerning Insurer Claims Settlement Policies

Most UNIP statutes prohibit settlement offers that are unreasonable when compared to the insurer’s claims in advertising or sales presentations concerning its generous claims payment policy.535 It is a UDAP violation to sell insurance without disclosing the insurance company’s harsh and unfair claims settlement practices.536 But the Seventh Circuit held that an insurer did not violate the Illinois UDAP statute by falsely promising to restore its insureds’ vehicles to their pre-loss condition, th

Unfair and Deceptive Acts and Practices: 9.5.5.1 Introduction

Consumers have sued insurers for a variety of other insurance sales schemes. These schemes are often named and addressed with specificity in UNIP statutes. This again makes it especially important to understand, before filing any complaint, the relationship between the state’s UNIP statute and its UDAP statute—and whether the explicit identification of the scheme within the UNIP statute establishes a private right of action, provides evidence for a UDAP violation, or instead excludes or preempts such a private right of action.540

Unfair and Deceptive Acts and Practices: 11.2.2.3 Series of Events

Another means by which the limitations period is extended is to show a series of deceptive practices continuing after the initial transaction.65 For example, the limitations period can run not from the initial sale, but rather from subsequent promises to fix or deliver replacements.66 Showing that the seller has continued to bill the consumer or withhold the consumer’s money unlawfully or that the seller has deceptively or unfairly responded to a consumer’s demand for relief may establish a continui

Unfair and Deceptive Acts and Practices: 11.2.2.4 Other State Rules

Michigan’s UDAP statute extends the statute of limitations until six years after the deceptive act or one year after the consumer makes the last payment in the transaction, whichever is later.77 This provision did not, however, extend the statute of limitations while the consumer was making payments on a loan that financed a purchase, where the consumer was complaining about the purchase itself, not the loan.78

Unfair and Deceptive Acts and Practices: 11.2.3.2 Fraudulent Concealment and Equitable Estoppel

Although courts use inconsistent terminology, they often recognize three interrelated grounds for tolling: fraudulent concealment, equitable estoppel, and equitable tolling.89 Fraudulent concealment is shown if the defendant has wrongfully deceived or misled the plaintiff in order to conceal the existence of a cause of action. Equitable estoppel takes place when the plaintiff knows about the cause of action but the defendant engages in intentional conduct to cause the plaintiff to miss the filing deadline.

Unfair and Deceptive Acts and Practices: 11.2.3.3 Pendency of Another Suit

The Georgia, Hawaii, Illinois, Kentucky, Nebraska, North Carolina, Ohio, Oregon, Utah, Virginia, and Washington UDAP statutes toll the limitations period for a private action during the pendency of a state action against the challenged activity. Nevertheless, an Oregon decision holds that the limitations period continues to run where the prosecutor only initiates an investigation and sends a notice to the seller, but does not file a legal complaint.96