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Unfair and Deceptive Acts and Practices: 11.2.4 Limitations Period Where Complaint Amended to Add New Claims or Parties

Often a consumer will amend the complaint to add a UDAP claim, and the question arises whether to use the date of filing the original action or the amended UDAP claim in calculating whether the statute of limitations has run. The federal rule102 and many state rules103 provide that an amendment relates back to the date of the original pleading if it arises out of the conduct, transaction, or occurrence that was set forth in the original pleading.

Unfair and Deceptive Acts and Practices: 9.5.5.2 Sales of Unnecessary Insurance

Certain state UNIP and UDAP statutes provide private rights of action for misrepresenting the terms, benefits, or advantages of a policy during the sale of that policy.541 Some of the UNIP statutes that provide a private cause of action limit it to unfair claims settlement practices,542 however, and a statutory bad faith claim may be similarly limited.543 Conversely, a few courts have interpreted their UDAP statutes to allow claims only for misrepr

Unfair and Deceptive Acts and Practices: 9.5.5.3 Twisting

“Twisting” is the use of various misrepresentations to get the consumer to switch from one insurance company to another. Twisting may be accomplished by using the cash-surrender value of the old policy to buy the new one or by making the old policy lapse. UNIP statutes prohibit “twisting”547 and the practice should be a UDAP violation as well.

Unfair and Deceptive Acts and Practices: 9.5.5.5 Other Sales Schemes

Other unfair insurance practices involve selling insurance to a consumer without the consumer’s consent or understanding that insurance is being purchased557 or backdating insurance policies in order to increase premiums.558 It is deceptive to charge the full premium rate for title insurance, without disclosing that the consumer qualifies for a lower refinance rate.559 Several New Mexico decisions hold that an insurer may commit a UDAP violation by

Unfair and Deceptive Acts and Practices: 9.5.6 Unfair Discrimination

With wide variations, state UNIP legislation prohibits unfair discrimination in the issuance, renewal, extent of coverage, rates charged, or other terms or conditions of all insurance or certain types of insurance. Prohibited grounds may include race, creed, color, gender, marital status, mental or physical impairments, age, occupation, religion, national origin, and domestic abuse.566 Prohibitions against discrimination may also be found in a state statute regulating the particular type of insurance in question.

Unfair and Deceptive Acts and Practices: 9.5.7 Excessive Premiums As a UDAP Violation

Rates for a number of lines of insurance are approved or set by the state insurance commissioner.570 It is a UDAP violation to charge rates in excess of those approved by the state,571 or to increase policy premiums during the policy term without the insured’s authorization.572 Making misrepresentations to the consumer about the rates charged,573 the likelihood and magnitude of future premium increase

Unfair and Deceptive Acts and Practices: 9.5.8 Third Party’s Failure to Purchase Insurance for the Consumer

An insurance claim where actual damages may be significant involves the situation where the consumer has a claim under a policy, but an insurance agent, escrow holder, employer, or other third party failed to purchase the insurance.582 The consumer’s actual damages equal at least the size of the claim, and it would be helpful to raise the claim as a UDAP violation, leading to attorney fees and possibly multiple or punitive damages.

Unfair and Deceptive Acts and Practices: 9.5.9.1 Introduction

Credit insurance protects the creditor’s interest in repayment of a consumer debt. Credit life insurance pays off the outstanding balance on a loan if the debtor dies. Credit accident and health coverage makes installment payments when the debtor cannot work because of a disability. Credit property insurance protects the collateral on a loan. Credit unemployment insurance pays installments when the consumer is unemployed.

Unfair and Deceptive Acts and Practices: 9.5.9.3 Marketing Deception, Illusory Coverage

It is a factual issue whether advertising free credit life insurance is deceptive where eligibility depends on the debtor meeting certain physical preconditions.599 A creditor commits a UDAP violation by switching a credit disability policy mid-term to a different company with less generous benefits, particularly where any financial benefit from the switch goes to the creditor and not the consumer.600 However, an auto dealer was held not liable for failing to inform a consumer that a credit disa

Unfair and Deceptive Acts and Practices: 9.5.9.4 Coercion in Selling Credit Insurance

Violation of a state credit law that prohibits creditors from requiring a consumer to purchase credit insurance is evidence of a UDAP violation.606 It is also a UDAP violation to misrepresent that credit insurance is required when the creditor has portrayed it as voluntary in order to disclose the premium as part of the amount financed in compliance with the Truth in Lending Act.607 Even if the consumer initials a provision stating that the consumer is purchasing the insurance voluntarily, it ca

Unfair and Deceptive Acts and Practices: 9.5.9.5 Sale of Credit Insurance That Is Excessive or Violates State Lending Laws

Some states’ lending statutes restrict the types or amounts of credit insurance that can be sold or the circumstances in which it can be sold.616 These restrictions are most common with respect to credit property insurance. In addition, UNIP statutes may prohibit the sale of credit property insurance in amounts greater than necessary to cover the loan or the collateral.617

Unfair and Deceptive Acts and Practices: 9.5.9.6 Failure to Pay Credit Insurance Claims

A common credit insurance abuse that may be subject to a UDAP challenge is the refusal to pay an insurance claim because of a preexisting illness excluded by the current policy. A creditor may be liable under a UDAP statute if it does not tell a borrower that refinancing a loan will result in loss of coverage of a condition that arose during the time the original loan was in effect.620 It may be unfair to deny coverage when insurance was in continuous effect before the illness was manifest.

Unfair and Deceptive Acts and Practices: 9.5.10 Force-Placed Automobile Insurance

Automobile creditors typically require consumers to purchase collision and theft coverage to protect the creditor’s interest in the automobile. The credit contract will authorize the creditor to purchase such insurance on behalf of the consumer if the consumer does not present evidence of continuous coverage or if the coverage ever lapses during the term of the loan. This coverage purchased by the creditor is often called “force-placed,” “creditor-placed,” or “collateral protection” insurance.

Unfair and Deceptive Acts and Practices: 9.5.11 “Packing” Non-Credit Insurance in Conjunction with Credit Sale

Insurance “packing” involves folding in various insurance products with the extension of a loan. For example, it was alleged that Aetna Finance Company, usually without customers’ knowledge, “packed” or loaded onto consumer loans various types of expensive optional insurance.630 Loan officers faced with heavy insurance sales quotas used various techniques to persuade hesitant customers to sign up for insurance.631 Typically the debtor would request a loan in a specified amount.

Unfair and Deceptive Acts and Practices: 9.6.2 Investments

Whether a UDAP statute applies to investments and securities transactions is discussed at § 2.2.8.3, supra. The many FTC decisions that address deception in the promotion of investments are good precedent on the nature of unfair and deceptive practices in this area.

Unfair and Deceptive Acts and Practices: 9.6.4 Pyramid Sales

A pyramid sale is one in which, in the guise of selling a product or business opportunity, the scammer is really selling the right to sell new memberships in the pyramid. Investors make their return not through the sale of the product, but through encouraging others to invest. Pyramid schemes take many guises and are often marketed over the internet.

Unfair and Deceptive Acts and Practices: 9.6.5 Contests and Game Promotions

It is deceptive, in connection with a game or contest promotion, to misrepresent the chances of winning.703 It is deceptive to use a sham contest to gain sales leads by failing to offer bona fide prizes and awards704 or by offering fictitious discounts as a prize to specially selected winners.705 Informing all entrants that they are “finalists,” thereby falsely implying that they are members of a smaller group with a greater chance of winning, is d

Unfair and Deceptive Acts and Practices: 9.6.6.1 State and Federal Restrictions

Many states, either as part of their UDAP statutes or as separate laws, require a charitable organization to register with the state, disclosing various types of information, such as its name and address, the amount of funds to be raised, estimated expenses, previous court actions, and the organization’s tax status.729 In addition, the FTC telemarketing sales rule applies to charitable solicitations conducted over the telephone by for-profit entities on behalf of non-profit organizations.730 The