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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

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.