This month, we want to discuss three areas of the Arizona Unfair Claims Settlement Practices Act that tend to generate a number of questions from insurers. Please keep in mind that the Arizona Unfair Claims Settlement Practices Act does not create a private cause of action for an insured and cannot be used to instruct a jury in a bad faith case. However, the Unfair Claims Settlement Practices Act and regulations set forth under the Arizona Administrative Code provide specific standards for conduct during an insurer’s daily investigation, evaluation and processing of claims.
Does an insurer need to notify a third-party claimant that the statute of limitation is about to expire?
Yes, pursuant to Arizona Administrative Code Rule 20-6-801(G)(4), insurers shall not continue negotiations for settlement of a claim directly with a claimant who is neither an attorney or represented by an attorney until the claimant’s rights may be affected by the statute of limitations without giving the claimant written notice of the statute of limitations and that the statute of limitations may affect the claimant’s rights. In a third-party situation, this notice needs to be given to claimants at least sixty (60) days before the date on which the statute of limitations may expire. Some attorneys may argue that if the insurer fails to provide this notice, the statute of limitations is tolled on the claim, thus preventing dismissal of an untimely filed lawsuit. However, any argument that the statute of limitations defense has been waived or tolled by promissory estoppel or equitable estoppel will likely fail absent a specific promise to toll the statute of limitations during settlement negotiations. Nevertheless, it always best to disclose the applicable statute of limitations to unrepresented claimants early and often to avoid having to defend these types of arguments.
Does an insurer need to disclose all pertinent coverages to a first party insured?
Yes, pursuant to Arizona Administrative Code Rule 20-6-801(D)(1), an insurer has an obligation to advise an insured of all pertinent policy provisions when a claim is presented. Thus, if an insured submits a med pay claim for an accident involving an uninsured motorist, the carrier is under an obligation to point out to the insured that uninsured motorist coverage may apply to the loss as well if uninsured motorist coverage exists on the policy. Rule 20-6-801(E)(4) also requires the insurer, upon receiving notification of a claim, to promptly provide necessary claim forms, instructions, and reasonable assistance so that first party claimants can comply with the policy conditions and the insurer’s reasonable requirements. Ultimately, the insurer has a duty to treat the insured fairly, and providing notice of applicable coverages and forms is one way to make sure insurers are complying with this duty.
Does an insurer have to cite pertinent policy provisions in a written denial of coverage?
Yes, under Arizona Administrative Code Rule 20-6-801(G)(1)(a), an insurer, when denying a claim, must reference provisions, conditions, or exclusions which form the grounds of the written denial. Regardless of this rule, it is always best to inform the insured of specific policy language which forms the basis of a denial to avoid confusion and to give the insured a fair opportunity to respond to the denial.
If you have additional questions about the Arizona Unfair Claims Settlement Practices Act or we can assist with any potential case, please contact Brian Rubin brubin@trkfirm.com or Michael Kelley mkelley@trkfirm.com.