Not all states impose all of the same claim-handling requirements, nor do they do so in the same way. We'll discuss the following requirements in this article:

  • Acknowledge receipt of the claim and provide contact information to the claimant
  • Reply to communications
  • Provide the necessary claim forms
  • Advise as to the acceptance or denial of a claim
  • Provide an explanation as to why the investigation and resolution of the claim are not completed and when such will occur
  • Advise of the running of a statutory or contractual statute of limitations
  • Pay that portion of a claim that is not in dispute

Sixteen states require that the insurer send an acknowledgment of the receipt of the claim. The deadlines for compliance are 10 days in Alaska, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Vermont, and Virginia; 15 days in California, Kentucky, Nebraska, New York, Ohio, and Utah; 20 days in Nevada; and 30 days in Oregon. Oklahoma's deadline is 30 days by statute, but its administrative rules mandate 20 days. Research did not reveal a reason for this distinction.

Six states require that the insurer provide claim forms and instructions. Alaska requires that this must be done "promptly," with no specific time given. New York and Ohio specifically require that this be done within 15 days. Rhode Island and Virginia require that this be done "promptly," or at least 10 days after receipt of the notice of claim. New Jersey also requires that it be done "promptly," but limits the third-party obligation to only those not represented by counsel.

Sixteen states set a time limit for responding to communications from the claimant or someone acting on their behalf. Generally, this requirement is limited to communications that indicate a response is expected or anticipated. The time limit for compliance is 10 days in New Hampshire, New Jersey, Rhode Island, Vermont, Virginia, and Washington; 15 days in Alaska, Kentucky, Nebraska, New York, Ohio, Pennsylvania, and Utah; 20 days in Nevada; and 30 days in Oregon. Similar to above, Oklahoma's deadline is 30 days by statute, but its administrative rules mandate 20 days. Again, research did not reveal a reason for this distinction.

Twelve states require that the insurer provide an initial report as to the status of the investigation and, if necessary, follow-up reports as to when the claim may be resolved. The states are California, Nebraska, Nevada, New Hampshire, New Jersey, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and West Virginia.

No two states are similar when it comes to requiring status reports. The compliance time frames range from 15 days (Nebraska) to 45 days (Oregon) after the receipt of the first notice of claim, with follow-up reports every 15 days (Washington) to 45 days (Ohio) and thereafter. It is best in each of these states to review the specific statute or regulation.

The requirement of warning claimants of the running of a statute of limitations or contractual limitation exists in 16 of the states. California, Nevada, New Jersey, Ohio, and Utah require that this warning be given to first- and third-party claimants prior to 60 days before the deadline. Arizona, Arkansas, Kansas, Missouri, Oklahoma, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and West Virginia require a 60-day warning for first-party and a 30-day warning for third-party claimants.

Seven of the states require that both first- and third-party claims be affirmed or denied within a specified time period. These state requirements are outlined below:

  • Illinois – 30 days after investigation completed.
  • Kentucky – Reasonable time after receipt of notice of claim.
  • Nebraska – 15 days after receipt of proof of loss.
  • New Hampshire – 30 days after receipt of notice of claim.
  • New Jersey – 45 days from notice of claim, or 30 days from proof of loss.
  • New York – 15 days after receipt of proof of loss.
  • Rhode Island – 15 days after receipt of proof of loss.

Finally, three of the states require that undisputed portions of both first- and third-party claims be paid within a specified time period. Both New Hampshire and Ohio give a carrier five days, while Nebraska provides 15 days.

These requirements directly affect the working relationship between the third-party claimant and the adjuster who is attempting to protect the insured's and his principal's interests, while, at the same time, assisting the principal in carrying out its legally mandated duties to all of those affected by the insurance contract.

An adjuster may be tempted to "help" the insured or his principal by a creative interpretation of his duties under these provisions. A good example would be providing a vague or incomplete notification as to the running of the statute of limitations. This is especially tempting when the claim has the potential to exceed the policy limits, thereby exposing the insured's personal assets.

The solution for the claim professional is to comply with the regulations. The adjuster should not attempt to avoid the effect of the regulations by doing anything that could later be characterized as a subterfuge. To do so may expose the principal to direct action and the possibility of punitive damages.

Tim Lynch and Anne Bandle are insurance defense attorneys with Lynch and Associates in Anchorage, Alaska. They also are members of the Council on Litigation Management. They can be reached at 907-276-3222, tlynch@northlaw.com, abandle@northlaw.com, www.northlaw.com.

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