Which of the following acts by an insurance company would be considered an unfair claims settlement practice under California law?
- APromptly investigating and settling claims where liability is reasonably clear.
- BAttempting to settle a claim for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material.
- CRefusing to pay claims based on a thorough and objective investigation.
- DAdvising a claimant to obtain the services of an attorney.
Show answer & explanationAnswer & explanation
Correct answer: B. Attempting to settle a claim for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material.
California Insurance Code Section 790.03(h)(9) specifically lists 'Attempting to settle claims for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application' as an unfair claims settlement practice.
Why the other options are wrong
- A. This is a proper claims settlement practice, not an unfair one.
- C. Refusing to pay a claim after a thorough and objective investigation, if the investigation supports the refusal, is a legitimate claims practice.
- D. Advising a claimant to seek legal counsel is generally not an unfair practice; it can be a protective measure for both parties.
Unfair Claims Settlement Practices (CA)
California law prohibits specific actions by insurers during the claims process that are deemed unfair or deceptive to policyholders.
- Includes misrepresenting policy provisions.
- Includes failing to promptly investigate/settle claims.
- Includes attempting to settle for less than advertised benefits.
Memory trick: Claims must be fair, no tricks, no lies, honor ads, no nasty surprises.