AMENDMENT FOR PRINTED BILL
1054ja

___________________ moved that HB 1054 be amended as follows:


    On the printed bill, delete everything after the enacting clause and insert:

"    Section 1. Terms used in this Act mean:
                                                    

            (1)    "Director," the director of the South Dakota Division of Insurance;

            (2)    "Insured," the party named on a policy or certificate as the individual with legal rights to the benefits provided by the policy;

            (3)    "Insurer," a person, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including claim agents, brokers, adjusters, and third party administrators. The term also includes medical service plans, hospital service plans, health maintenance organizations, prepaid limited health care service plans, dental plans, and optometric plans;

            (4)    "Person," a natural or artificial entity, including individuals, partnerships, associations, trusts, or corporations;

            (5)    "Policy," or "certificate," a contract of insurance, indemnity, medical, health, or hospital service, or annuity issued. The term does not include contracts of workers' compensation, fidelity, suretyship, or boiler and machinery insurance.

    Section 2. The provisions of this Act set forth standards for claim investigation and disposition of claims arising under policies or certificates of insurance issued to residents of South Dakota. It does not apply to claims involving workers' compensation, fidelity, suretyship, or boiler and machinery insurance. Nothing in this Act may be construed to create or imply a private cause of action for violation of this Act.

    Section 3. Any act by an insurer, if committed in violation of this section, is an unfair claims practice if:

            (1)    It is committed flagrantly and in conscious disregard of the provisions of this Act or any rule promulgated pursuant to this Act; or

            (2)    It is committed with such frequency to indicate a general business practice to engage in that type of conduct.

    Section 4. Any of the following acts by an insurer, if committed in violation of section 3 of this Act, is an unfair claims practice:

            (1)    Knowingly misrepresents to a claimant or an insured a relevant fact or policy provision relating to coverages at issue;

            (2)    Fails to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies;

            (3)    Fails to adopt and implement reasonable standards to promptly complete claim investigations and settlement of claims arising under its policies;

            (4)    Fails to make a good faith attempt to effectuate prompt, fair, and equitable settlement of claims submitted in which liability has become reasonably clear;

            (5)    Compels an insured or beneficiary to institute a suit to recover an amount due under its policies by offering substantially less than the amount ultimately recovered in a suit brought by the insured or beneficiary;

            (6)    Refuses to pay claims without conducting a reasonable claim investigation;

            (7)    Fails to affirm or deny coverage of claims within a reasonable time after having completed a claim investigation related to the claim;

            (8)    Attempts to settle a claim for less than the amount that a reasonable person would believe the insured or beneficiary is entitled by reference to written or printed advertising material accompanying or made part of an application;

            (9)    Attempts to settle a claim on the basis of an application that was materially altered without notice to, or knowledge or consent of, the insured;

            (10)    Makes a claim payment to an insured or beneficiary without indicating the coverage under which each payment is being made;

            (11)    Unreasonably delays a claim investigation or payment of a claim by requiring both a formal proof of loss form and subsequent verification that would result in duplication of information and verification appearing in the formal proof of loss form;

            (12)    Fails, in the case of a claim denial or offer of compromise settlement, to promptly provide a reasonable and accurate explanation of the basis for such action; and

            (13)    Fails to provide forms necessary to present a claim within fifteen days of a request with reasonable explanations regarding their use.

    Section 5. If the director has reasonable cause to believe that an insurer doing business in this state is engaging in an unfair claims practice and that a proceeding in respect thereto is in the public interest, the director may issue and serve upon the insurer a notice of hearing, which shall set a hearing date not less than thirty days from the date of the notice. The hearing shall be conducted pursuant to chapter 1-26.

    Section 6. If, after the hearing, the director finds an insurer has engaged in an unfair claims practice, the director shall reduce the findings to writing and shall issue and serve the insurer a copy of the findings and an order requiring the insurer to cease and desist from engaging in the act or practice. The director may, at the director's discretion, order either or both of the following:

            (1)    The insurer to pay a monetary penalty of not more than one thousand dollars for each violation but not to exceed an aggregate penalty of one hundred thousand dollars, unless the violation was committed flagrantly and in conscious disregard of this Act, in which case the penalty may not be more than twenty-five thousand dollars for each violation, but

not to exceed an aggregate penalty of two hundred fifty thousand dollars; and

            (2)    Suspension or revocation of the insurer's license if the insurer knew or reasonably should have known it was in violation of this Act.

    This section only applies to violations of this Act.

    Section 7. The director may promulgate rules, pursuant to chapter 1-26, to carry out the purposes of this Act. In promulgating rules, the director shall consider the impact of the rule on the cost and availability of insurance in this state and the degree of protection that the rule will have for the insurance buying public in this state. The rules are limited to the following areas:

            (1)    Definition of terms; and

            (2)    Record keeping."