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."