SENATE, No. 1296

 

STATE OF NEW JERSEY

 

INTRODUCED JUNE 6, 1996

 

 

By Senators CARDINALE and Kyrillos

 

 

An Act establishing the Office of the Insurance Claims Ombudsman.

 

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

    1. The Legislature hereby finds and declares that:

    a. There is presently no effective mechanism in the State for the thorough investigation of the complaints of insureds regarding the disposition of property and casualty insurance claims in the State; and

    b. Insurance contracts governing property and casualty insurance are often complex, rendering insureds at a disadvantage with respect to their rights and understanding of obligations of insurers under an insurance contract; and

    c. Many insurance contracts, particularly those governing commercial lines of insurance covering specialized risks, contain endorsements which modify the language of the standard contract in ways which make the coverage subject to interpretation and subjective judgments; and

    d. It is not uncommon for insureds to be faced with situations in which there are multiple contracts in force which result in a dispute between insurers as to which contract is the appropriate contract to respond to a specific claim, which leaves the insured in a position of having to attempt to negotiate between them, often with no recourse except costly litigation; and

    e. Because the State is charged with the approval of contract provisions, it is essential that the State play a role in determining the right of an insured to fair compensation under an insurance contract, providing a means whereby the insured has a right to appeal an insurer's disposition of a claim.

 

    2. For the purposes of this act:

    "Commissioner" means the Commissioner of Insurance;

    "Claim" means any claim filed under a policy of insurance;

    "Insurance" means any contract of property-casualty insurance written pursuant to R.S.17:17-1;

    "Ombudsman" means the Insurance Claims Ombudsman appointed pursuant to section 3 of this act.

    3. There is created within the Department of Insurance the Office of the Insurance Claims Ombudsman. The ombudsman shall be appointed by the Governor with the advice and consent of the Senate and shall serve at the pleasure of the Governor during the Governor's term of office. The ombudsman shall devote his entire time to the duties of his office. Any vacancy occurring tin the position of ombudsman shall be filled in the same manner as the original appointment. If the ombudsman shall be unable for any reason to serve his full term of office, the Governor may designate an acting ombudsman until a successor is appointed and qualified. The ombudsman shall have a least a baccalaureate degree and at least seven years' experience in property and casualty insurance.

 

    4. The ombudsman shall have the following duties:

    a. Administer and organize the work of the office and hire such persons as shall be deemed necessary to effectuate the carrying out of his duties, subject to Title 11A (Civil Service) of the New Jersey Statutes, and within the limits of funds made available by the Department of Insurance;

    b. Appoint and employ any consultants, independent adjusters, claims specialists, attorneys or others for the purpose of providing legal and professional advice as the ombudsman may from time to time require, within the limits of the funds provided therefor;

    c. Promulgate such rules and regulations as shall be necessary to effectuate the purposes of this act;

    d. Perform such other functions as may be prescribed by this or by any other law or regulation.

 

    5. Any person who: a. has reasonable cause to believe that any insurer has failed or refuses to settle a claim in accordance with the provisions of the insurance contract; and b. has previously filed an appeal with the insurer's internal appeals procedure established pursuant to section 9 of this act, may file an application with the ombudsman for a review of the claims settlement.

 

    6. In any investigation the ombudsman may:

    a. Investigate whether the claims settlement was appropriate and in accordance with the contract;

    b. Make the necessary inquiries and obtain such information as he deems necessary;

    c. Hold a hearing on the disputed claim;

    d. Inspect any books or records which are relevant to the claim;

    e. Compel any person to produce at a specific time and place, by subpoena, any documents, books, records, papers, objects or other evidence which he believes may relate to a claim under investigation.


    7. The ombudsman need not investigate any complaint where he determines that:

    a. The complaint is trivial, frivolous, vexatious or not made in good faith;

    b. The complaint has been too long delayed to justify present investigation;

    c. The resources available, considering the established priorities, are insufficient for an adequate investigation; or

    d. The matter complained of is not within the investigatory authority of the office.

 

    8. The ombudsman shall maintain a central registry of all claims investigations which have been disposed of and closed, the nature of the investigation, findings, and recommended actions. No information so compiled shall be construed to be a public record. In addition, the ombudsman shall:

    a. Report to the commissioner any evidence that an insurer has established a pattern of settlement practices which would constitute an unfair claims settlement practice within the meaning of P.L.1947, c.379 (C.17:29B-1 et seq.);

    b. Report to the commissioner any contract provision, including any endorsements, which are unfairly discriminatory, misleading or contrary to public policy, along with a recommendation as to whether the policy form be modified or withdrawn;

    c. Report to the commissioner any conduct on the part of an insurer which constitutes an unfair claims settlement practice within the meaning of P.L.1947, c.379 (C.17:29B-1 et seq.).

 

    9. Every insurer writing property and casualty insurance in this State shall establish an internal appeals procedure for the adjudication of disputed claims, in accordance with terms set forth by the commissioner by rule and regulation. The adjudication shall be conducted by a panel of the insurer's employees, who shall be personnel other than those responsible for claims payment on a day-to-day basis and shall be conducted within 10 business days.

 

    10. The office of the ombudsman shall acknowledge the receipt of complaints, and advise the applicants of any action taken or opinions and recommendations which may have been made by it to the insurer. The ombudsman shall make recommendations to the commissioner as he deems necessary, including, but not limited to:

    a. A recommendation that a policy form or endorsement thereon which he finds unfairly discriminatory, misleading or contrary to public policy be modified;

    b. A recommendation that specific rules and regulations promulgated by the commissioner, including rules concerning trade practices and claims settlement practices, be modified or repealed;

    c. A recommendation that the claims settlement practices of a specific insurer or insurers be further investigated by the commissioner;

    d. A recommendation that the commissioner impose penalties or other sanctions against an insurer or insurers as a result of the insurer's claims settlement practices.

 

    11. Every buyer's guide which is required by law to be provided to insureds for any line of property-casualty insurance shall contain a notice describing the functions of the ombudsman, the mailing address of the ombudsman, and a toll-free information telephone number. The ombudsman may publicize his existence, function and activities to the public at large.

 

    12. a. Any correspondence or written communication from any applicant and any written material submitted by an insurer shall remain confidential and shall not be part of any public record, unless the parties authorize, in writing, the release of the information, except for such disclosures as may be necessary to enable the ombudsman to perform his duties and to support any opinions or recommendations.

    b. Any person conducting or participating in any investigation of a complaint who discloses to any person, other than the office of the ombudsman, or those authorized by the ombudsman to receive it, any information collected during the investigation, is a disorderly person.

    c. Any statement or communication made by the office of the ombudsman relevant to a complaint received by the ombudsman, to proceedings conducted by the ombudsman, or relating to an investigation conducted by the ombudsman, which is provided to the office in good faith, shall be absolutely privileged.

    d. The ombudsman shall not be required to testify in court with respect to matters held to be confidential except as the court may deem necessary to enforce the provisions of this act.

 

    13. Upon making his determination as to the appropriate disposition of the claim, the ombudsman shall notify the insurer and the claimant of his decision. The decision shall be admissible in any court action or any other proceeding which is instituted to determine final disposition of the claim. The ombudsman may file a brief with the court in connection with an action relating to the disposition of claim.

 

    14. Any person who willfully hinders the lawful actions of the ombudsman or willfully refuses to comply with his lawful demands, including the demand for the inspection of records, shall be subject to a penalty of not more than $5,000. The penalty shall be collected and enforced by summary proceedings pursuant to "the penalty enforcement law," N.J.S.2A:58-1 et seq. Each violation of this act shall constitute a separate offense.

 

    15. The ombudsman may bring suit in any court of competent jurisdiction to enforce any of the powers enumerated in this act.

 

    16. The ombudsman shall report to the Governor and the Legislature on or before September 30 of each year, summarizing his activities for the preceding year, documenting any significant insurance industry problems with regard to claims settlement practices in any line of insurance, and setting forth any recommendations for statutory or regulatory change which will further the State's capacity to resolve claims disputes.

 

    17. This act shall take effect immediately.

 

 

STATEMENT

 

    This bill establishes the Office of the Insurance Claims Ombudsman within the Department of Insurance. The ombudsman would be appointed by the Governor with the advice and consent of the Senate and serve at the pleasure of the Governor during the Governor's term of office. The ombudsman must have a least a baccalaureate degree and at least seven years' of experience in property and casualty insurance.

    Any person may file an application with the ombudsman for a review of a claims settlement if that person has a reasonable cause to believe that an insurer has failed or refuses to settle a claim in accordance with the provisions of the insurance contract and has previously filed with the insurer's internal adjudication procedure established pursuant to section 9 of the bill. After investigating the claims settlement and making his determination as to the appropriate disposition of the claim, the ombudsman shall notify the insurer and the claimant of his decision.

    Any person who willfully hinders the lawful actions of the ombudsman or willfully refuses to comply with its lawful demands would be subject to a penalty of not more than $5,000.

 

 

                             

 

Establishes the Office of the Insurance Claims Ombudsman.