SF 2233 (LSB 5777XS (2) 91)

SENATE FILE 2233

BY  WEBSTER

A BILL FOR

An Act relating to insurer’s requests for information and claim timelines, and property and casualty insurer’s loss calculations, adjustments, payments of claims, and policy terms.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 507B.4, subsection 3, Code 2026, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  w.  Insured —— requests for information.  

Refusing to provide requested information to an insured in accordance with section 507B.4D on the basis that the requested information is privileged, if the information is later determined not to be privileged.
    Sec. 2.  NEW SECTION.  507B.4D  Insured —— requests for information.
   1.  As used in this section, unless the context otherwise requires:
   a.  “Insured” means a person covered under an insurance policy.
   b.  “Insurer” means a person licensed to transact the business of insurance in this state.
   c.  “Person” means an individual, corporation, limited liability company, business trust, estate, trust, partnership or association, or any other legal entity.
   2.  Except as provided under subsection 3, an insurer shall provide, within fifteen calendar days of receipt of a request, the following information to an insured if requested by the insured:
   a.  A certified copy of the insured’s insurance policy.
   b.  A copy of a claim application filed by the insured.
   c.  The name and contact information of any person involved on the insurer’s behalf with a claim filed by the insured.
   d.  An accounting of the amount paid on a claim filed by the insured.
   e.  An accounting of the reserve set on a claim filed by the insured.
   f.  A copy of internal communications, notes, or memos related to a claim filed by the insured, including internal communications, notes, or memos of a third-party administrator or independent adjusting firm.
   g.  A copy of communications related to a claim filed by the insured between the insurer and any other party.
   h.  A copy of all information in the possession of the insurer related to a claim filed by the insured, including information submitted by the insured to the insurer, and information the insurer independently gathered.
   i.  Other information required to be provided to an insured upon request pursuant to rules adopted by the commissioner.
   3.  An insurer shall not be required to provide privileged information to an insured. If an insurer refuses to provide information to an insured on the basis that the information is privileged, the insurer shall provide the insured with a written explanation for the basis of the privilege. If the information is later determined not to be privileged, the insurer’s prior refusal to provide the requested information shall constitute an unfair method of competition and unfair or deceptive act or practice under section 507B.4.
    Sec. 3.  NEW SECTION.  507B.4E  Insurance policies —— prohibited deadlines and statutes of limitation.
   An insurer shall not include any of the following in an insurance policy:
   1.  A deadline for an insured to provide notice of a loss to the insurer if the insured could not have reasonably known about the loss, and the insurer will not be prejudiced by a delay in notice.
   2.  If the insurance policy provides for replacement cost, a deadline for the insured to recover the depreciation amount that is less than one year from the date that the insurer made the most recent actual cash value payment to the insured. An insurer shall provide written notice to the insured of the deadline for the insured to recover the depreciation amount no later than ninety calendar days prior to the date of the deadline.
   3.  Language that imposes a statute of limitations for an insured to file a lawsuit against the insurer for wrongfully denying a claim submitted by the insured to less than five years from the date of the loss that is the subject of the claim that the insurer denied, or less than two years from the date of the denial of the claim, whichever is later. An insurer shall provide written notice to the insured of the statute of limitations deadline for the insured to file a lawsuit related to a denied claim no later than ninety calendar days prior to the date of the deadline.
    Sec. 4.  NEW SECTION.  515.116  Loss calculations —— property insurance claims.
   1.  Definitions.  As used in this section, unless the context otherwise requires:
   a.  “Actual cash value” means the replacement cost of property at the time of the loss, less depreciation, if any. If the replacement cost of property at the time of the loss, less depreciation, cannot be ascertained, a person may determine the actual cash value of property using the market value, diminished value, or other evidence or information to determine the actual cash value of property at the time of the loss.
   b.  “Commissioner” means the commissioner of insurance.
   c.  “Insurance policy” means a property insurance policy issued by an insurer.
   d.  “Insured” means a named insured covered under an insurance policy.
   e.  “Insurer” means a person to whom the commissioner of insurance has issued a property insurance producer license.
   f.  “Line of sight” means any location a reasonable person would stand, on the ground or any floor of an insured’s damaged structure, to view, without obstruction or the use of aerial tools or technology, the damaged area of the interior or exterior of the damaged structure from a reasonable distance. “Line of sight” is not limited to a view of the insured’s damaged structure from the location at which the damage occurred.
   g.  “Reasonable distance” means, for exterior repair or replacement, a vantage point approximately thirty feet from where the repair or replacement is to occur. A “reasonable distance” for interior repair or replacement means a vantage point approximately five feet from where the repair or replacement is to occur. Based on a particular property, “reasonable distance” may be determined to be greater than or less than thirty feet for exterior repair, or greater than or less than five feet for interior repair.
   h.  “Reasonably similar appearance” means if, within a line of sight, a person viewing the repaired or replaced property would find the property to resemble the property’s preloss condition, or would find the repaired or replaced property indistinguishable from the remaining original property. Whether a replacement results in a reasonably similar appearance is a fact-specific determination made on a case-by-case basis considering the totality of the circumstances.
   2.  Replacement cost.  For an insurance policy providing for the adjustment and settlement of first-party losses based on replacement cost, all of the following shall apply:
   a.  When a loss requires repair or replacement of a product or part, consequential physical damage incurred during the repair or replacement of the product or part shall be included in the calculation of loss. The insured shall not be required to pay for betterment or other costs, except for any applicable deductible.
   b.  (1)  When a loss requires repair or replacement of a product or part, the insurer shall repair or replace as much of the product or part as is necessary to achieve a reasonably similar appearance.
   (2)  An insurer shall have the burden to prove that a proposed repair or replacement of a product or part will achieve a reasonably similar appearance, after the insurer conducts a comparison of the original product or part to the proposed repair or replacement product or part.
   (3)  As necessary to determine whether a proposed repair or replacement will achieve a reasonably similar appearance, an insurer may compel an insured to complete the repair or replacement at the expense of the insurer. The insured shall not bear any cost over the insured’s applicable deductible, if any.
   (4)  An insurer that includes, in an insurance policy providing for the adjustment and settlement of first-party losses based on replacement cost, an endorsement that excludes or limits the requirement for a repair or replacement product or part to achieve a reasonably similar appearance shall not be subject to subparagraphs (1) through (3), provided the endorsement meets all of the following requirements:
   (a)  The endorsement is approved by the commissioner.
   (b)  The endorsement is listed in the insurance policy declarations page.
   (c)  The endorsement results in a premium discount for the insured.
   (d)  The endorsement includes a disclosure statement, in twelve point or larger bold font, informing the insured that the insured is forfeiting the rights provided under subparagraphs (1) through (3).
   (e)  The endorsement is signed by the insured.
   c.  (1)  When a loss requires repair or replacement of a building, the insurer shall repair or replace as much of the building as is necessary to bring the building into compliance with the building code adopted by the jurisdiction in which the damaged building is located. If the jurisdiction has not adopted a building code, the insurer shall repair or replace as much of the building as is necessary to bring the building into compliance with the state building code. The insured shall not bear the cost of betterment or any cost except for the applicable deductible, if any.
   (2)  An insurer that includes, in an insurance policy providing for the adjustment and settlement of first-party losses based on replacement cost, an endorsement that excludes or limits the requirement for a repair or replacement of a building to comply with the building code adopted by the jurisdiction in which the damaged building is located or the state building code shall not be subject to subparagraph (1) provided the endorsement meets all of the following requirements:
   (a)  The endorsement is approved by the commissioner.
   (b)  The endorsement is listed in the insurance policy declarations page.
   (c)  The endorsement results in a premium discount for the insured.
   (d)  The endorsement includes a disclosure statement, in twelve point or larger bold font, informing the insured that the insured is forfeiting the rights provided under subparagraph (1).
   (e)   The endorsement is signed by the insured.
   d.  (1)  The insurance policy shall not include a roof payment schedule, or a similar provision, intended to reduce the insurer’s liability for damage to roof surfaces or to property otherwise insured at a replacement cost.
   (2)  An insurer that includes, in an insurance policy providing for the adjustment and settlement of first-party losses based on replacement cost, an endorsement that excludes or limits the insurer’s liability for damage to roof surfaces or to property otherwise insured at a replacement cost shall not be subject to subparagraph (1), provided the endorsement meets all of the following requirements:
   (a)  The endorsement is approved by the commissioner.
   (b)  The endorsement is listed in the insurance policy declarations page.
   (c)  The endorsement results in a premium discount for the insured.
   (d)  The endorsement includes a disclosure statement, in twelve point or larger bold font, informing the insured that the insured is forfeiting the rights provided under subparagraph (1).
   (e)  The endorsement is signed by the insured.
   e.  The replacement cost of damaged property shall be calculated based on the replacement cost on the date that the damaged property is repaired or replaced.
   3.  Actual cash value.  For an insurance policy providing for adjustment and settlement of first-party losses based on actual cash value, if the actual cash value of a claim is not calculated as the replacement cost less depreciation, the insurer shall provide a copy of the claim file worksheet detailing all deductions for depreciation and a detailed written explanation that describes the manner in which depreciation was calculated and the actual cash value determined.
   4.  Total loss.  For property covered by an insurance policy that is wholly destroyed or damaged and cannot be repaired, or the cost of repair exceeds the value of the property, the insurer shall pay the insured the limit of the insurance policy. The insurer shall not withhold the cost of depreciation or the insured’s deductible.
   5.  Cosmetic damage.
   a.  An insurance policy shall not include a provision that requires covered property damage to satisfy certain criteria in order to exclude or limit the insurer’s liability for cosmetic or nonfunctional damages.
   b.  An insurer that includes an endorsement insurance policy that establishes criteria that covered property must satisfy in order for the insured to receive cosmetic or nonfunctional damages shall not be subject to this subsection provided the endorsement meets all of the following requirements:
   (1)  The endorsement is approved by the commissioner.
   (2)  The endorsement is listed in the insurance policy declarations page.
   (3)  The endorsement results in a premium discount for the insured.
   (4)  The endorsement includes a disclosure statement, in twelve point or larger bold font, informing the insured that the insured is forfeiting the rights provided under paragraph “a”.
   (5)  The endorsement is signed by the insured.
    Sec. 5.  NEW SECTION.  515.117  Adjustment and payment of claims.
   1.  Definitions.  As used in this section, unless the context otherwise requires:
   a.  “Commissioner” means the commissioner of insurance.
   b.  “Insurance policy” means a property insurance policy issued by an insurer.
   c.  “Insured” means a named insured covered under an insurance policy.
   d.  “Insurer” means a person to whom the commissioner of insurance has issued a property insurance producer license.
   2.  Acknowledgment of claim.  No later than fifteen business days after the date an insurer receives notice of a claim, or notice that a claim has been received by an agent of the insurer, the insurer shall do all of the following:
   a.  Provide acknowledgment to the insured that the claim has been received. If the acknowledgment is not made in writing, the insurer shall make a record specifying the date, manner, and content of the acknowledgment.
   b.  Commence review or investigation of the claim as necessary.
   c.  Request that the insured provide any item, statement, or form related to the claim, including any proof of loss form required by the insurer, necessary for review or investigation of the claim. The insurer shall provide the insured with any form or instruction necessary for the insured to provide such item, statement, or form. The insurer may request additional items, statements, or forms related to the claim during the course of the review or investigation.
   3.  Communications.  An insurer shall reply within fifteen business days from the date of receipt to a communication from an insured to which an insured would reasonably expect a response from the insurer. The insurer’s response shall address all material parts of the insured’s communication.
   4.  Acceptance or denial of claim.
   a.  Except as provided by paragraph “b”, an insurer shall notify an insured in writing of the acceptance or denial of a claim no later than thirty calendar days from the date of receipt of a properly completed proof of loss form.
   b.  If there is a reasonable basis, supported by specific evidence, for an insurer to believe that an insured fraudulently caused or contributed to a claim, an insurer shall do all of the following:
   (1)  Notify the insured, no later than thirty calendar days from the date of receipt of a properly completed proof of loss form, of the reason additional time is required to investigate the claim.
   (2)  Notify the insured every thirty calendar days following the notice under subparagraph (1) of the reason additional time is required to investigate the claim.
   (3)  Within a reasonable amount of time after completing an investigation of the claim and making a determination whether the insured fraudulently caused or contributed to the claim, notify the insured of the acceptance or denial of the claim.
   c.  If any part of a claim is denied by an insurer, the notice required by paragraph “a” or paragraph “b”, subparagraph (3), must include a complete and detailed explanation of the reason for the denial and include a citation to applicable insurance policy language or law that is the basis for the denial. If a denial of a claim, in part or in full, is based on a written report or other documentation of the claim by the insurer or by an agent of the insurer, the written report or other documentation shall be provided to the insured.
   5.  Inspection of damaged property.
   a.  If, prior to an insurer accepting or denying a claim, inspection of damaged property that is the subject of a claim is required, the insurer shall schedule and complete the inspection no later than thirty calendar days from the date of receipt of a properly completed proof of loss form.
   b.  An insurer shall complete an inspection of damaged property within the time limit under paragraph “a” unless an act of nature prevents the insurer from completing the inspection. If an inspection is delayed the insurer shall notify the insured within the time limit under paragraph “a”, and every thirty calendar days thereafter until an inspection is completed, of the reason the inspection is delayed or continuing to be delayed.
   6.  Claim payment.
   a.  Except as otherwise provided by this section, if an insurer accepts liability for all or part of a claim, the insurer shall pay the portion of the claim for which liability has been accepted not later than ten business days after the date liability was accepted.
   b.  If payment of all or part of a claim is conditioned on the performance of an act by the insured, the insurer shall pay the portion of the claim for which liability has been accepted not later than ten business days after the act is performed by the insured.
   c.  This subsection shall not apply if, through litigation, arbitration, mediation, or appraisal, it is discovered that any of the following are true:
   (1)  The damaged property that is the subject of a claim does not belong to the insured that filed the claim, such that the insured did not suffer any loss.
   (2)  The insured’s insurance policy does not provide coverage for the damaged property that is the subject of a claim.
   (3)  The claim is otherwise invalid.
   7.  Penalties.
   a.  If an insurer that accepts all or part of a claim violates subsection 4, 5, or 6, the insurer shall be liable for, in an action brought by an insured against the insurer in which the insured prevails, the portion of the claim for which the insurer accepted liability plus simple interest at an annual rate of eighteen percent on the portion of the claim not adjusted or paid pursuant to this section, the insured’s cost of litigation, including reasonable attorney fees, and any other damages provided by law. Simple interest on a claim shall begin accruing on the date of the insurer’s violation and shall accrue until the date the underlying claim and interest is paid in full by the insurer.
   b.  This subsection shall not be construed to prevent or replace an award of prejudgment interest or any other damages as provided by law.
   8.  Public adjusters.
   a.  An insurer shall not include a provision in an insurance policy that prohibits an insured from contracting with a public adjuster.
   b.  For purposes of this subsection, “public adjuster” means the same as defined in section 522C.2.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to insurer’s requests for information and claim timelines, and property and casualty insurer’s loss calculations, adjustments, payments of claims, and policy terms.
   Under the bill, an insurer shall provide to an insured, within 15 days of receipt of a request, copies of requested documents, the name and contact information of a person involved on the insurer’s behalf with a claim, an accounting of the amount paid and reserve set on a claim, or other required information as detailed by the bill. The insurer is not required to provide privileged information, but must provide to the insured a written explanation for the basis of the privilege. If the information is later determined not to be privileged, the insurer’s prior refusal constitutes an unfair method of competition and unfair or deceptive act or practice. The bill makes a conforming change to Code section 507B.4(3).
   An insurer shall not include in a policy a deadline for an insured to provide notice of a loss if the insured could not have reasonably known about the loss and the insurer will not be prejudiced by a delay. If a policy provides for replacement cost, an insurer shall not include a deadline for the insured to recover the depreciation amount that is less than one year from the insurer’s most recent actual cash value payment to the insured, and shall notify the insured of such deadline no later than 90 days prior to the deadline. An insurer shall not include in a policy language that imposes a statute of limitations for an insured to sue the insurer for wrongfully denying a claim to less than five years from the date of the loss, or two years from the denial of the claim, whichever is later, and shall notify the insured of such deadline no later than 90 days prior to the deadline.
   For a policy providing for replacement cost for property, and the loss requires repair or replacement of a product or part, consequential physical damage shall be included in the calculation of loss, the insured shall not be required to pay for betterment or costs other than an applicable deductible, and the insurer shall repair or replace as much of the property necessary to achieve a reasonably similar appearance as detailed by the bill. “Reasonably similar appearance” is defined by the bill. If the loss requires repair or replacement of a building, the insurer shall repair or replace as much of the building necessary to bring the building into compliance with the local or state building code, and the insured shall not be required to pay for betterment or costs other than an applicable deductible. The requirement that an insurer bring a building into compliance with a local or state building code may be waived pursuant to an endorsement in a policy as detailed by the bill.
   A policy shall not include a roof payment schedule or a similar provision, or a provision that requires covered property damage to satisfy certain criteria in order to exclude or limit the insurer’s liability for cosmetic or nonfunctional damages, unless an endorsement providing otherwise is included in a policy as detailed by the bill.
   The replacement cost of damaged property shall be calculated based on the date the damaged property is repaired or replaced.
   For a policy providing for actual cash value for a claim, and the actual cash value is not calculated as the replacement cost less depreciation, the insurer shall provide the insured a copy of the claim file worksheet and an explanation of the calculation of depreciation and determination of the actual cash value. “Actual cash value” is defined by the bill.
   For property covered by a policy that is wholly destroyed or damaged and cannot be repaired, or is too expensive to repair, the insurer shall pay the limit of the policy and shall not withhold the cost of depreciation or the deductible.
   The bill requires an insurer to, within 15 days of receiving notice of a claim, acknowledge receipt of the claim to the insured, commence review or investigation of the claim, and request from the insured any item, statement, or form related to the claim. An insurer shall reply within 15 days to a communication from an insured to which an insured would reasonably expect a response, and shall address all material parts of the insured’s communication.
   An insurer shall notify an insured of the acceptance or denial of a claim no later than 30 days from the date of receipt of a properly completed proof of loss form. If an insurer believes an insured fraudulently caused or contributed to a claim, the insurer shall notify the insured within 30 days of receiving a proof of loss form of the reason additional time is required to investigate the claim, notify the insured every 30 calendar days thereafter of the continuing reason additional time is required, and, within a reasonable amount of time after completing an investigation and a determination whether the insured fraudulently caused or contributed to the claim, notify the insured of the acceptance or denial of the claim.
   If part of a claim is denied by an insurer, the notice must include an explanation of the reason for the denial and a citation to applicable policy language or law that is the basis for the denial. If a denial is based on a written report or other documentation, the report or documentation shall be provided to the insured.
   If, prior to accepting or denying a claim, inspection of damaged property under a claim is required, the insurer shall schedule and complete the inspection within 30 days of receipt of a proof of loss form. The inspection may only be delayed if an act of nature reasonably prevents the inspection, in which case the insurer shall notify the insured of the reason for delay.
   If an insurer accepts liability for all or part of a claim, the insurer shall pay the accepted portion of the claim within 10 days. If payment is conditioned on the performance of an act by the insured, the insurer shall pay the portion for which liability has been accepted within 10 days of the act being performed. Payment of a claim shall not be required if it is discovered that the damaged property does not belong to the insured, the policy does not provide coverage for the damaged property, or the claim is otherwise invalid.
   An insurer that violates the bill and has accepted all or part of a claim is liable for, in an action brought by an insured in which the insured prevails, the portion of the claim for which the insurer accepted liability plus simple interest at an annual rate of 18 percent, the insured’s reasonable attorney fees, costs of litigation, and any other damages provided by law. The bill shall not be construed to prevent or replace an award of prejudgment interest or any other damages as provided by law.
   An insurer shall not include a provision in a policy that prohibits an insured from contracting with a public adjuster.