A recently passed House bill aims to protect Rhode Island drivers from delays in settling claims for accidents with uninsured drivers, but insurance officials are opposed to language in the legislation that prohibits them from denying accident settlements.
The bill, sponsored by state Rep. Al Gemma, D-Warwick, mandates that auto insurers respond to requests to settle claims within 60 days and must grant the initial settlement offer if they fail to meet the deadline.
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“Oftentimes, insurance companies drag out what should be a one-week process of collecting information,” Gemma said. “This bill protects individuals who have been hit by an uninsured driver, and find themselves waiting for a settlement from their own insurance company for a prolonged period of time.”
Insurance companies are not obligated, under current state law, to accept settlement offers from uninsured or underinsured drivers, bill proponents say. And accident victims can be left waiting for months during the sometimes prolonged process of processing and investigating the claims.
“I’ve seen it happen too often where people are left swinging in the breeze because the insurance company won’t pay,” Gemma said. “Sometimes people are left with a damaged car for months and months, waiting to have it fixed. That’s too long.”
The insurance industry, however, sees the process as more complex, and says the 60-day time frame is insufficient to investigate uninsured or underinsured drivers’ financial status before accepting settlement offers.
“First of all, I’m not sure there is an issue that needs to be addressed here,” said Robert P. Suglia, senior assistant vice president and assistant general counsel for Lincoln-based Amica Mutual Insurance Co.
Suglia, a lobbyist at the State House, used a hypothetical accident in which an underinsured driver is at fault and wants to settle, to explain his opposition:
The victim of an auto accident, who has uninsured-driver insurance for such incidents, suffers injuries that require $100,000 in medical treatment. However, the driver at fault’s insurance covers him or her for only $25,000 for accidents resulting in injury to another driver. Here’s where the problems could arise.
The victim wants to accept the driver’s $25,000 settlement offer and collect $75,000 from their insurance company on their uninsured driver coverage, Suglia said. Yet the settlement offer includes a clause that the victim’s insurance company cannot collect against the driver’s personal assets. And the victim’s insurance company suspects the driver has $1 million in personal assets but needs time to conduct an investigation.
Not only is the 60 days provided in the proposed legislation not enough time to investigate, Suglia said, but it also would require the insurance company to accept the settlement offer within that time frame.
“The problem with the bill,” Suglia added, “is unless you provide consent within 60 days, consent is implied.”
Property Casualty Insurers Association’s local counsel, Stephen D. Zubiago, had similar gripes with the House bill.
Both attorneys noted their vehement objections to a particular line in the bill, which states that “consent of the company to the release of the (insurance awards) shall be deemed to have been granted if the insurer fails to provide such written consent within 60 days after receiving a written request from the insured.”
Zubiago said if an insurer has a legitimate reason not to consent to a claim, the way the bill reads, it still would have to acquiesce under any circumstances.
“It’s unbelievably poorly written,” Zubiago said.
Nevertheless, both Zubiago and Suglia said they were willing to work with legislators to draft a bill that addresses the issues.
The House bill was referred to the Senate Judiciary Committee for review before going before the Senate for further consideration. No date has been set for the judiciary committee’s review of the bill.
