Written by David Karl Gross

No matter how safe or cautious you may be, the odds are high that you will eventually need to file an insurance claim.  The claim could be the result of a variety of situations; it could be a traffic accident due to a red light runner, perhaps a slip and fall in your home or business, or your home could suffer damage from an earthquake or fire.  When an unfortunate event occurs, your first action should be to contact your insurance company for assistance.  When you make the call, there is an expectation that the insurance company will jump into action.  Unfortunately, many people are disappointed by their insurer’s lack of responsiveness.

Luckily, there are rules in place requiring insurance companies to act in a certain manner.  These rules are found in the Alaska Claims Handling Regulations (3 AAC 26.010, et seq.), and are designed to set the minimum standards required of insurers in the first-party context.  (A first-party claim is a claim being made under a policy you have purchased.  A third-party claim is where you are seeking compensation under someone else’s policy.)  Being aware of these rules, or knowing where to find them, will help you understand what an insurer should do.

One of the first rules (3 AAC 26.040) deals with what the insurer must do when you put it on notice of a claim.  This rule states that when you tell the insurer about a claim (either by calling, emailing, faxing, writing, or on-line), it has 10 business days to inform you in writing that it has received the claim.  In the initial letter, the insurer is also required to provide you with the name of the adjuster that will be handling the claim, as well as contact information.  The insurer must also provide you with a claim number to track the claim and must specifically set forth the benefits you may be entitled to under the terms of the insurance policy.  If you make contact with an insurer, and if you ask a question that warrants a response, the insurer must respond to you within 15 business days, which prevents the insurer from unduly delaying the claim.

Once the insurance company begins its investigation of your claim, it must keep a detailed file, which includes all notes, work papers, statements, pictures, diagrams, and other such information. If the claim results in a lawsuit, all of the documentation in the file is discoverable (i.e., it must be provided to you), unless the material was prepared at the direction of a lawyer for the insurance company.  In other words, you will be able to have access to all of this information if a lawsuit is filed.

The insurer is required to let you know if the claim is being accepted or denied within 15 working days after receipt of the claim (3 AAC 26.040).  On occasion, there are exclusions or deadlines in the insurance policy that could allow the insurer to avoid coverage.  If the insurer is going to rely on one of these policy provisions to deny a claim, not only must they act fast (15 business days), but they are also required to provide you with a written denial of the claim, which must state the specific provisions, conditions, exclusions, and facts upon which the denial is based.  An adjuster cannot deny your claim over the telephone.

If only part of a claim is being denied, the insurer is required to pay you the portions of the claim it has no reason to dispute.  In other words, if you are injured in a car crash and you submit covered medical bills to your automobile insurance carrier for payment, an insurer is not allowed to delay the payment of the entire claim simply because it is challenging the reasonableness of one bill.  Instead, the insurer is obligated to promptly pay all undisputed bills.  Again, the idea behind this rule is to prevent an insurer from delaying the entire claim simply because one small part of it could be in dispute.

An insurance company is entitled to conduct a claim investigation, but any such investigation must be completed within 30 business days after you give written notification of the claim.  The only exception to this rule is if the insurer can demonstrate that the investigation cannot possibly be completed in the allowable timeframe after using due diligence.  If the insurer believes that additional time is needed, it is required to send you a letter outlining the reasons why additional time is needed and providing an estimate as to when the investigation will be complete.

If there are certain time limits in place, such as a statute of limitations, an insurer cannot delay your claim in an effort to avoid having to pay.  For example, if you make a claim 90 days before a statute of limitations runs, an insurer cannot delay the claim until after the statute of limitations has run and then contend that your claim is time barred.  Instead, the insurer must clearly notify you as to the time limits that might be expiring and the impact of missing a deadline.  This written notice must be given to you at least 60 calendar days (3 AAC 26.070) before the date the time limit will expire on.

If the insurer is required to pay your claim, it must do so promptly.  Payment should be made by a check that can be cashed at a bank located in the State of Alaska.  It is not proper for an insurer to issue payment with an out-of-state check, which will only delay the actual payment of the claim.

If it is determined that an insurer violated one or more of these rules, it will be deemed to have acted in an unfair and deceptive manner.  Such a finding can be used as evidence to establish bad faith if there is a lawsuit against the insurer for breaching the implied-in-law covenant of good faith and fair dealing, which is imbued in every insurance contract in Alaska.  In addition, if an insurer violates these rules, the Division of Insurance for the State of Alaska is authorized to order the insurer to cease and desist from such conduct, and if it refuses, to penalize the insurer in an amount up to $25,000.  If the insurer persists, the Division of Insurance can revoke the insurer’s license to conduct business in the State of Alaska and penalize the insurer an amount not to exceed $250,000. There are other rules that specifically deal with motor vehicle claims (3 AAC 26.080), property loss claims (3 AAC 26.090), worker’s compensation claims (3 AAC 26.100), and health insurance claims (3 AAC 26.110). 

If you are involved in a claim and you think your insurer has violated the above-stated rules, or is acting in a manner that is not in your best interests, it is always a good idea to have a lawyer examine the circumstances and to advise you if your claim is being handled properly.  The lawyers at Birch Horton Bittner & Cherot know the rules — inside and out – and stand ready to assist anyone who thinks that their insurer may not be playing by the rules.