Bill will encourage fraud, critics say

by Jack Minor,
for The Greeley Gazette

A bill in the Colorado Senate being touted as insurance reform will make it easier for people to commit fraud, critics say. SB 76, the Concerning Unreasonable Insurance Claims Settlement Practices Act is intended to prevent insurance companies from paying incentives for denying claims. The U.S. Chamber Institute for Legal Reform says the bill will criminalize the basic duties of claims adjusters. They worry the law is so broadly worded that it can be applied to any adjuster who receives any type of salary from an insurance company. The bill states in the summary that it defines an unfair claim settlement process as one where a company provides “compensation to induce or encourage the decision to deny or delay resolution of a claim or to cancel or rescind an insurance policy.” The bill goes on to state that judges are permitted to instruct juries that the “willful payment of a financial incentive is prohibited” and that the bill “establishes a presumption of unreasonableness when a claim for benefits is denied or delayed and the person who makes the decision to delay or deny payment of the claim receives any personal financial incentive” for denying a claim. The chamber points out the term financial incentive is not defined and therefore it could apply to any payment made to an adjuster including wages and overtime pay. In a press release announcing its opposition to the bill, the chamber said “with such a threat hanging over their heads, employees will hesitate to reject any claim, no matter how preposterous. And scammers will know that it's open season on insurance companies. Even if their claims are rejected, they can simply go to court and suggest that some employee somewhere received a financial incentive including regular wages for rejecting those claims.” The chamber said this bill will lead to lost jobs and an increase in insurance fraud.

State Rep. Jim Riesberg told the Gazette he agrees with those concerns and that while he thinks the intentions are good he would not support the bill. Riesberg mentioned that he carries liability insurance and said that if someone were to bring a claim against him one of the steps taken is for the insurance company to investigate whether the claim has any validity or not. He said under this bill if they were to deny any claim made against him even if it had no merit, the investigator could be said to have done so for financial incentive if they were receiving any kind of wages from the company.

The bill has passed the third reading and has been introduced to the House.

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