MISSISSIPPI LEGISLATURE

2007 Regular Session

To: Insurance

By: Representative Peranich, Fleming, Gibbs, Guice, Ishee, Janus, Lane, Mayo, McBride, Simpson, Upshaw

House Bill 1237

AN ACT TO SET FORTH THE MISSISSIPPI CONSUMER INSURANCE POLICYHOLDER BILL OF RIGHTS; TO PROVIDE THAT, IN ANY ACTION FOR DAMAGES BY THE POLICYHOLDER AGAINST AN INSURER UNDER A HOMEOWNERS POLICY, THE INSURER HAS THE BURDEN OF PROOF AS TO THE APPLICATION OF ANY EXCLUSION IN THE POLICY AND ANY EXCEPTION TO OR OTHER AVOIDANCE OF COVERAGE BY THE INSURER; TO AMEND SECTION 23-15-193, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT THE OFFICE OF COMMISSIONER OF INSURANCE SHALL BE AN ELECTED POSITION AND THAT THIS REQUIREMENT MAY NOT BE CHANGED OR AMENDED BY GENERAL LAW; TO AMEND SECTION 83-1-3, MISSISSIPPI CODE OF 1972, TO PROHIBIT THE COMMISSIONER OF INSURANCE FROM RECEIVING GIFTS OR CAMPAIGN CONTRIBUTIONS FROM ANY INSURANCE COMPANY DOING BUSINESS AND REGULATED WITHIN THE STATE OF MISSISSIPPI; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. (1) The Mississippi State Legislature finds that:

(a) The geographic location and coastline bordering the Gulf of Mexico makes the State of Mississippi especially vulnerable to damages caused by hurricanes;

(b) The state, and particularly the Mississippi Gulf Coast, suffered enormous losses when Hurricane Katrina hit Mississippi on August 29, 2005;

(c) In multitudes of instances, the homes of Mississippi citizens were leveled to the ground leaving those homeowners with only the slabs of their former homes; and

(d) The response of insurance companies providing residential insurance coverage to those homeowners was disappointing in that many companies were reported to have relied on water damage exclusions contained in the policies to summarily deny coverage, alleging that the damages to the properties of such homeowners was caused by wind and not water.

(2) Despite warning bulletins from the Commissioner of Insurance, reports of insurance companies summarily denying coverage, based solely on water damage exclusions that may not have been adequately proven, continue as of the effective date of this act. On January 4, 2007, the Commissioner of Insurance filed a new proposed regulation with the Secretary of State's Office that outlines a homeowner insurance policyholder bill of rights, on which public hearings will be held in due course; however, this Legislature finds that the proposed regulation does not grant adequate rights to Mississippi citizens. Therefore, the Legislature is enacting the provisions of this act.

SECTION 2. (1) The Commissioner of Insurance shall:

(a) Require each property and casualty insurer writing homeowners personal lines residential insurance property coverage, including renters/tenants insurance and mobile home/manufactured housing property coverage, to attach a copy of the "Mississippi Consumer Insurance Policyholder Bill of Rights" specified in Section 3 of this act to any policy providing such coverage that is sold to any person in the state.

(b) Provide a toll-free telephone number, toll-free facsimile number and the necessary forms to contact the Mississippi Department of Insurance to obtain information about any of the rights specified in Section 3 of this act or to make a complaint based on any of the rights enumerated in Section 3 of this act.

(c) Make an annual report to all Mississippi residents, by means of Internet access or providing paper copies of the report to any resident requesting same, evaluating the performance of insurance companies offering the types of insurance described in paragraph (a), with regard to property claims based on damage incurred within the state, including the number of insurance claims paid, the total dollar amount of claims paid, the number of claims denied, and the number of claims filed against each such insurance company.

(2) The bill of rights described in Section 3 of this act shall supercede any bill of rights pertaining to the same subject matter that may be promulgated by the Commissioner of Insurance.

SECTION 3. The following shall be attached to every policy providing residential insurance property coverage, including renters/tenants insurance and mobile home/manufactured housing property coverage, that is sold in this state:

"MISSISSIPPI CONSUMER INSURANCE POLICYHOLDER BILL OF RIGHTS

This Bill of Rights is a summary of your rights and does not become a part of your policy. The Mississippi Legislature adopted the Bill of Rights and requires insurance companies to provide you a copy when they issue your policy.

Mississippi law gives you certain rights regarding insurance companies providing residential insurance property coverage, including renters/tenants insurance and mobile home/manufactured housing property coverage, that are regulated within the state. This Bill of Rights identifies your rights specified by this statute, but it does not include all your rights. If your agent, company or adjuster tells you that one of these rights does not apply to you, contact the Mississippi Department of Insurance.

You have the right to call the department, free of charge at [insert toll-free telephone number of the Mississippi Department of Insurance] to learn more about:

Your rights as an insurance consumer;

The license status of an insurance company or agent;

The financial condition of an insurance company;

The complaint ratio and type of consumer complaints filed against an insurance company;

The use of credit information by insurance companies, including which insurance companies use it and access to each company's credit scoring model;

An insurance company's rates filed with the state;

An insurance company's underwriting guidelines (subject to any exemptions contained in the Mississippi Public Records Act of 1983).

WHAT YOU SHOULD KNOW BEFORE YOU BUY INSURANCE

1. PROHIBITED STATEMENTS. Your insurance company or agent is prohibited from making false, misleading, or deceptive statements to you relating to insurance.

2. LENDER-REQUIRED INSURANCE. A lender cannot require you to purchase insurance on your property in an amount that exceeds the replacement cost of the property and its contents as a condition of financing or providing other financing arrangements for the property, regardless of the amount of the mortgage or other financing arrangements. In determining the replacement cost of the dwelling, a lender cannot include the fair market value of the land on which a dwelling is located.

3. EXCESS LIMITS. An insurer or agent cannot require you to purchase insurance for coverage limits greater than the limits required by law or require you to purchase other types of coverage as a condition of offering insurance or continued insurance to you.

4. CREDIT INFORMATION. An insurance company cannot deny you insurance solely on the basis of credit information. Insurers who use credit information must also consider other underwriting factors independent of credit information when deciding whether to offer coverage.

5. PAYMENT PLANS. You have the right to pay your insurance premium in installments. Insurance companies may charge a reasonable fee for each installment. Your initial down payment on a premium cannot exceed the cost of two (2) months of coverage. For a twelve-month policy, you have the right to pay the balance in at least ten (10) equal monthly installments.

6. WINDSTORM COVERAGE. For property located in areas designated by the commissioner in certain counties on or near the Coast, you have the right to buy windstorm and hail coverage from the Mississippi Windstorm Underwriting Association created under Section 83-34-1 et seq., Mississippi Code of 1972. Your property must meet certain requirements, and the basic coverage is limited to a maximum amount set each year by the Commissioner of Insurance. This right applies whether or not you buy other insurance for your house. In all other counties your homeowners or dwelling policy includes this coverage.

7. EXPLANATION OF DENIAL. Upon request, you have the right to be told in writing why you have been denied coverage. The written statement must fully explain the decision, including the precise incidents, circumstances, or risk factors that disqualified you. It must also state the sources of information used.

NOTE: The obligation to provide a written explanation applies to insurance companies directly. An independent agent has a specific duty to quote the lowest possible rate to a consumer or to provide a written statement explaining why the agent did not offer the consumer the lowest possible rate.

8. NOTICE OF REDUCED COVERAGE. If an insurer uses an endorsement to reduce the amount of coverage provided by your policy, the insurer must give you a written explanation of the change made by the endorsement. The insurer must provide the explanation before the effective date of the new or renewal policy. An insurance company cannot reduce coverage during the policy period unless you request the change. If you request the change, the company is not required to provide notice.

9. NOTICE OF PREMIUM INCREASE. If your insurer intends to increase your premium by ten percent (10%) or more upon renewal, the insurer must send you notice of the rate increase at least thirty (30) days before your renewal date.

10. LIMITATION ON CANCELLATION. After your initial policy with your company has been in effect for sixty (60) days or more, that insurance company cannot cancel your policy unless:

You do not pay your premium when due;

You file a fraudulent claim;

The Mississippi Department of Insurance determines that the continuation of the policy would result in violation of insurance laws.

11. RIGHT TO PRIVACY. You have the right to prevent an insurance company, agent, adjuster or financial institution from disclosing your personal financial information to companies that are not affiliated with the insurance company or financial institution. Some examples are income, social security number, credit history and premium payment history. If you apply for a policy, the insurance company or financial institution must notify you if it intends to share financial information about you and give you at least thirty (30) days to refuse. This refusal is called "opting out."

12. POLICYHOLDER'S RIGHT TO CANCEL. You have the right to cancel your policy at any time and receive a refund of the remaining premium. The refund will be paid to you unless your premium was financed through a premium finance company, in which case, the refund will be paid to the premium finance company to reduce the amount you owe on your loan.

13. NOTICE OF NONRENEWAL. If the insurance company does not mail you notice of nonrenewal at least thirty (30) days before your policy expires, you have the right to require the insurance company to renew your policy.

14. EXPLANATION OF CANCELLATION OR NONRENEWAL. Upon request, you have the right to a written explanation of an insurance company's decision to cancel or not renew your policy. The written statement must fully explain the decision, including the precise incidents, circumstances, or risk factors that disqualified you. It must also state the sources of information used.

15. NOTICE OF CHANGE IN POLICY FORM. Your insurer must notify you in writing of any difference between your current policy and each policy offered to you when the policy renews.

WHAT YOU SHOULD KNOW WHEN YOU FILE A CLAIM

16. FAIR TREATMENT. You have the right to be treated fairly and honestly when you make a claim. If you believe an insurance company has treated you unfairly, call the Mississippi Department of Insurance at [insert toll-free telephone number of the Mississippi Department of Insurance] or download a complaint form from the Mississippi Department of Insurance's Web site. You can complete a complaint form on line via the Internet or fax it to the department at [insert toll-free fax number of the Mississippi Department of Insurance].

17. EXPLANATION OF CLAIM DENIAL. Your insurance company must tell you in writing why your claim or part of your claim was denied.

18. SETTLEMENT OFFER. You have the right to reject any settlement amount, including any unfair evaluation, offered by the insurance company.

19. TIME FRAMES FOR CLAIM PROCESSING AND PAYMENT. When you file a claim on your own policy, you have the right to have your claim processed and paid promptly. If the insurance company fails to meet required claims processing and payment deadlines, you have the right to collect eighteen percent (18%) annual interest and attorney's fees in addition to your claim amount.

Generally, within fifteen (15) calendar days, your insurance company must acknowledge receipt of your claim and request any additional information reasonably related to your claim. Within fifteen (15) business days after receipt of all requested information, the company must approve or deny your claim in writing. The insurance company may extend this deadline up to thirty (30) days if it notifies you that more time is needed and tells you why. After notifying you that your claim is approved, your insurance company must pay the claim within five (5) business days. If your claim results from a weather-related catastrophe or other major natural disaster as defined by the Commissioner of Insurance, your insurance company may take forty-five (45) additional calendar days to approve or deny your claim and fifteen (15) additional calendar days to pay your claim.

20. INFORMATION NOT REQUIRED FOR PROCESSING A CLAIM. You have the right to refuse to provide your insurance company with information that does not relate to your claim. In addition, you may refuse to provide your federal income tax records, unless your insurer gets a court order or your claim involves lost income or a fire loss.

21. EQUAL TREATMENT. Unless based on sound actuarial principles, an insurance company may not treat you differently from other individuals of the same class and essentially the same hazard. If you sustain economic damages as a result of such unfair discrimination, you have the right to sue that insurance company. If your suit prevails, you may recover economic damages, court costs and attorney and necessary expert witness fees. If the court finds the insurance company knowingly violated your rights, it may award up to an additional Two Hundred Fifty Thousand Dollars ($250,000.00) per claimant. You must file the suit on or before the second anniversary of the date you were denied insurance or the unfair act occurred or the date you reasonably should have discovered the occurrence of the unfair act. If the court determines your suit was groundless and you brought the lawsuit in bad faith, or brought it for the purposes of harassment, you will be required to pay the insurance company's court costs and attorney's fees.

22. FILING COMPLAINTS OR LAWSUITS. You have the right to complain to the Mississippi Department of Insurance about any insurance company and/or insurance matter and to receive a prompt investigation and response to your complaint. If you sue to recover under your insurance policy, the insurance company has the burden of proof as to the application of any exclusionin the policy and any exception to or other avoidance of coverage claimed by the insurer."

SECTION 4.(1) In any civil action against a property and casualty insurer under an insurance policy providing homeowners personal lines residential insurance property coverage, including renters/tenants insurance and mobile home/manufactured housing property coverage, by the policyholder under the policy for failure of the insurer to pay a lawful claim made under the policy, including any damages related to the failure to pay, the insurer has the burden of proving by a preponderance of clear and convincing evidence that any exclusion in the policy, and any exception to or other avoidance of coverage by the insurer, applies to the cause of action.

(2) The provisions of this section shall apply to any action filed on or after the effective date of this act, regardless of the date that the cause of such action may have accrued.

SECTION 5. Section 23-15-193, Mississippi Code of 1972, is amended as follows:

23-15-193. At the election in 1995, and every four (4) years thereafter, there shall be elected a Governor, Lieutenant Governor, Secretary of State, Auditor of Public Accounts, State Treasurer, Attorney General, three (3) public service commissioners, three (3) Mississippi transportation commissioners, Commissioner of Insurance, Commissioner of Agriculture and Commerce, Senators and members of the House of Representatives in the Legislature, district attorneys for the several districts, clerks of the circuit and chancery courts of the several counties, as well as sheriffs, coroners, assessors, surveyors and members of the boards of supervisors, justice court judges and constables, and all other officers to be elected by the people at the general state election. All such officers shall hold their offices for a term of four (4) years, and until their successors are elected and qualified. The state officers shall be elected in the manner prescribed in Section 140 of the Constitution. The office of Commissioner of Insurance shall be an elected office, and this requirement may not be amended or changed by general law.

SECTION 6. Section 83-1-3, Mississippi Code of 1972, is amended as follows:

83-1-3. (1) The chief officer of the department shall be denominated the Commissioner of Insurance, who shall be elected at the general election as other state officers, and who shall possess the same qualifications as required for the Secretary of State. His term of office shall be four (4) years, as that of other state officials. No person shall be Commissioner of Insurance who is in any way connected with the management or control of any company, corporation, association, or order affected by this title, and his term of office shall immediately cease if at any time he shall become so interested. Before entering on the discharge of his duties, the commissioner shall take the oath of office required of state officers and give a corporate bond in favor of the state in the penal sum of Twenty-five Thousand Dollars ($25,000.00) in some company or companies duly authorized to transact business in this state, to be approved by the Governor and conditioned for the faithful performance of the duties of said office during his term, which bond and oath of office shall be filed with the Secretary of State.

(2) No person seeking the elected office of Commissioner of Insurance and no person serving as commissioner may receive, accept or become the beneficiary of, directly or indirectly, any contribution or gift of money or other thing of monetary value, whether offered, received or accepted for campaign expenses under Sections 23-15-801 et seq., or otherwise, from any insurance company that is doing business in the State of Mississippi and regulated by the commissioner or the Mississippi Department of Insurance. Any person violating the provisions of this subsection by giving or receiving such contribution or other thing of monetary value shall be guilty of a felony, and upon conviction, shall be punished by a fine of not less than One Thousand Dollars ($1,000.00) or by imprisonment in the custody of the Department of Corrections for not more than three (3) years, or by both such fine and imprisonment. In addition to the criminal penalties set forth in this subsection, if the person violating the provisions of this subsection is the commissioner, his term of office shall immediately cease.

SECTION 7. The Attorney General of the State of Mississippi shall submit this act, immediately upon approval by the Governor, or upon approval by the Legislature subsequent to a veto, to the Attorney General of the United States or to the United States District Court for the District of Columbia in accordance with the provisions of the Voting Rights Act of 1965, as amended and extended.

SECTION 8. This act shall take effect and be in force from and after the date it is effectuated under Section 5 of the Voting Rights Act of 1965, as amended and extended.