1. Tennessee Department of
Commerce and Insurance
to Adopt New Unfair Claims
Settlement Practices Rules
“The purpose of the
new rules is to
provide “minimum
standards for the
investigation and
disposition of claims,”
through newly
created standards for
prompt, fair and
equitable claim
settlements specific
to the insurance
industry”.
The Tennessee Department of Commerce and Insurance is in the process of adopting
new practices and procedures to assist in determining what constitutes unfair claims
practices with respect to personal insurance contracts in Tennessee. The new rules do
not replace the Unfair Trade Practices and Unfair Claims Settlement Practices act of
2009, but were created in addition to the law and will be promulgated in the Rules of the
Department of Commerce and Insurance chapter 0780-01-05. Supported by insurance
industry groups, and drafted in part based on models from the National Association of
Insurance Commissioners, the new rules came about as the result of a recent hearing in
September, 2016. The purpose of the new rules is to provide “minimum standards for
the investigation and disposition of claims,” through newly created standards for prompt,
fair and equitable claim settlements specific to the insurance industry. The new rules do
not pertain to workers compensation or health care. The Insurance Commissioner, the
Attorney General and the Secretary of State still must sign off on the rules before they
become effective which could be as early as the spring of 2017. This essay will present
a general overview of the new rules in non-specific terms and highlight a few noteworthy
additions and is in no way a complete review of the filing. We recommend you view the
complete filing of the rule-making hearing and draft of the new rules for more complete
information through the following link:
https://tn.gov/assets/entities/commerce/attachments/0780-01-05_Unfair_Claims_Practices_Filing.pdf
By Dan Kuczek, LUTCF January 2017
Highlights: What are some of the major additions to the
Unfair Claims Settlement Practices Act of 2009?
Among many other provisions, the new chapter of rules adds definitions, outlines requirements for file and record
documentation, and establishes language for the misrepresentation of policy provisions and failure to acknowledge
pertinent communications. Standards for fair and equitable settlements have been developed for:
 Property/Casualty Insurers
 Automobile Insurance
 Fire and Extended Coverage Policies with Replacement Cost
 Life Insurers
 Claims Made by Third Party Claimants
Definitions were added for notice of claim, proof of loss, reasonable explanation, documentation, written communication,
first party claimant, and third party claimant among others. While the definitions are very general in nature, and what
insurance professionals might expect, definitions to the aforementioned terms were absent in the original act of 2009.
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By Dan Kuczek, LUTCF January 2017

2. “With respect to
misrepresentations of
policy provisions,
insurers will be
required to fully
disclose all pertinent
coverage terms and
conditions upon
request to first
party claimants”.
Timelines Added
Generally speaking, some timelines in the original act were defined by the phrases,
“within a reasonable time,” or “with reasonable promptness,” rather than a specified
number of days. The sampling of timelines paraphrased from the new rules below is not
complete. Please reference the filing for more complete information.
 Insurers will be required to maintain claim data for the current year and
preceding five years whereas the original act of 2009 previously only required
the current year and the preceding two years.
 Insurers will be required to acknowledge receipt of claim within 30 days.
 Insurers will be required to provide necessary claim forms within 30 days of noti-
fication to first party claimants.
 Insurers will be required to respond to complaint requests from the insurance
department within 30 days of receipt.
 Replies to a first party claimant that suggest a response is expected shall be
made within 30 days by the insurer.
 First party claimants shall be advised of acceptance or denial of liability within 60 days of receipt by the insurer of
proper proof of loss and documentation. A written basis must be provided for denials.
 First party claimants will be required to be notified within 60 days if the insurer needs more time to determine liabil-
ity after receipt of proof of loss; and every 60 days thereafter if more time is needed with reasons stated.
 Insurers will be required to notify first party claimants within 30 days after concluding an investigation.
 Insurers will be required to notify first party claimants at least 30 days in advance of the expiration of applicable
statute of limitations.
 Insurers will be required to tender payment within 30 days of affirmation of liability if the amount is not disputed.
Policy holders can elect to forgo the limitation if so desired.
With respect to misrepresentations of policy provisions, insurers will be required to fully disclose all pertinent coverage
terms and conditions upon request to first party claimants. In addition, insurers cannot indicate on a payment remittance
that payment is “final” or otherwise attempt to release themselves from a claim unless the policy limits have been paid or a
negotiated settlement has been reached with the first party claimant.
Auto & Property Settlement Standards
Settlement valuations for “actual cash value” and “replacement auto” for automobile insurance have been established
including standards on how valuations must be substantiated within the marketplace. In addition, new rules were created
to resolve differences for vehicle repairs on partial losses, specified repair shops, betterment and depreciation, towing and
storage.
For property policies with fire and extended coverage, actual cash value is defined as “replacement cost at the time of
loss less depreciation.“ However, an exception for ACV settlements is provided for where property has little or no
economic value or a disproportionate value to replacement cost less depreciation when a written explanation determining
the amount is provided.
January 2017
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3. Property policies with replacement cost have two conditions:
 “…Consequential physical damage incurred in making repairs or replacement not otherwise excluded shall be
included in the loss. The insured shall not have to pay for any cost except betterment and any deductible…”
 Insurers are required to “replace items so as to conform to a reasonably uniform appearance according to
applicable policy provisions. This applies to interior and exterior losses.” This begs the question about matching
shingles on roof repairs. Should an insurance company be required to match the shingles on the entire roof, or only
on the side where the damage occurred, or patch only the affected area? However, “uniform appearance according
to applicable policy provisions” may well be the determining factor.
Interpretive opinions and coverage questions can be addressed directly with the Tennessee Department of Commerce and
Insurance.
Once the new rules are effective, insurers will have six months to change forms and policies. However, existing policies on
the effective date may run through to their expiration but may not be renewed without first complying.
Since the new rules were based on NAIC models, other states will be considering similar changes. While this new chapter
defines a clearer path to what constitutes unfair claims practices, it should be noted that many insurance companies
contributed to the development of the new language and many already subscribe to the practices and procedures set forth.
Sources:
Notice of Rulemaking Hearing, Unfair Claims Settlement Practices Chapter 0780-05-05,Tennessee Department of
Commerce & Insurance, July 25, 2016
https://tn.gov/assets/entities/commerce/attachments/0780-01-05_Unfair_Claims_Practices_Filing.pdf
Tennessee Code Unannotated, Title 56, Chapter 8, Part 1, By the State of Tennessee, 2016
http://www.lexisnexis.com/hottopics/tncode/
Dan Kuczek is a twenty-nine year veteran of the insurance industry and brings a variety of experience to his clients. He is a graduate of
Western Michigan University.
Tenco Services, Inc. is a regional, independent adjusting company home-officed in Nashville, TN, and has been handling property and
casualty claims in the southeastern United States 24 hours a day, 365 days per year since 1947. Sextant Claims Management is its TPA
division specializing in claims management for self-insured programs and distinct accounts.
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January 2017
Sextant Claims Administrators
3310 West End Avenue, Suite 465
Nashville, TN 37203
(615) 724-0049
www.sextantclaims.com
claims@sextantclaims.com