Second Regular Session Sixty-fifth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 06-0209.01 Kristen Forrestal HOUSE BILL 06-1044 HOUSE SPONSORSHIP Cloer, SENATE SPONSORSHIP Tochtrop, House Committees Senate Committees Business Affairs and Labor A BILL FOR AN ACT Concerning claims practices for bodily injury to a third-party claimant arising out of the use of a motor vehicle. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) Interim Committee on Auto Insurance. Requires an insurer to make benefit disclosures to a 3rd-party claimant in a motor vehicle accident. Requires an insurer to promptly determine legal liability for bodily injury resulting from a motor vehicle accident. Makes a presumption for legal liability for 3rd-party bodily injury once payment has been made for property damage resulting from a motor vehicle accident. Requires an insurer to establish a fair and consistent method for determining the bodily injury loss of a 3rd party. Creates a penalty for the willful nonpayment of a 3rd-party claim resulting from a motor vehicle accident. Excludes payment of a penalty, interest, attorney fees, and court costs from legal liability coverage and from rate filing, claims experience, or show of loss by the insured. Allows for the assignment of legal liability coverage for 3rd-party bodily injury to a licensed hospital or other health care provider. Includes an injured 3rd-party entitled to coverage as a result of a motor vehicle accident in the definition of "claimant" for the purposes of prompt payment of direct benefits. Declares certain actions by an insurer to be unfair claim settlement practices. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Part 6 of article 4 of title 10, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 10-4-644. Claims practices for bodily injury to third parties arising out the use of a motor vehicle - legislative declaration - disclosure. (1) The general assembly finds, determines, and declares that: (a) Patients and health care providers are entitled to receive reimbursement from insurers in a timely manner; (b) Health insurance carriers should not pay patient and provider claims that are the legal responsibility of an at-fault driver and the at-fault driver's auto insurer; (c) Health insurance rates have increased after the repeal of motor vehicle no-fault insurance because health carriers have been paying auto insurance claims of which very few have been reimbursed by the auto insurers; (d) The public policy of this state is to promptly determine liability in an auto accident and to promptly pay for property damage resulting from an auto accident; therefore, the policy of this state shall include the prompt payment for bodily injuries of a third party resulting from an auto accident where liability is reasonably clear by the third-party insurer; (e) Unnecessary delays in the payment of routine and uncontested claims where liability has become reasonably clear represent an unwarranted drain on health care providers' resources as well as a waste of patients' time and money; (f) It is in the interests of the people in Colorado that the general assembly impose reasonable standards for the timely payment of health care claims to third parties injured in motor vehicle accidents. (2) An insurer shall clearly disclose to an injured person and inform any third-party claimant of the benefits that are provided to any one person in any one accident and to all persons in any one accident that are related to legal liability coverage for bodily injury or death arising out of the use of the motor vehicle. (3) (a) An insurer shall promptly determine if the insured is legally liable for the bodily injury arising out of the use of a motor vehicle. (b) If the insurer has made payment for property damage or loss of a motor vehicle pursuant to section 10-4-639, the legal liability of the insured shall be presumed and payment for third-party bodily injury shall be paid by the insurer. (4) An insurer shall establish a fair and consistent method for determining the bodily injury loss of a third party. Such method shall include the consideration of the unique characteristics of the injury to the third party and a credible source of the valuation of the health care payments for the injury. The insurer shall maintain a record of the methodology for determining loss evaluation and provide such methodology upon request to the commissioner, the third party, and a health care provider who has an assignment. An insurer may not use different credible sources of valuation only to determine the lowest amount payable for the bodily injury loss of the third party. (5) The amount charged by a health care provider shall be reasonable if the charges are the lesser of such provider's customary charge for the service or the average level of reimbursement for such service pursuant to current negotiated contracts or payment schedules between such provider and any insurers. (6) (a) The insurer shall be liable for a penalty of fifty percent of the amount of nonpayment for the willful nonpayment of a third-party claim in any action in which the claimant prevails. In any action brought by the claimant for willful nonpayment of a claim, the insurer shall bear the burden of proving that the withholding of the payment to the claimant was not wrongful. (b) Any payment of any penalty, interest, reasonable attorney fees or court costs related to the action shall not be considered to be part of the legal liability limits of the insurer, shall not diminish the amount of liability owed by the insurer on behalf of its insured, and shall be paid by the insurer from other sources and not deducted from the legal liability the insurer owes under the insurance policy. (c) Any payment of any penalty, interest, reasonable attorney fees or court costs related to the action shall not be considered part of any rate filing, any showing of claims experience, any supporting documentation, any actuarial opinion or certification, or any showing of loss by the insurer. (7) (a) An injured third party or the third party's health care provider shall have a direct right of action against the insurer for the payment of the third-party claims for bodily injury only to the extent of the insurance coverage. (b) The payment of a health care provider claim for bodily injury to a third party shall be treated the same as the payment by an insurer for a third party's property damage. (c) Upon the receipt of payment by an insurer to a health care provider, the health care provider shall provide a statement of the amount received to the patient at his or her last-known mailing or email address, either in written or electronic format. (d) Upon the request of an injured person or a third-party claimant, an insurer shall promptly and clearly disclose the benefits that remain related to legal liability coverage for bodily injury or death arising out of the use of a motor vehicle to any one person in any one accident and to all persons in any one accident. (8) Nothing in this section shall preclude an injured third-party claimant from maintaining an action against any other party for any damages or liability. SECTION 2. 10-4-634 (1), Colorado Revised Statutes, is amended to read: 10-4-634. Assignment of payment for covered benefits. (1) On and after thirty days after April 5, 2004, A policy of motor vehicle insurance coverage pursuant to this part 6 shall allow, but not require, an insured under the policy to assign, in writing, payments due under medical payments coverage or legal liability coverage for third-party bodily injury of the policy to a licensed hospital or other licensed health care provider, as defined in section 10-4-902 (3), an occupational therapist as described in section 6-1-707 (1) (c), C.R.S., or a massage therapist for services provided to the insured that are covered under the policy. SECTION 3. 10-4-642 (2) (a) and (2) (b), Colorado Revised Statutes, are amended to read: 10-4-642. Prompt payment of direct benefits - legislative declaration - definitions. (2) As used in this section, unless the context otherwise requires: (a) "Claim" means a claim for payment of medical payments coverage benefits or payment for third-party bodily injury arising out of the use of a motor vehicle in accordance with the insurer's policy. (b) "Claimant" means a policyholder, insured, or injured person entitled to medical payments benefits or an injured person entitled to third-party bodily injury legal liability coverage as a result of a motor vehicle accident or a provider with the proper assignment of benefits. SECTION 4. 10-3-1104 (1) (h), Colorado Revised Statutes, is amended BY THE ADDITION OF THE FOLLOWING NEW SUBPARAGRAPHS to read: 10-3-1104. Unfair methods of competition and unfair or deceptive acts or practices. (1) The following are defined as unfair methods of competition and unfair or deceptive acts or practices in the business of insurance: (h) Unfair claim settlement practices: Committing or performing, either in willful violation of this part 11 or with such frequency as to indicate a tendency to engage in a general business practice, any of the following: (XVIII) Failing to promptly determine liability in a third-party claim pursuant to section 10-4-644; (XIX) Claiming no liability as a defense or partial offset in the adjustment of a third-party claim without conducting a reasonable investigation and developing substantial evidence in support of such claim; (XX) Delaying payment for a claim to a third party or a health care provider with proper assignment of benefits, after liability has become reasonably clear and payment has been made for property damage pursuant to part 6 of this article; (XXI) Failure to honor an assignment for legal liability coverage for third-party bodily injury as set forth in section 10-4-634. SECTION 5. Effective date - applicability. (1) This act shall take effect January 1, 2007. (2) However, if a referendum petition is filed against this act or an item, section, or part of this act during the 90-day period after final adjournment of the general assembly that is allowed for submitting a referendum petition pursuant to article V, section 1 (3) of the state constitution, then the act, item, section, or part, shall not take effect unless approved by the people at a biennial regular general election and shall take effect on the date specified in subsection (1) or on the date of the official declaration of the vote thereon by proclamation of the governor, whichever is later. (3) The provisions of this act shall apply to injuries sustained in a motor vehicle accident on or after the applicable effective date of this act.