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3 AAC 26.080. Additional standards for prompt, fair, and equitable settlements of motor vehicle claims

(a) A person transacting a business of insurance who participates in the investigation, adjustment, negotiation, or settlement of a first-party or third-party motor vehicle claim shall

(1) apply one of the following settlement methods if coverage provides for the adjustment of a motor vehicle total loss on the basis of actual cash value or replacement with a vehicle of like kind and quality:

(A) offer a comparable and available replacement motor vehicle, with all applicable taxes, license fees, destination or delivery charges, and other fees incident to transfer of ownership of the motor vehicle paid, at no cost to the claimant other than the deductible amount, if any, as stated in the coverage; the offer of a replacement motor vehicle shall be made in writing if rejected by the claimant; or

(B) make a cash settlement based upon the actual cost to purchase a comparable motor vehicle, including all applicable taxes, license fees, destination or delivery charges, and other fees incident to transfer of ownership, less the deductible amount, if any, as stated in the coverage; the cost shall be determined by

(i) the cost of a comparable motor vehicle in the local market area to the claimant, if that motor vehicle is available in that area or was available during the last 90 days;

(ii) the average of two or more cost quotations obtained for a comparable motor vehicle from two or more licensed dealers located within the local market area, if a comparable motor vehicle is not available in that area; if quotes from two or more licensed dealers are not available from the local market area, the search area may be expanded to areas surrounding the local market area in 25-mile increments until two quotes are obtained;

(iii) a computerized database valuation service that produces statistically valid fair market values under (i) of this section;

(iv) the average retail value of a comparable motor vehicle, if that value is obtained from two industry sources published on a regular basis, at least once every two months, that contain the average retail, wholesale, and finance values for all makes and models for at least each of the last five model years, as well as a listing for all major options; cost may be determined under this sub-subparagraph only if (i) - (iii) of this subparagraph do not identify any comparable motor vehicles, and only with the consent of the claimant; or

(v) the cost of a comparable motor vehicle using a basis that is allowable under the coverage, if supported by documentation in the claim file and fully explained to the claimant; cost may be determined under this sub-subparagraph only if (i) - (iv) of this subparagraph do not identify any comparable motor vehicles;

(2) provide to a claimant a reasonable written explanation of the valuation of damages to the motor vehicle;

(3) include the first-party claimant's deductible, if any, in a subrogation demand unless the first-party claimant requests that it not be included or unless the deductible has been otherwise recovered by the first-party claimant; no deduction for expense may be made from any deductible recovered unless an outside attorney or other outside expert witnesses have been retained and any deduction is no more than a pro rata share of their cost less any attorney fees and costs recovered; any recovery of prejudgement or postjudgement interest shall be shared pro rata.

(b) Any person transacting a business of insurance who participates in the investigation, adjustment, negotiation, or settlement of a third-party motor vehicle claim

(1) repealed 6/6/2015;

(2) may not recommend that a third-party claimant make a claim under the claimant's own coverage in order to delay or avoid paying a claim where liability and damages are reasonably clear.

(c) A claimant may not be required to travel unreasonably either to inspect a replacement motor vehicle, obtain a repair estimate, or have the motor vehicle repaired at a specific facility.

(d) Any estimate or appraisal of the cost of repair of a motor vehicle must be in a fair and appropriate amount that the claimant may reasonably be expected to be charged for repairs at one or more conveniently located repair facilities.

(e) If the amount claimed as damage to the motor vehicle is reduced on the basis of betterment or depreciation, the person adjusting or settling the claim shall itemize each deduction and explain the basis for each reduction in writing to the claimant.

(f) If a person adjusting or settling a claim elects to have repaired a claimant's motor vehicle and chooses a specific facility for the repairs, that person shall guarantee the repairs and cause the damaged motor vehicle to be restored to its condition before the loss, at no additional cost to the claimant, and cause the repairs to be completed within a reasonable time.

(g) If the claimant's motor vehicle is determined to be economically unrepairable and, therefore, a total loss, the person adjusting or settling the claim may not reduce the salvage value of the vehicle by charges for cleaning.

(h) An insurer may reduce the value of the motor vehicle on the basis of betterment. Any deductions must be measurable, be itemized, have specific dollar amounts, and be documented in the claim file. Betterment deductions may be made only if the deductions

(1) reflect a measurable decrease in market value attributable to the poorer condition of the vehicle or damage to the vehicle that existed before the current claim;

(2) apply to parts normally subject to repair and replacement during the useful life of the vehicle;

(3) reflect missing parts and the deductions are not more than the replacement cost of the parts.

(i) A source for determining fair market values under (a)( l )(B)(iii) of this section must meet the following criteria:

(1) the source must give primary consideration to the values of comparable motor vehicles in the local market area that are currently available or were available during the last 90 days;

(2) the source must produce values applicable in this state for at least 85 percent of all makes and models for the last 15 model years taking into account the values of all major options for these vehicles;

(3) if at least two comparable motor vehicles are not found in the local market area during the last 90 days, the search may be expanded up to the last 180 days in 30-day increments until two or more comparable motor vehicles are located;

(4) if at least two comparable motor vehicles are not found in the local market area after expanding the search period as provided under (3) of this subsection, the search area may be expanded to areas surrounding the local market area in 25-mile increments for comparable motor vehicles that are currently available or were available during the last 90 days; if at least two comparable motor vehicles are not found in the expanded search area, the search area or time period in 30-day increments may be expanded further with the agreement of the claimant.

(j) If the claimant notifies the insurer not later than 60 days after receipt of the claim payment that the claimant cannot purchase a comparable vehicle for the amount determined under (a)(l)(B) of this section, the insurer shall, if the appraisal section of the policy has not been exercised, reopen the insurer's claim file and determine a new settlement amount using one of the following procedures:

(1) the insurer may locate a comparable motor vehicle available through a licensed dealer for the value determined by the insurer at the time of settlement, along with all applicable taxes, license fees, destination or delivery charges, and other fees incident to transfer of ownership of the motor vehicle, at no cost to the claimant other than the deductible amount, if any, as stated in the coverage;

(2) if the claimant has located a comparable motor vehicle of like kind and quality, the insurer may

(A) pay the difference between the value determined by the insurer at the time of settlement and the cost of the comparable motor vehicle; or

(B) negotiate and effect the purchase of the comparable motor vehicle for the claimant;

(3) for a first-party claimant, the insurer may conclude the loss settlement using the appraisal provisions of the policy.

(k) An insurer is not required to take action under (j) of this section if

(1) the insurer provided documentation to the claimant at the time of settlement of the location of a specific comparable motor vehicle available for purchase for the agreed settlement amount and the claimant did not purchase this vehicle not later than 10 working days after the date final payment is sent to the claimant, lienholder, or both; or

(2) the appraisal section of the policy has been exercised.

(l) If comparable motor vehicles cannot be found under the procedures described in this section, the insurer may consider vehicles by other manufacturers that otherwise fall within the definition of "comparable motor vehicle" under 3 AAC 26.300 in the valuation processes described in this section.

(m) This section does not prohibit an insurer from issuing a stated policy insuring against physical damage, where the amount of damages to be paid in the event of a total loss is a specified dollar amount.

History: Eff. 5/6/89, Register 110; am 6/6/2015, Register 214

Authority: AS 21.06.090

AS 21.36.125

Editor's note: In 2010 the revisor of statutes, acting under AS 01.05.031 , redesignated former AS 21.36.350 as AS 21.36.125 (c). As of Register 196 (January 2011), the regulations attorney made a conforming technical revision under AS 44.62.125 (b)(6), to the authority citation that follows 3 AAC 26.080, deleting the citation to former AS 21.36.350 to reflect that the authority citation already includes a citation to AS 21.36.125 , the section where material formerly in AS 21.36.350 was relocated.

3 AAC 26.090. Additional standards for prompt, fair, and equitable settlements of property claims

(a) A person transacting a business of insurance who participates in the investigation, adjustment, negotiation, or settlement of a first-party or third-party property claim shall

(1) apply one of the following settlement methods if coverage provides for the adjustment of a claimant's property loss on the basis of actual cash value or replacement with other property of like kind and quality;

(A) offer specific comparable and available replacement property with all applicable taxes, charges, and other fees incident to the transfer of ownership of the property at no cost to the claimant other than the deductible amount, if any, as stated in the coverage; the offer of replacement property must be in writing if rejected by the claimant.

(B) make a cash settlement based upon the actual cost of comparable property, including all applicable taxes, charges and other fees incident to transfer of ownership, less the deductible amount, if any, as stated in the coverage; the cost shall be determined by

(i) the cost of comparable property in the local market area to the claimant, if comparable property is available in that area or was available during the last 90 days; or

(ii) the average of two or more cost quotations obtained for comparable property from two or more licensed dealers, suppliers, or contractors located within the local market area, if comparable property is not available in that area;

(iii) repealed 6/6/2015;

(2) provide to a claimant a reasonable written explanation of the valuation of the damages to the property;

(3) include the first-party claimant's deductible, if any, in a subrogation demand unless the first-party claimant requests that it not be included or unless the deductible has been otherwise recovered by the first-party claimant; no deduction for expense may be made from any deductible recovered unless an outside attorney or other outside expert witnesses have been retained and deduction may be for no more than a pro rata share of their cost less attorney fees and costs recovered; any recovery of prejudgement or postjudgement interest shall be shared pro rata.

(b) Any person transacting the business of insurance who participates in the investigation, adjustment, negotiation, or settlement of a third-party property claim

(1) repealed 6/6/2015;

(2) may not recommend that a third-party claimant make a claim under the claimant's own coverage in order to delay or avoid paying a claim where liability and damages are reasonably clear.

(c) Any person settling or adjusting a property claim may not require a claimant to travel unreasonably either to inspect replacement property, obtain a repair estimate, or have the property repaired at a specific facility.

(d) Any estimate of the costs of the repair of the property must be a fair and appropriate amount for which the damage can be reasonably expected to be repaired at one or more conveniently located repair facilities, dealers, or contractors.

(e) Any person who reduces the amount claimed as damage to property on the basis of betterment or depreciation shall itemize each deduction. The basis for the reduction shall be documented in the claim file.

(f) If a person adjusting or settling a claim elects to have repaired a claimant's property and chooses a specific repair facility, dealer, or contractor, that person shall guarantee the repairs and cause the damaged property to be restored to its condition before the loss, at no additional cost to the claimant, and cause the repairs to be completed within a reasonable period of time.

(g) If no comparable property is found in the local market area, the search may be expanded up to the last 180 days in 30-day increments until a comparable property is located.

(h) If no comparable property is found in the local market area after expanding the search period as provided under (g) of this section, the search area may be expanded to areas surrounding the local market area that include two additional licensed dealers, suppliers, or contractors for property that is currently available or that was available during the last 90 days.

(i) If no comparable property is found in the expanded search area or time period allowed under (g) and (h) of this section, the search area may be further expanded or the time period may be expanded in 30-day increments.

(j) If the claimant notifies the insurer not later than 60 days after receipt of the claim payment that the claimant cannot purchase replacement property for the amount determined under (a)(l)(B) of this section, the insurer shall, if the appraisal section of the policy has not been exercised, reopen the insurer's claim file and determine a new settlement amount using one of the following procedures:

(1) the insurer may locate comparable property through a licensed dealer, supplier, or contractor for the value determined by the insurer at the time of settlement;

(2) if the claimant has located comparable property of like kind and quality, the insurer may

(A) pay the difference between the value determined by the insurer at the time of settlement and the cost of the comparable property; or

(B) negotiate and effect the purchase of the comparable property for the claimant;

(3) for a first-party claimant, the insurer may conclude the loss settlement using the appraisal provisions of the policy.

(k) An insurer is not required to take action under (j) of this section if

(1) the insurer provided documentation to the claimant at the time of settlement of the location of specific comparable property available for purchase for the agreed settlement amount and the claimant did not purchase this property not later than 10 working days after the date final payment is sent to the claimant, lienholder, or both; or

(2) the appraisal section of the policy has been exercised.

(l) Any person adjusting, negotiating, or settling a property claim on the basis of replacement cost

(1) shall include in the repair or replacement of the property or part of the property any consequential physical damage incurred in making the repair or replacement that is not otherwise excluded by the policy; the claimant is not required to pay for betterment or any other cost except for the applicable deductible;

(2) for a loss that requires replacement of property, and if the replacement property does not match in quality, color or size, shall replace the property in the area to provide for a reasonably uniform appearance; this paragraph applies to interior and exterior losses; the claimant is not required to pay for betterment or any other cost except for the applicable deductible.

History: Eff. 5/6/89, Register 110; am 6/6/2015, Register 214

Authority: AS 21.06.090

AS 21.36.125

Editor's note: In 2010 the revisor of statutes, acting under AS 01.05.031 , redesignated former AS 21.36.350 as AS 21.36.125 (c). As of Register 196 (January 2011), the regulations attorney made a conforming technical revision under AS 44.62.125 (b)(6), to the authority citation that follows 3 AAC 26.090, deleting the citation to former AS 21.36.350 to reflect that the authority citation already includes a citation to AS 21.36.125 , the section where material formerly in AS 21.36.350 was relocated.

3 AAC 26.100. Additional standards for prompt, fair, and equitable settlements of workers' compensation claims

Any person transacting a business of insurance who participates in the investigation, adjustment, negotiation, or settlement of a workers' compensation claim:

(1) may not require a claimant to travel unreasonably for medical care, rehabilitation services, or any other purpose;

(2) shall provide necessary claim forms, written instructions, and assistance that is reasonable so that any claimant not represented by an attorney is able to comply with the law and reasonable claims handling requirements;

(3) shall promptly make all payments or denials of payments as required by statute or regulation.

History: Eff. 5/6/89, Register 110

Authority: AS 21.06.090

AS 21.36.125

Editor's note: In 2010 the revisor of statutes, acting under AS 01.05.031 , redesignated former AS 21.36.350 as AS 21.36.125 (c). As of Register 196 (January 2011), the regulations attorney made a conforming technical revision under AS 44.62.125 (b)(6), to the authority citation that follows 3 AAC 26.100, deleting the citation to former AS 21.36.350 to reflect that the authority citation already includes a citation to AS 21.36.125 , the section where material formerly in AS 21.36.350 was relocated.

3 AAC 26.110. Additional standards for prompt, fair, and equitable settlements of health claims

(a) A person that provides coverage in this state for health care services or supplies on an expense incurred basis for which benefits are based on an amount that is less than the actual amount billed for the health care services or supplies shall

(1) maintain or use a statistically credible profile of covered health care services and supplies on which to base payment; the profile must

(A) be updated at least every six months;

(B) contain billed charges for services performed not more than one year before the date of the most recent profile; and

(C) contain billed charges for each geographical area in which a claimant might receive treatment or, if statistically credible data for a particular service or supply item in a certain geographical area is unavailable, contain a sufficient number of billed charges for that service or supply item from another geographical area so that a reliable basis is established;

(2) except as provided in (3) of this subsection, determine the final payment for a covered service or supply based on an amount that

(A) reflects the general cost differences between the geographical area where the service was performed and the other geographical areas used in establishing the statistically credible profile under (1) of this subsection; and

(B) is equal to or greater than the 80th percentile of charges under (1) of this subsection for the health care services or supplies;

(3) for a vaccine covered by an insurance policy that is an included vaccine and purchased by a provider instead of obtained from the state under the statewide immunization program established under AS 18.09.200 , determine the final payment for the covered vaccine at an amount equal to or greater than the cost of the state purchased vaccine under the statewide immunization program; in this paragraph, "included vaccine" has the meaning given in AS 18.09.990 ;

(4) provide with any claim payment an explanation of the basis of payments in clear and simple terms, including explanation of any adjustments made under (2)(A) of this subsection, and document the explanation provided in the claim file; and

(5) provide an explanation in the health insurance policy of the basis of payments, including any payments for which a covered individual may be responsible and include on any schedule or summary of benefits page accompanying the policy

(A) the percentile used to determine final payment under (2)(B) of this subsection; and

(B) a statement regarding whether the covered individual is responsible for any amount billed for a health care service or supply item that exceeds the amount of final payment.

(b) This section does not apply to workers' compensation claims.

(c) If a person who is required to include a coordination of benefits provision under AS 21.42.205 provides coverage on a secondary basis,

(1) absent evidence of fraud, the secondary insurer must accept the primary insurer's precertification, utilization review, or other managed care requirement determination and may not deny, delay, or reduce benefits under its policy for a covered person who has met the primary insurer's precertification, utilization review, or other managed care requirement; and

(2) the secondary insurer must calculate its covered benefits at no greater cost to the covered person than if the health care services were obtained from the secondary insurer's participating provider if

(A) the secondary policy provides benefits through a provider network but the primary insurer's policy does not provide coverage through a provider network;

(B) both the primary policy and the secondary policy provide benefits through provider networks but the covered person obtains health care services from a provider that is in the provider network of the primary insurer but not the provider network of the secondary insurer; or

(C) both the primary policy and the secondary policy provide benefits through provider networks but the covered person obtains health care services from a provider that is not part of the provider network of the primary insurer or the secondary insurer because no provider in the primary insurer's provider network is able to meet the particular health need of the covered person.

(d) A health care insurer shall give written notice to a health care provider, health care facility, or consumer at least 30 calendar days before the insurer seeks recovery of an overpayment. The notice must include adequate information for the health care provider, health care facility, or consumer to identify the specific claim and the specific reason for the recovery. A health care insurer may not initiate recovery of an overpayment more than 365 days after the date the original payment was made to a health care provider, health care facility, or consumer, or its agents, unless the health care insurer has clear and documented reason to believe that the health care provider, the health care facility, or consumer, or its agents has committed fraud or other intentional misconduct.

(e) A health care insurer shall provide a health care provider, health care facility, or consumer with an opportunity to challenge the recovery of an overpayment, including sharing of claims information, and shall establish written policies and procedures for a health care provider, health care facility, or consumer to follow in order to challenge the recovery of an overpayment.

(f) If a health insurance policy provides in-network and out-of-network benefits, the policy must provide at a minimum the in-network benefit level for the following:

(1) emergency services;

(2) services or supplies provided by an out-of-network health care provider or health care facility, if an in-network health care provider or health care facility is not reasonably accessible as defined in the policy;

(3) services provided by an out-of-network health care provider as part of a covered stay at an in-network health care facility when a covered individual does not have or is not given a choice of health care provider.

(g) An insurer may require a covered individual to purchase specialty drugs from a specific in-network health care provider in order to receive benefits under a health insurance policy, unless the specialty drug is not available from the health care provider when needed and a delay in receiving the drug would threaten the efficacy of treatment or the life of the covered individual.

(h) An insurer may require a covered individual to receive transplant services from an in-network health care provider in order to receive benefits under a health insurance policy, unless transplant services are not available from a network health care provider when needed and a delay in receiving the transplant services would threaten the efficacy of treatment or the life of the covered individual.

(i) An insurer may not process claims based on a procedure code that differs from the procedure code specified in the claim unless agreed upon by the health care provider that provided the service or supply.

(j) If an insurer provides benefits to a domestic partner, then the insurer may not unfairly discriminate on the basis of gender and must provide benefits to both same and opposite gender domestic partners.

(k) If an insurer, for purposes of negotiating discounts with a health care provider, delays payment of an otherwise clean claim beyond the timeframes under AS 21.36.495 , the insurer is subject to the 15 percent interest penalty under AS 21.36.495 (c) or (d).

(l) An insurer may not reduce the payment on a current claim for an overpayment on a previous claim unless the reduction

(1) is determined to be in compliance with (d) and (e) of this section; and

(2) does not result in a reduction on the amount allowed on any other claims of the covered individual.

History: Eff. 5/6/89, Register 110; am 4/20/97, Register 142; am 1/2/98, Register 145; am 9/15/2004, Register 171; am 10/16/2011, Register 200; am 12/16/2015, Register 216; am 8/20/2016, Register 219

Authority: AS 21.06.090

AS 21.36.125

AS 21.36.495

AS 21.42.205

Editor's note: In 2010 the revisor of statutes, acting under AS 01.05.031 , redesignated former AS 21.36.350 as AS 21.36.125 (c). As of Register 196 (January 2011), the regulations attorney made a conforming technical revision under AS 44.62.125 (b)(6), to the authority citation that follows 3 AAC 26.110, deleting the citation to former AS 21.36.350 to reflect that the authority citation already includes a citation to AS 21.36.125 , the section where material formerly in AS 21.36.350 was relocated.

3 AAC 26.300. Definitions

In this chapter,

(1) "claim" means notice that an event, act or omission has occurred which may result in injury or damage for which an insured may be legally obligated to pay;

(2) "claimant" means a first-party claimant, a third-party claimant, or both, and includes the claimant's legal representative and includes a member of the claimant's immediate family if authorized by the claimant;

(3) repealed 8/20/2016;

(4) "destination or delivery charges" means the charges for shipping a motor vehicle to a primary residence of the claimant or to where the motor vehicle is primarily operated;

(5) "first-party claimant" means a person asserting a right to payment under his or her own coverage;

(6) "frequency as to indicate a general business practice" means violation of any one standard committed on one or more percent of claims handled within a 12-month period, or the repeated violation of a single standard without reasonable explanation;

(7) "local market area" means the geographical area, in the closest proximity to the claimant's residence, in which two or more licensed dealers are located;

(8) "outside attorney" means an attorney who is in private practice and not an employee of a person transacting a business of insurance under AS 21;

(9) repealed 8/20/2016;

(10) "third-party claimant" means any person asserting a claim against any other person;

(11) repealed 9/15/2004;

(12) "working days" means all calendar days except Saturdays, Sundays, all official federal holidays, and all official Alaska holidays.

(13) "comparable motor vehicle" means a motor vehicle by the same manufacturer, of the same or newer model year, and with similar body style, similar options, and similar mileage as the loss vehicle, and in as good or better condition;

(14) "licensed," when used with reference to a dealer, supplier, or contractor, means in possession of a current business license under AS 43.70 and 12 AAC 12;

(15) "similar mileage" means having mileage that does not exceed the mileage of the loss vehicle on the date of loss by more than 4,000 miles or 10 percent of the mileage of the loss vehicle, whichever is greater.

(16) "clean claim" has the meaning given in AS 21.36.495 ;

(17) "electronic funds transfer" means a paperless or cardless transfer of funds initiated by an insurer to authorize a financial institution to credit a claimant's account using the insurer's funds in order to pay a judgment or settlement of a claim;

(18) "emergency medical condition" means a medical condition manifesting itself by acute symptoms of sufficient severity, including severe pain, that a prudent person who possesses an average knowledge of health and medicine could reasonably expect that the absence of immediate medical attention would result in serious impairment of bodily functions, serious dysfunction of a bodily organ or part, or would place the person's health or, with respect to a pregnant woman, the health of the woman or her unborn child, in serious jeopardy.

(19) "emergency services" means medical care services or items furnished or required to evaluate and treat an emergency medical condition;

(20) "health care insurance" has the meaning given in AS 21.12.050 ;

(21) "prepaid card product" means a reloadable card issued by a financial institution in the name of the claimant that is loaded with funds from an insurer to pay a judgment or settlement of a claim;

(22) "procedure code" means a universal code used by a health care provider to identify the services or supplies provided to an insured under a health care insurance policy.

History: Eff. 5/6/89, Register 110; am 4/20/97, Register 142; am 9/15/2004, Register 171; am 6/6/2015, Register 214; am 8/20/2016, Register 219

Authority: AS 21.06.090

AS 21.12.050

AS 21.36.125

AS 21.36.495

Editor's note: In 2010 the revisor of statutes, acting under AS 01.05.031 , redesignated former AS 21.36.350 as AS 21.36.125 (c). As of Register 196 (January 2011), the regulations attorney made a conforming technical revision under AS 44.62.125 (b)(6), to the authority citation that follows 3 AAC 26.300, deleting the citation to former AS 21.36.350 to reflect that the authority citation already includes a citation to AS 21.36.125 , the section where material formerly in AS 21.36.350 was relocated.

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