Notice, Proof of Loss, and Claims

Notice and Proof of Loss Requirements

If proof of loss is furnished to the insurer as soon as reasonably possible and within one year after the time it was required by the policy, then failure to furnish notice or proof within the time required by the policy does NOT invalidate or reduce a claim — unless the insurer is harmed as a result, and it was reasonably possible to meet the time limit. Notice or proof of loss is sufficient if properly mailed or delivered to the insurer within the time prescribed. The Commissioner may expressly approve clauses requiring more prompt and efficient methods of notice where reasonable.

Important: The insurer’s acknowledgment of receipt of notice, its furnishing of forms for proof of loss, its acceptance of proof, or its investigation of any claim — none of those alone waive the insurer’s rights in defense of the claim. Just because the insurer is processing your paperwork doesn’t mean it has agreed to pay.

Standards for Claim Settlement Practices

Wisconsin law regulates insurance claim settlement practices to promote fair and equitable treatment of policyholders, claimants, and insurers, by defining certain claim adjustment practices as unfair business methods and practices.

Standardized Forms in Health Insurance

Individual and institutional providers must use standardized billing forms for health care services. When an insurer pays a claim to a health care provider, the insurer must use a standardized remittance advice form and the claim disposition codes of the American National Standards Institute. There’s no standard format for explanation of benefits forms sent to insureds, but insurers are required to include certain minimum information. Insurers are NOT required to provide an EOB if the insured has no liability for payment or is liable only for a copayment — unless the insured requests one.

Prompt Payment of Claims

Unless otherwise provided by Wisconsin law, subject to interest payment, an insurer must promptly pay most insurance claims. A covered claim is overdue if not paid within thirty days after the insurer is furnished with written notice of the fact of covered loss and the amount of loss. If the written notice doesn’t cover the entire claim, any partial amount supported by written notice is overdue if not paid within thirty days. A payment is not overdue if the insurer has reasonable proof to establish that the insurer isn’t responsible for the payment, even when written notice has been furnished.

Date of Payment and Interest

The date of payment is the date a check or payment was properly mailed or, if not mailed, the date of delivery. All overdue payments are charged simple interest at the rate of 7.5% per year.

When Payment Isn’t Overdue

Payment isn’t overdue until thirty days after the insurer receives the proof of loss required under the policy, or equivalent evidence. A delay may also be justified if the insurer can’t determine to whom the claim should be paid.

Sidenote

Remember the number

7.5% simple interest per year on overdue claim payments, with the thirty-day clock starting from receipt of written notice of loss (or proof of loss, depending on policy terms). Memorize the rate and the deadline.

Unfair Claim Settlement Methods

Any of the following — done without just cause and with such regularity as to indicate a general business practice — constitutes an unfair method and practice:

• Failure to promptly acknowledge pertinent communications about claims arising under insurance policies.
• Failure to promptly provide the necessary claim forms, instructions, and reasonable assistance to insureds and claimants.
• Failure to attempt in good faith to effectuate fair and equitable settlements of claims in which liability has become reasonably clear.
• Knowingly misrepresenting to claimants pertinent facts or policy provisions. The key phrases there are “without just cause” and “with such regularity as to indicate a general business practice.” A single oversight isn’t the issue. A pattern is. Wisconsin is targeting systemic bad behavior.

Multiple Policies Covering the Same Loss

When two or more policies promise to indemnify an insured against the same loss, the total protection of the insured is the LESSER of (a) the actual insured loss suffered, or (b) the total indemnification promised by the policies if any “other insurance” provisions are ignored.

The policies may define which is primary and which is excess. If the policies have inconsistent terms on that point, the insurers are jointly and severally liable to the policyholder on any coverage where the terms are inconsistent — each to the full amount it provided. Settlement among the insurers doesn’t alter the insured’s rights. None of this affects the insurer’s right to defend against a claim on grounds of fraudulent misrepresentation.

Nonwaiver Clauses

An insurer may insert into a policy a provision that no change in the policy is valid unless approved by an executive officer of the insurance company and endorsed on the policy or attached to it. The insurer may also specify that an agent has no authority to change the policy or waive any of its provisions. These clauses don’t preclude a person claiming a right under a policy from relying on waiver or estoppel in an appropriate case — they just provide a default rule.