I Paid But Can’t Use It Claims Denial Act

AN ACT
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, TO ENACT THE “I PAID BUT CAN’T USE IT CLAIMS DENIAL ACT”; TO PROVIDE FOR TRANSPARENCY AND INTEGRITY IN INSURANCE CLAIMS DOCUMENTATION; TO EXPAND UNFAIR CLAIM SETTLEMENT PRACTICES AND PENALTIES; TO REQUIRE MARKET CONDUCT OVERSIGHT AND REPORTING; TO ESTABLISH WHISTLEBLOWER PROTECTIONS; TO RESTRICT POST-LOSS CANCELLATION AND NONRENEWAL OF RESIDENTIAL PROPERTY INSURANCE; TO REQUIRE TRANSPARENCY AND PERIODIC REVIEW OF MITIGATION DISCOUNTS; AND TO PROVIDE AN EFFECTIVE DATE.

SECTION 1. Short Title

This act may be cited as the “I Paid But Can’t Use It Claims Denial Act.”

SECTION 2. Definitions

As used in this act:

  1. “Adjuster report” means any report, estimate, inspection summary, or valuation prepared by a licensed adjuster or independent adjuster relating to the assessment of a loss.
  2. “Claims-related document” means any document created for use in evaluating, adjusting, or settling an insurance claim, including estimates, photographs, engineering reports, contractor assessments, drone or aerial imagery, or similar materials.
  3. “Material alteration” means any change that affects the scope of repairs, estimated cost, factual findings, or conclusions in an adjuster report.
  4. “Insurer” means any entity authorized to write insurance in this State.

SECTION 3. Prohibition on Undisclosed Alterations to Claims Documents

(A) An insurer may not materially alter, revise, or omit any portion of an adjuster report or other claims-related document unless the insurer documents:

  1. the identity of the individual making the change;
  2. the date the change was made; and
  3. a specific explanation of the reason for the change.

(B) The insurer shall maintain an audit trail of all revisions for not fewer than seven years.

(C) Upon request of the policyholder or the South Carolina Department of Insurance, the insurer shall provide:

  1. the original version of the document;
  2. all revised versions; and
  3. the audit-trail documentation required under subsection (B).

These materials must be provided within ten business days.

(D) An insurer may not instruct or permit an adjuster or claims professional to modify a report in a manner that misrepresents the factual basis of the claim or suppresses findings favorable to the policyholder.

SECTION 4. Disclosure of Claims Documentation to Policyholders

(A) An insurer shall provide to the policyholder:

  1. all adjuster reports used in making a claim determination;
  2. any engineering, expert, or third-party reports relied upon; and
  3. any subsequent revisions or supplemental documents.

(B) Documents required under this section must be provided within seven business days of the insurer’s receipt or creation of the document.

(C) Failure to comply with this section constitutes an unfair claim settlement practice.

SECTION 5. Unfair Claim Settlement Practices

An insurer engages in an unfair claim settlement practice if it:

  1. fails to disclose material alterations to claims-related documents;
  2. intentionally modifies or omits findings in an adjuster report without reasonable explanation;
  3. knowingly uses inaccurate, incomplete, or altered documents to deny, delay, or reduce a claim;
  4. repeatedly fails to timely communicate with or provide documentation to policyholders;
  5. issues claim denials based on boilerplate or unsupported reasoning; or
  6. engages in a pattern of delay that increases the insured’s financial exposure.

For violations, the South Carolina Department of Insurance may impose administrative fines, restitution to affected policyholders, enhanced market-conduct examinations, and license suspension or revocation as authorized by law.

SECTION 6. Market Conduct Oversight and Annual Certification

(A) Insurers shall maintain written claims-handling procedures and internal controls sufficient to ensure compliance with this act.

(B) Each insurer shall annually certify compliance to the South Carolina Department of Insurance, including documentation of:

  1. claims-handling procedures;
  2. documentation practices;
  3. training materials;
  4. internal audit findings; and
  5. corrective actions taken.

(C) The Department may promulgate regulations necessary to implement and enforce this section.

SECTION 7. Whistleblower Protections

(A) An employee, contractor, adjuster, or agent of an insurer who reports suspected violations of this act to the South Carolina Department of Insurance may not be retaliated against.

(B) Retaliation includes termination, demotion, reduction in compensation, reassignment, or threats of adverse employment action.

(C) A whistleblower subjected to retaliation may bring a civil action for reinstatement, lost wages, actual and consequential damages, attorney’s fees, and punitive damages for willful retaliation.

(D) The whistleblower’s identity shall remain confidential unless disclosure is required by court order.

SECTION 8. Post-Loss Cancellation and Nonrenewal Restrictions

(A) An insurer may not cancel or nonrenew a residential property insurance policy following a covered loss until:

  1. repairs to the dwelling are completed; or
  2. twelve months have elapsed after the insurer issues its final claim payment;

whichever occurs first.

(B) This section does not apply if the insured commits fraud, fails to pay the premium, or fails to commence repairs within a reasonable time after receiving claim funds.

(C) After the period described in subsection (A), an insurer electing nonrenewal shall provide at least ninety days’ written notice stating the specific reasons for nonrenewal and information regarding available mitigation credits and discounts.

(D) A violation of this section constitutes an unfair claim settlement practice.

SECTION 9. Mitigation Discount Transparency and Periodic Review

(A) Every insurer writing residential property insurance in this State shall publicly disclose all available mitigation credits, discounts, and rate differentials on its website and provide this information annually to policyholders at renewal.

(B) Beginning January after approval by the Governor, and at least every five years thereafter, the South Carolina Department of Insurance shall review mitigation standards, publish updated guidance, and require insurers to update rate filings accordingly.

(C) Failure to comply with this section constitutes an unfair trade practice and an unfair claim settlement practice.

SECTION 10. Effective Date

This act takes effect on January 1 following approval by the Governor.