230-20-40 R.I. Code R. § 2.8

Current through April 4, 2024
Section 230-RICR-20-40-2.8 - Standards for Prompt, Fair and Equitable Settlements Applicable to Automobile Insurance
A. Total Loss Vehicles
1. Pursuant to R.I. Gen. Laws § 27-9.1-4(25) an insurer may not designate a vehicle a total loss if the cost to rebuild or reconstruct the motor vehicle to pre accident condition is less than 75% of the fair market value of the motor vehicle immediately preceding the time it was damaged unless the requirements of § 2.8(A)(3) of this Part are met.
2. Fair market value means the retail value of the motor vehicle as set forth in a current edition of a nationally recognized compilation of retail values commonly used by the automotive industry to establish values of motor vehicles.
a. To qualify as "nationally recognized compilation of retail values commonly used by the automotive industry," a filing must be made with the Department requesting that the entity be deemed to qualify under R.I. Gen. Laws § 27-9.1-4(25). The filing may be made by the entity itself or any person seeking qualification of an entity for this purpose.
b. The Department reviewed the initial filings and published a bulletin in 2014 identifying two entities that initially qualified. The bulletin will be updated as entities are added or removed due to changes in circumstances.
c. Applications requesting to add entities may be filed at any time and will be addressed by the Department in due course. The Department will publish information relating to future filings on its website.
3. If the total cost to rebuild or reconstruct the motor vehicle is less than 75% the vehicle may be considered a total loss with the written agreement of the owner . The owner is the person or entity listed on the title to the motor vehicle if a title exists.
4. If an insurer is not retaining salvage, the insurer must notify the vehicle owner, in writing, of the requirements for obtaining a salvage and reconstructed title.
5. Cash Settlements
a. A cash settlement shall be based upon the fair market value of the motor vehicle less any deductible provided in the policy, if applicable, including all applicable taxes, title, registration and other fees incident to transfer of evidence of ownership of a comparable automobile.
b. When the cash settlement amount is affected by betterment or depreciation, the insurer must support the deviation by documentation in the claim file by giving particulars of the automobile condition that warrant said deviation. Any deductions or betterment from fair market value, including deduction for salvage, must be measurable, discernible, itemized and specified as to dollar amount and shall be appropriate in amount. Deduction shall not be made for reconditioning or dealer preparation. The basis for determining fair market value shall be fully explained to the claimant. All information that is the basis for such reduction shall be contained in the claim file and a copy of the valuation shall be provided to the claimant.
c. If the insurer in the process of adjusting a total loss makes a deduction for salvage of the claimant's vehicle, the insurer must furnish the claimant with the name and address of a salvage dealer who will purchase the salvage for the amount deducted.
B. Replacement Vehicles and Cash Settlement.
1. When the policy provides for the adjustment and settlement of first party automobile total losses on the basis of fair market value or a replacement with another of like kind and quality, one of the following methods shall apply:
a. The insurer may elect to offer a replacement automobile that is at least comparable in that it will be by the same manufacturer, same or newer year, similar body style, similar options and mileage as the first party claimant vehicle and in as good or better overall condition and available for inspection at a licensed dealer within a reasonable distance of the first party claimant's residence. The insurer shall pay all applicable taxes, title, registration and other fees incident to transfer of evidence of ownership of the automobile paid, at no cost other than any deductible provided in the policy. The offer and any rejection thereof must be documented in the claim file.
b. The insurer may elect a cash settlement based upon the fair market value of the motor vehicle less any deductible provided in the policy including all applicable taxes, title, registration and fees incident to transfer of evidence of ownership of a comparable automobile.
(1) When the cash settlement amount is affected by betterment or depreciation, the insurer must support the deviation by documentation in the claim file by giving particulars of the automobile condition that warrant said deviation. Any deductions or betterment from fair market value, including deduction for salvage, must be measurable, discernible, itemized and specified as to dollar amount and shall be appropriate in amount and shall be in accordance with R.I. Gen. Laws § 27-9.1-4(a)(25)(iv). Deduction shall not be made for reconditioning or dealer preparation. The basis for determining fair market value shall be fully explained to the claimant. All information that is the basis for such reduction shall be contained in the claim file and a copy of the valuation shall be provided to the claimant.
(2) If the insurer in the process of adjusting a total loss makes a deduction for salvage of the claimant's vehicle, the insurer must furnish the claimant with the name and address of a salvage dealer who will purchase the salvage for the amount deducted.
2. Right of Recourse - If the insurer is notified within thirty-five (35) days of the receipt of the claim draft that the insured cannot purchase a comparable vehicle for the fair market value, the insurer shall reopen its claim file and the following procedure(s) shall apply:
a. The insurer may locate a comparable vehicle by the same manufacturer, same year, similar body style and similar options and price range for the insured for the fair market value determined by the insurer at the time of settlement. Any such vehicle must be available through licensed dealers;
b. The insurer shall either pay the insured the difference between the fair market value before applicable deductions and the cost of the comparable vehicle of like kind and quality which the insured has located, or negotiate and effect the purchase of this vehicle for the insured;
c. The insurer may elect to offer a replacement in accordance with the provisions set forth in § 2.8(B)(1) of this Part; or
d. The insurer may conclude the loss settlement as provided for under the appraisal section of the insurance contract in force at the time of loss. This appraisal shall be binding against both parties, but shall not preclude or waive any other rights either party has under the insurance contract or a common law.
(1) The insurer is not required to take action under this subsection if its documentation to the claimant at the time of settlement included written notification of the availability and location of a specified and comparable vehicle of the same manufacturer, same year, similar body style and similar options in as good or better condition as the total loss vehicle which could have been purchased for the fair market value before applicable deductions. The documentation shall include the vehicle identification number.
C. Vehicle Repairs
1. Partial losses shall be settled on the basis of a written appraisal or for claims less than $2,500 on the basis of an appraisal or estimate. Written appraisals for claims in excess of $2,500 must be based on a physical inspection of the motor vehicle. The insurer shall supply the claimant with a copy of the appraisal upon which the settlement is based. The appraisal shall be reasonable, in accordance with applicable policy provisions, and of an amount which will allow for repairs to be made in a workmanlike manner. If the claimant subsequently claims, based upon a written appraisal which he or she obtains, that necessary repairs will exceed the written appraisal prepared by or for the insurer, the insurer shall:
a. pay the difference between the written appraisal and a higher appraisal obtained by the claimant, or
b. promptly provide the claimant with the name of at least one Automobile Body Shop that will make the repairs for the amount of the written appraisal. If the insurer designates only one or two such repairers, the insurer shall assure that the repairs are performed in a workmanlike manner. The insurer shall maintain documentation of all such communications. The claimant shall not be required to use said Automobile Body Shop; however, the insurer shall not be required to pay for the difference between the insurer's written appraisal and the claimant's appraisal if the claimant chooses to use another Automobile Body Shop.
2. When settling a claim, the amount of the settlement shall allow for the motor vehicle to be repaired to its condition prior to the loss within a reasonable time period.
3. When the amount claimed is reduced because of betterment or depreciation all information for such reduction shall be contained in the claim file. The deductions shall be itemized and specified as to dollar amount and shall be appropriate for the amount of deductions.
4. An insurer may not withhold payment to a claimant, pending reinspection under R.I. Gen. Laws § 27-10.1-9.
5. Aftermarket Crash Parts.
a. The purpose of this subsection is to set forth standards for the prompt, fair and equitable settlements applicable to automobile insurance with regard to the use of aftermarket crash parts. It is intended to regulate the use of aftermarket crash parts in automobile damage repairs paid by insurers. It also requires that all aftermarket crash parts, as defined in this section, be identified and be of the same quality as the original part.
b. For motor vehicles less than thirty (30) months beyond the date of manufacture, the insurer shall not specify the use of an aftermarket crash part or used parts whether OEM or otherwise, for the repair of the motor vehicle unless the Automobile Body Shop has written consent from the claimant pursuant to R.I. Gen. Laws § 27-10.2-2.
c. All aftermarket crash parts, which are subject to this section and manufactured after the effective date of this section, shall carry sufficient permanent non-removable identification so as to identify its manufacturer. Such identification shall be accessible to the extent possible after installation.
d. For all motor vehicles thirty (30) months or more beyond date of manufacture, no insurer shall require the use of aftermarket crash parts in the repair of an automobile unless the aftermarket crash part is at least equal in kind and quality to the original part in terms of fit, quality and performance. Insurers specifying the use of aftermarket crash parts, when allowable under R.I. Gen. Laws § 27-10.2-2, shall consider the cost of any modifications which may become necessary when making the repair.
D. Steering
1. The purpose of R.I. Gen. Laws § 27-29-4 is to protect consumers from unfair methods of competition or unfair or deceptive acts or practices. Specifically, the legislative intent of subsection (15) is to assure consumers (first and third party claimants) the right to have a free choice in selecting an automobile body repair shop. The purpose of this section is to clarify insurance companies' obligations pursuant to R.I. Gen. Laws § 27-29-4(15).
2. R.I. Gen. Laws § 27-29-4(15) defines one unfair method of competition and unfair or deceptive act or practice in the business of insurance as:
a. REQUIRING that repairs be made to an automobile at a specified auto body repair shop or INTERFERING with the insured's or claimant's FREE CHOICE of repair facility. The insured or claimant shall be promptly informed by the insurer of his or her free choice in the selection of an auto body repair shop. Once the insured or claimant has advised the insurer that an auto body repair shop has been selected, the insurer may NOT RECOMMEND that a different auto body repair shop be selected to repair the automobile. [ Emphasis added].
3. When a claim is reported to an insurer, the insurer must promptly inform the claimant (first or third party) of his or her free choice in the selection of an automobile body repair shop. The insurer may not REQUIRE repairs to be made at a specific auto body shop or INTERFERE with the insured's or claimant's free choice of repair facility. In addition, once the insured or claimant tells the insurer that he/she has selected an automobile body repair shop, the insurer may not RECOMMEND a different auto body repair shop.
4. R.I. Gen. Laws § 27-29-4(15) does not prevent an insurer from communicating true information to a consumer. The mere transmittal of information does not constitute "steering." Providing truthful, non-coercive information about options available to consumers is not a "recommendation" prohibited by the statute. The fact that a consumer alters his or her choice of repairer after speaking with an insurer does not itself establish a violation of the statute. However, an insurer may not disseminate false information. At no time shall an insurer make any misrepresentation to the claimant (first or third party) about any of the following: the limitations, scope, and/or quality of the work of any automobile body repair shop or of the warranty or guarantee provided by any shop for the work performed.
5. The choice of an auto body shop is the consumers. Insurers should guide their conduct by that principle. Examples of conduct, in the totality of the circumstance, that constitute "interfering" can be found in the Department's administrative decision in Providence Auto Body v. Allstate Insurance Company, DBR 07-I-0114. Further, the Department does not interpret R.I. Gen. Laws § 27-29-4(15) as prohibiting the insured or claimant from receiving, or the insurance company from conveying to, the insured or claimant information concerning the insurer's obligations and benefits under the contract (policy).
6. The provisions of this section also apply to claims involving motor vehicle glass installation.
7. Insurers shall not require that vehicles be removed from a repair shop for purposes of appraisal, where an appraisal may reasonably be conducted at the repair shop in question. While insurers may request appraisal at a centralized location, if the owner does not agree the appraisal should occur at the consumers' selected repair shop or other requested location unless there are documented circumstances of impossibility.
E. Miscellaneous Requirements
1. Where liability and damages are reasonably clear, insurers shall not recommend that third party claimants make claim under their own policies solely to avoid paying claims under such insurer's policy.
2. Insurers shall not require a claimant to travel an unreasonable distance to inspect a replacement automobile.
3. In order to fully compensate for the loss to the consumer, the insurer must include applicable sales tax in its calculation of settlement value in any total loss claim.
4. The claimant may exercise his or her right to arbitration pursuant to R.I. Gen. Laws § 27-10.3-1.
5. An insurer shall include the first party claimant's deductible, if any, in subrogation demands. Pursuant to R.I. Gen. Laws § 27-8-12 upon settlement of the subrogation claim, the first party claimant's insurer shall pay the first party claimant the full deductible or the amount collected if less than the full deductible, less the first party claimant 's prorated share of the subrogation expenses, if any. The subrogation expenses, as opposed to the first party claimant's deductible, are subject to prorating based on percentage of fault. The insurer may only retain funds in excess of the deductible portion of the recovery as set forth in this section.
6. When the insurer elects to repair and designates a specific repair shop for automobile repairs, the insurer shall cause the damaged automobile to be restored to its condition prior to the loss at no additional cost to the claimant other than as stated in the policy and within a reasonable period of time.
7. Storage and Towing. Storage and towing rates set by regulation or order of an administrative agency with jurisdiction over that subject matter, shall be considered the appropriate and reasonable charges for those services. The insurer shall provide reasonable notice to a first or third party claimant prior to termination of payment for automobile storage. Such insurer shall provide reasonable time for the claimant to remove the vehicle from storage prior to the termination of payment.
a. The insurer shall provide written notice to a claimant, with a copy to the storage facility, prior to termination of payment for motor vehicle storage charges. Such notice shall be given in reasonable time so as to provide the claimant the opportunity to remove the vehicle from storage prior to the termination of payment.
8. An insurer taking possession of a motor vehicle with a Rhode Island certificate of title that has been declared a total loss because of damage to that vehicle shall
a. Apply for a salvage certificate of title within ten (10) days in accordance with R.I. Gen. Laws §§ 31-46-1 and 31-46-1.1.
b. Prior to making application with the division of motor vehicles, evaluate the damage to the vehicle and properly classify the salvage as either "parts only" or "repairable" as defined in R.I. Gen. Laws § 31-46-1.1.
c. Maintain copies of all documents utilized to evaluate the damage for classification purposes.
d. Produce such documentation as required by the division of motor vehicles upon applying for the salvage certificate of title.
e. In accordance with R.I. Gen. Laws § 27-8-14 all insurers shall report all vehicle thefts within thirty (30) days of the theft and all salvage declarations to the National Insurance Crime Bureau (NICB) or similar organization that maintains a central database of automobile theft and salvage.

230 R.I. Code R. § 230-RICR-20-40-2.8

Amended effective 6/11/2019
Amended effective 12/24/2019