November 12, 2020

The North Carolina Insurance Department (“Department”) recently announced a regulatory action against an insurer for alleged claims practices violations and contracting with a TPA before it became licensed in North Carolina. The regulatory action resulted in a settlement agreement between the Department and the insurer in which the insurer was assessed a $1,100,000 monetary penalty and the insurer also had to pay out $2,533,000 in additional claims and interest payments to claimants. 

According to the Department, the settlement agreement was the result of a target examination of the insurer’s claims practices and claims procedures. The Department’s examiners reviewed approximately 300 claims in the target examination and the examination revealed numerous alleged claims processing violations of the insurer’s accidental death and dismemberment policies. 

The Department asserted that, in some cases, unnecessary information was requested from claimants, significantly delaying their claim payment. Additionally, the Department alleged some claims were not promptly settled under one portion of a policy where the insurer’s liability was reasonable clear in order to influence settlement under other portions of the policies. The Department also alleged the average time to process the accidental death and dismemberment claims was 208 calendar days. The Department examiners also allegedly discovered that when payments were made, interest was not paid to the claimant as required by North Carolina insurance law. 

Finally, the examination also revealed the insurer had contracted with a TPA to administer its accidental death and dismemberment policies, but the TPA had not been licensed as a TPA in North Carolina for almost three years while it was servicing the policies.

This regulatory action by the North Carolina Insurance Department is a reminder that insurers may be held strictly liable for alleged violations of insurance laws committed by their TPA business partners.

More Information on Our TPA Team

Polsinelli’s TPA team provides TPA licensing services, TPA regulatory and compliance services, drafting and negotiating of administrative services agreements and a number of other TPA services. Our TPA team includes attorneys who were former in-house counsel for TPAs, as well as attorneys who were formerly insurance regulators. By leveraging its extensive experience representing TPAs, our TPA team helps clients avoid the learning curve and related cost implications that can be experienced by working with companies or attorneys less familiar with the regulatory and compliance needs of TPAs. To learn more about our TPA Licensing and Compliance practice or to contact a member of our TPA Licensing and Compliance services team, visit our Third Party Administrators page.

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