January 20, 2022

Volume XII, Number 20

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Third Party Administrator Licensing and Compliance Services: North Carolina Regulatory Action a Reminder That Insurers Are Responsible for the Acts of Their TPAs

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.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 317
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About this Author

Steven L. Imber, Polsinelli PC, Insurance Regulatory Attorney, Enforcement Actions Lawyer,
Shareholder

Steve Imber chairs Polsinelli's Insurance Business and Regulatory group.  As a former General Counsel at a state insurance department, Steve Imber has the knowledge and experience to provide quality counsel to insurers, third party administrators, insurance agencies, medical discount plans and other insurance regulated entities. His practice includes representing and assisting clients on multi-state and national licensing projects, research projects, enforcement actions, market conduct examinations, audits and compliance programs and various other regulatory and...

913.234.7469
Jennifer Osborn Insurance Lawyer Polsinelli Law Firm
Shareholder

Jennifer Osborn Nix works diligently for insurance companies, third-party administrators, and other regulated entities to further their goals and help them remain compliant within the 50-state regulatory scheme. She focuses on insurance regulatory and compliance issues, with a primary emphasis on life and health insurance matters.

Jennifer works with many regulated entities, including many in the health care sector, who rely on her for research, advice, strategic counsel, and licensing.

913.234.7472
Shareholder

Justin Liby has a talent for organizing and managing large national and multi-state licensure and research projects. This knack provides him with a solid foundation for crafting and implementing sound, efficient strategies that achieve success for his clients. Justin concentrates his efforts on helping the insurance industry navigate the formidable federal and state regulatory maze to achieve the industry’s business needs. He stays current in the insurance industry's evolution, as well as the legislation and regulatory activity impacting the industry.

...
913-234-7427
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