S 2771Insurance

Insurance - Domestic Insurance Companies

Insurers must accept, deny, or request info on claims within 30 days or pay the policyholder $250 per day.

Held for study

Population
Affected

Introduced Mar 4, 2026Committee Senate Commerce

Plain-English Summary

This legislation establishes strict timelines for domestic insurance companies to handle claims. Upon receiving a claim, an insurer has 30 days to either accept coverage and make a settlement offer, deny coverage, or request specific additional information in writing. If the insurer fails to meet these deadlines, they are subject to a penalty of $250 per day, which is paid directly to the insured person. The Department of Business Regulation is authorized to investigate complaints regarding these delays and order payments. This bill does not prevent policyholders from filing separate lawsuits.

For younger readers

When people pay for insurance, they expect the company to help pay for things when accidents happen. Sometimes, insurance companies take a long time to decide if they will pay. This new rule says the company has 30 days to make a decision or tell the person exactly what else is needed. If the insurance company is too slow and breaks this rule, they must pay the person $250 for every day they are late. This helps make sure people get their answers and money faster.

Who & Where It Applies

Impacted groups

Domestic Insurance CompaniesPolicyholders/Insured PartiesDepartment of Business RegulationCivil Litigation AttorneysInsurance Adjusters

Impacted communities

All

Constitutional & Fiscal Check

There is a potential Due Process concern regarding the power granted to the Department of Business Regulation (DBR). The bill authorizes the DBR Director to investigate and "order payment" of penalties within 14 days. It does not explicitly outline a hearing process or an opportunity for the insurer to contest the findings before the order is issued. If interpreted as denying the insurer an opportunity to be heard before a deprivation of property (the penalty), it could be unconstitutional.

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Provides direct financial accountability to corporations that delay payments, ensuring that vulnerable individuals waiting on claims receive compensation for the inconvenience and financial stress caused by bureaucratic stalling.
Empowers consumers by creating a clear, accessible avenue for recourse through the Department of Business Regulation, reducing the immediate need for expensive litigation to get an insurer to act.
Strengthens the social safety net by mandating quicker access to insurance funds, which are often critical for individuals recovering from accidents, damage, or loss.
The strict 30-day window might incentivize insurance companies to issue premature denials of coverage to stop the clock rather than conducting thorough investigations that might result in approval.
Insurance companies may pass the costs of these penalties and increased administrative urgency onto consumers in the form of higher premiums, which disproportionately affects low-income policyholders.
Relies heavily on the Department of Business Regulation to conduct investigations effectively; if the department is underfunded or understaffed, the enforcement mechanism may fail to protect consumers adequately.

For Conservatives

Ensures that the penalty money goes directly to the individual property owner or policyholder rather than into the government's general fund, respecting private property rights and compensation.
Enforces the sanctity of contracts by requiring insurance companies to fulfill their contractual obligations to clients in a timely and professional manner.
Establishes clear, objective rules for business operations, removing ambiguity regarding what constitutes a "reasonable" time for claim processing.
Imposes heavy government regulations on private businesses, dictating internal operational timelines that may not be realistic for complex claims, potentially stifling business flexibility.
The $250 per day penalty is a steep, government-mandated fine that could financially damage smaller domestic insurance carriers, potentially reducing competition in the market.
Empowers an unelected bureaucratic agency (Department of Business Regulation) to investigate and order payments, potentially bypassing standard judicial due process for business disputes.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 20 additions

SECTION 1. Chapter 27-1 of the General Laws entitled "Domestic Insurance Companies" is hereby amended by adding thereto the following section: 27-1-48. Time limits for claim settlements.

(a) Notwithstanding the provisions of any other general or public law to the contrary, within thirty (30) days from receipt of a notice of claim filed by an insured party, the insurer shall either:

(1) Issue a determination of denial of coverage or acceptance of coverage to the insured party and if coverage is accepted, provide a good faith offer to settle the claim; or

(2) Notify the insured in writing that additional information is required to complete the review of the claim. If the insurer provides notice pursuant to this subsection, then the insurer shall provide in the written notice the additional items that are needed to complete the review. Upon receipt of the identified items by the insurer, the insurer shall comply with the requirements of subsection (a)(1) of this section.

(b) Failure to comply with the provisions of this section shall subject the insurer to a penalty of two hundred fifty dollars ($250) per day, payable to the insured party.

(c) Insured parties may file a written complaint with the department of business regulation (DBR). The director of the DBR or the director’s designee shall conduct an investigation, and upon a determination that the conduct of the insurer violates the provisions of this section, the director shall order payment to the insured party within fourteen (14) days.

(d) Nothing in this section shall be construed to limit the rights of an insured to pursue a civil action against the insurer for breach of contract or bad faith, nor shall the provisions of this section be construed to limit any recovery or judgment for compensatory damage, punitive damages, or costs or expenses.

SECTION 2. This act shall take effect upon passage.