Which of the following is a prohibited unfair claims settlement practice under T.C.A. § 56-8-105?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
T.C.A. § 56-8-105 enumerates unfair claims settlement practices, and among them is failing to adopt and implement reasonable standards for the prompt investigation and processing of claims. The statute obligates insurers to maintain functioning claims systems, not merely to avoid overt bad acts, and the Tennessee Department of Commerce & Insurance enforces the standard through T.C.A. § 56-8-105 together with Tenn. Comp. R. & Regs. 0780-01-05. An insurer whose claims handling lacks reasonable, prompt investigation standards violates the act even before any single claim is mishandled.
Why the other options are wrong
- A) A denial supported by a reasonable investigation is the opposite of the prohibited practice; the statute bars denials made without one.
- C) Requesting required proof-of-loss documentation is proper claims processing, not a prohibited practice.
- D) Negotiating a settlement is ordinary claims resolution and is not on the list of unfair claims settlement practices.
Memory hook
The claims act punishes the system, not just the slip: reasonable, prompt investigation standards are mandatory.