Unfair Claims Practices Laws: What Insurers Are Not Allowed to Do

Every state regulates how insurance companies handle claims. In most states, those rules trace back to a model law written by the National Association of Insurance Commissioners (NAIC). Knowing what these laws say, and what they do not do, helps you spot problems early and put them in writing in a way regulators and lawyers take seriously.

Where these laws come from

The NAIC is the organization of state insurance regulators. It writes model laws that states can adopt, change, or ignore. Two matter most for property claims:

• Unfair Claims Settlement Practices Act (Model 900). This lists claim-handling conduct that is prohibited.
• Unfair Property/Casualty Claims Settlement Practices Model Regulation (Model 902). This adds detailed standards, including time limits for acknowledging and deciding claims.

Most states have adopted some version of these models, but each state wrote its own. Section numbers, deadlines, and wording differ. Always look up your own state’s statute and regulations.

What the model act prohibits

Model 900 lists practices that count as unfair when committed in violation of the act. In plain terms, they include:

• Knowingly misrepresenting relevant facts or policy provisions to claimants.
• Failing to acknowledge claim communications with reasonable promptness.
• Failing to adopt and implement reasonable standards for prompt investigation and settlement.
• Not attempting in good faith to settle promptly and fairly when liability has become reasonably clear.
• Compelling insureds to sue by offering substantially less than what they later recover in court.
• Refusing to pay without conducting a reasonable investigation.
• Failing to affirm or deny coverage within a reasonable time after the investigation is complete.
• Failing to promptly give a reasonable and accurate explanation for a denial or a compromise offer.

The “general business practice” requirement

Under Model 900, an act becomes an “improper claims practice” for penalty purposes only if it is committed flagrantly and in conscious disregard of the law, or often enough to indicate a general business practice. Many states use similar language. California’s version, Insurance Code section 790.03(h), opens with the phrase “knowingly committing or performing with such frequency as to indicate a general business practice.”

That does not make a single violation harmless. Regulators find patterns by collecting individual complaints. Your complaint may be one piece of that pattern.

No private lawsuit under the model act

Model 900 states that it does not create or imply a private cause of action. Its drafting note explains that a state wanting one should use a different statutory scheme. Enforcement is meant to come from the insurance commissioner through hearings, cease-and-desist orders, and penalties.

Three state examples

California

California Insurance Code section 790.03(h) lists 16 unfair claims settlement practices. Examples include misrepresenting pertinent facts or policy provisions, failing to affirm or deny coverage within a reasonable time after proof of loss, compelling insureds to sue by offering substantially less than they ultimately recover, and failing to promptly explain the basis for a denial or compromise offer.

In Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287, the California Supreme Court held that section 790.03 was not intended to create a private civil cause of action. Enforcement belongs to the Insurance Commissioner. California’s detailed deadlines live in the Fair Claims Settlement Practices Regulations, covered in California’s Fair Claims Settlement Regulations.

Texas

Texas takes a different approach. Insurance Code section 541.060 lists unfair settlement practices, including misrepresenting a material fact or policy provision, failing to promptly provide a reasonable explanation for a denial or compromise offer, and refusing to pay without a reasonable investigation. Section 541.151 lets a person who sustains actual damages bring a lawsuit for these practices.

Texas also has a Prompt Payment of Claims law in Chapter 542 with specific deadlines:

• Section 542.055: within 15 days after notice of a claim, the insurer must acknowledge it, begin any investigation, and request the items it reasonably needs (30 business days for surplus lines insurers).
• Section 542.056: the insurer must accept or reject in writing within 15 business days after receiving all requested items. If it needs more time, it must give reasons, then decide within 45 days of that notice.
• Section 542.057: once it accepts, the insurer must pay within 5 business days (20 business days for eligible surplus lines insurers).
• Section 542.059: in a weather-related catastrophe or major natural disaster, as defined by the commissioner, these deadlines extend by 15 days.
• Section 542.060: an insurer that violates the subchapter owes interest as damages, at 18 percent a year in general, plus reasonable attorney’s fees. A different interest formula applies to claims governed by Chapter 542A.

Texas Chapter 542A also requires written notice at least 61 days before filing certain property claim lawsuits (section 542A.003).

Florida

Florida Statutes section 626.9541(1)(i) defines unfair claim settlement practices. Some acts, like making a material misrepresentation to settle a claim on less favorable terms than the policy provides, are listed without a frequency requirement. Others, listed in subparagraph 3, apply when committed “with such frequency as to indicate a general business practice.” These include denying claims without a reasonable investigation and failing to promptly give a written explanation for a denial or compromise offer.

Florida’s property claim deadlines are in section 627.70131 and were tightened in recent reforms. As of the 2025 statutes:

• Acknowledge and respond to claim communications within 7 calendar days, with limited exceptions.
• Begin the investigation within 7 days after receiving proof-of-loss statements.
• Conduct any physical inspection within 30 days after receiving proof-of-loss statements.
• Send you a copy of any detailed estimate within 7 days after the adjuster generates it.
• Pay or deny an initial, reopened, or supplemental residential claim within 60 days after notice, unless factors beyond the insurer’s control prevent it.

Florida separately allows a civil action for certain bad faith conduct after a civil remedy notice under section 624.155. See Insurance Bad Faith Basics.

How policyholders actually use these laws

You do not need to be a lawyer to use these rules. Used carefully, they help in three ways.

1. In letters to the adjuster

A short, factual letter that names the rule is harder to ignore than a phone complaint. For example: “Under 10 CCR § 2695.7(b)(1), please identify the specific policy provision you are relying on to deny this part of the claim.” Keep it calm and specific. Date it and keep a copy.

2. In a Department of Insurance complaint

A regulator can act on a documented violation of its own state’s rules. Attach your timeline and the letters showing missed deadlines. See How to File a Department of Insurance Complaint.

3. As evidence in a larger dispute

Even where the statute does not allow a private lawsuit, repeated violations can support other claims, such as bad faith under your state’s case law. That is a question for an attorney.

Know this: These laws set minimum standards. An insurer that meets every deadline can still owe you more money. Deadlines protect your timeline, not the amount.

What to do with this information

• Find your state’s unfair claims law and claim-handling regulation. Your state Department of Insurance website usually links to them.
• Build a dated log of every contact with the insurer, including who, when, and what was said or sent.
• When a deadline passes, send a short written reminder that cites the rule.
• If the pattern continues, file a complaint with your state insurance department.

For specific claims, especially large losses or denials, talk with a licensed public adjuster or an attorney licensed in your state who represents policyholders. They can tell you whether your state’s rules give you a direct legal remedy or only a regulatory one. For a step-by-step response plan, see Denied or Lowballed: What to Do Next.