Delaware General Assembly


CHAPTER 275

RELATING TO PROHIBITED CONDUCT AND PRACTICES

AN ACT TO AMEND SUBCHAPTER II, CHAPTER 5, TITLE 18, DELAWARE CODE, ENTITLED "PROHIBITED CONDUCT AND PRACTICES", BY DEFINING TRADE PRACTICES IN THE BUSINESS OF INSURANCE WHICH CONSTITUTE UNFAIR METHODS OF COMPETITION OR UNFAIR OR DECEPTIVE ACTS OR PRACTICES AND BY PROHIBITING THE TRADE PRACTICES SO DEFINED; BY PROHIBITING FALSE SWEARING AND POLITICAL CONTRIBUTIONS; AND BY PROVIDING PENALTIES THEREFOR AND FOR VIOLATION OF TITLE 18.

Be it enacted by the General Assembly of the State of Delaware (two-thirds of all the Members elected to each House thereof concurring therein):

Section 1. Subchapter II, Chapter 5, Title 18, Delaware Code, is amended by striking out all of said Subchapter II and substituting the following:

SUBCHAPTER II. UNFAIR METHODS OF COMPETITION

AND UNFAIR AND DECEPTIVE ACTS AND PRACTICES

§ 531. Declaration of purpose

The purpose of this subchapter is to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in the Act of Congress of March 9, 1945 (Public Law 15, 79th Congress), by defining all such practices in this State which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined.

§ 531. Definitions As used in this subchapter--

"Person" means any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer,

fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers and adjusters.

§ 533. Unfair methods of competition or unfair and deceptive acts or practices prohibited

No person shall engage in this State in any trade practice which is defined in section 534 as an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.

§ 534. Unfair methods of competition and unfair or deceptive acts or practices defined

The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance :

(1) Misrepresentations and false advertising of policy contracts. Making, issuing, circulating, or causing to be made, issued or circulated, any estimate illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or making any false or misleading statement as to the dividends or share of surplus previously paid on similar policies, or making any misleading representation or any misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates, or using any name or title of any policy or class of policies misrepresenting the true nature thereof, or making any misrepresentation to any policyholder insured in any company for the purpose of inducing or tending to induce such policyholder to lapse, forfeit, or surrender his insurance.

(2) False information and advertising generally. Making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any

radio station, or in any other way, an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading.

(3) Defamation. Making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting or encouraging the making, publishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false, or maliciously critical of or derogatory to the financial condition of an insurer, and which is calculated to injure any person engaged in the business of insurance.

(4) Boycott, coercion and intimidation. Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance.

(5) False financial statements. Filing with any supervisory or other public official, or making, publishing, disseminating, circulating or delivering to any person, or placing before the public, or causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of financial condition of an insurer with intent to deceive.

Making any false entry in any book, report or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to whom such insurer is required by law to report, or who has authority by law to examine into its condition or into any of its affairs, or, with like intent, wilfully omitting to make a true entry of any material fact pertaining to the business of such insurer in any book, report or statement of such insurer.

(6) Stock operations and advisory board contracts. Issuing or delivering or permitting agents, officers, or employees to issue or deliver, agency company, stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance.

(7) Unfair discrimination.

(A) Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contract.

() Making or permitting any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of such contract, or in any other manner whatever.

(8) Rebates.

(A) Except as otherwise expressly provided by law, knowingly permitting or offering to make or making any contract of life insurance, life annuity or accident and health insurance, or agreement as to such contract other than as plainly expressed in the contract issued thereon, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance, or annuity, any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatever not specified in the contract; or giving, or selling, or purchasing or offering to give, sell, or purchase as inducement to such insurance or annuity or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the contract.

(B) Nothing in paragraph (7) or paragraph (8) (A) of this section shall be construed as including within the definition of discrimination or rebates any of the following practices : (i) in the case of any contract of life insurance or life annuity, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from non-participating insurance, provided that any such bonuses or abatement of premiums shall be fair and equitable to policyholders and for the best interests of the company and its policyholders; (ii) in the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of insurer in an amount which fairly represents the saving in collection expense; (iii) readjustment of the rate of premium for a group insurance policy based on the loss or expense experience thereunder, at the end of the first or any subsequent policy year of insurance thereunder, which may be made retroactive only for such policy year.

535. Power of Commissioner

The Commissioner shall have power to examine and investigate into the affairs of every person engaged in the business of insurance in this State in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by section 533. When after examination and investigation the Commissioner is satisfied that any person has violated the provisions of section 533, he shall present the facts relating thereto to the Attorney General for action.

§ 536. Penalty

Any person who violates section 533 shall be fined not more than $1,000 or imprisoned not more than one year, or both.

§ 537. Provisions of Subchapter II additional to existing law

The powers vested in the Commissioner by this subchapter shall be additional to any other powers to enforce any penalties, fines or forfeitures authorized by law with respect to the methods, acts and practices hereby declared to be unfair or deceptive.

§ 538. Immunity from prosecution

If any person shall ask to be excused from attending and testifying or from producing any books, papers, records, correspondence or other documents at any hearing or before any court, on the ground that the testimony or evidence required of him may tend to incriminate him or subject him to a penalty or forfeiture, and shall notwithstanding be directed to give such testimony or produce such evidence, he must none the less comply with such direction, but he shall not thereafter be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing concerning which he may testify or produce evidence pursuant thereto, and no testimony so given or evidence produced shall be received against him upon any criminal action, investigation or proceeding, provided, however, that no such individual so testifying shall be exempt from prosecution or punishment for any perjury committed by him while so testifying and the testimony or evidence so given or produced shall be admissible against him upon any criminal action, investigation or proceeding concerning such perjury, nor shall he be exempt from the refusal, revocation or suspension of any license, permission or authority conferred, or to be conferred, pursuant to this title. Any such individual may execute, acknowledge and file in the office of the Commissioner or the Attorney General a statement expressly waiving such immunity or privilege in respect to any transaction, matter or thing specified in such statement and thereupon the testimony of such person or such evidence in relation to such transaction, matter or thing may be received or produced before any judge or justice, court, tribunal, grand jury or otherwise, and if so received or produced such individual shall not be entitled to any immunity or privilege on account of any testimony he may so give or evidence so produced.

SUBCHAPTER III. PROHIBITED CONDUCT AND

PRACTICES

§ 551. False swearing

If any person making an oath or affirmation required by this title, shall swear falsely, or make a false affirmation, he shall be guilty of perjury.

§ 552. Prohibition of political contributions; penalty

(a) No insurance company doing business in this State shall, directly or indirectly, pay or use or offer, consent or agree to pay or use any money or property for or in aid of any political party, committee or organization, or for or in aid of any corporation or association organized or maintained for political purposes or for or in aid of any candidate for political office, or for nomination for such office, or for any political purpose whatsoever, or for the reimbursement or indemnification of any person for money or property so used.

(b) Any officer, director, stockholder, attorney or agent of any company which violates any of the provisions of this section, who participates in, aids, abets, or advises or consents to any such violation, and any person who solicits or knowingly receives money or property in violation of this section, shall be imprisoned not more than one year and fined not more than $1,000, and any officer aiding or abetting in any contribution made in violation of this section, shall be liable to the company for the amount so contributed.

(c) The provisions of section 538, Subchapter II, shall be applicable to any investigation, proceeding or trial for a violation of any of the provisions of this section.

§ 553. Violations and penalties

Any insurance company, agent or broker who violates or fails to observe and comply with any of the provisions of this title for which a penalty is not specifically provided, shall be fined not more than $1,000 or imprisoned not more than one year, or both. Any officer, manager or agent of such corporation wilfully violating or failing to observe or comply with the provisions of this title, shall be punishable under this section.

Approved June 13, 1955.