Mandatory provisions II: claim notice, forms, proof of loss, and payment of claims

From loss to check: five claim provisions

The first set of mandatory provisions protected the policy itself. This second set governs what happens after a loss, in the order a claim actually moves:

1. Notice of claim -- the insured tells the insurer a loss happened.
2. Claim forms -- the insurer sends the paperwork.
3. Proof of loss -- the insured documents the loss.
4. Time of payment of claims -- how fast the insurer must pay.
5. Payment of claims -- to whom the insurer pays.

Each step has its own clock. On the exam, the trick is usually matching the right number to the right step.

Notice of claim

The insured must give the insurer written notice of a claim within 20 days after the loss occurs or begins, or as soon after that as is reasonably possible.

• Notice given to the insurer or to its authorized agent, with enough information to

identify the insured, counts as notice to the insurer.

• A late notice does not automatically kill the claim if giving it sooner was not reasonably

possible.

• For disability income policies that pay benefits for at least 2 years, the policy may

require the insured, after 2 years of continuous disability, to give notice of continuing disability every 6 months (except while legally incapacitated).

Notice only tells the insurer that a claim exists. It does not prove the claim.

Claim forms

Once it receives notice, the insurer must furnish its claim forms within 15 days.

If the forms do not arrive in 15 days, the insured is treated as having complied by sending, within the proof-of-loss deadline, written proof covering the occurrence, character and extent of the loss. An insurer cannot stall a claim by withholding its own paperwork.

Proof of loss

Written proof of loss must reach the insurer within 90 days after the date of loss. For benefits paid periodically, such as disability income, it is due within 90 days after the end of each period for which the insurer is liable.

• If filing within 90 days was not reasonably possible, the claim is not invalidated or

reduced, as long as proof is given as soon as reasonably possible.

• Outer limit: no later than 1 year after proof was otherwise due, **unless the claimant

lacked legal capacity**.

Time of payment of claims

Florida prescribes the wording of this provision (Fla. Stat. § 627.613(1)): after receiving written proof of loss, the insurer pays monthly all benefits then due for periodic benefits such as disability income. Benefits for any other loss are paid as soon as the insurer receives proper written proof.

Florida then puts hard deadlines on health claims, counted from the insurer's receipt of the claim (§ 627.613(2)-(6)):

• 45 days to pay the claim, or to notify the insured in writing that it is contested

or denied. The notice must identify the contested portion and give the reasons.

• 60 days to pay or deny a contested claim after receiving the additional information it

asked for.

• 120 days after receiving the claim, the insurer must have paid or denied it, whatever

else is happening.

• Payment counts as made on the date it is placed in the U.S. mail, properly addressed and

postpaid, or otherwise on the date of delivery.

• Overdue payments bear 10 percent simple interest per year.

If an insured reports improper billing by a provider in writing, the insurer must investigate. If it cuts the provider's payment as a result, it pays the insured 20 percent of the reduction, up to $500 (§ 627.613(7)).

Don't mix these up with provider claims. Claims that physicians and hospitals file directly under major medical policies run on a separate schedule in § 627.6131: 20 days for an electronic claim and 40 days for a paper one to pay or contest, with 12 percent interest on overdue payments.

Payment of claims

This provision says who gets the money.

• Death benefits go to the named beneficiary. If none is designated or surviving,

they go to the insured's estate.

• All other benefits go to the insured.
• Optional facility of payment: if benefits are payable to the estate, or to a

beneficiary who is a minor or otherwise not competent to give a valid release, the insurer may pay up to $1,000 to a relative by blood or marriage whom it considers equitably entitled.

• Optional payment to providers: the insurer may pay a hospital, doctor or other provider

directly unless the insured asks otherwise in writing by the time proof of loss is filed. This is how an assignment of benefits works in practice.

Putting it together

A loss happens. The insured has 20 days to give notice. The insurer has 15 days to send forms. The insured has 90 days to file proof, with a 1-year outer limit unless legally incapacitated. Florida then gives the insurer 45 days to pay or contest, 60 days after requested information arrives, and 120 days at the most. Late money earns 10 percent interest. The check goes to the insured, to the beneficiary for a death benefit, or to the provider when the insured has assigned benefits.