Rhode Island introduces property insurance bad faith bill

A Rhode Island bill would allow consumers to seek recovery when an insurer, in bad faith, refuses to pay or settle a claim, regardless of whether there is a breach of contract. 

Senate Bill 2311 adds that good faith and fair dealing require insurance companies to conduct reasonable investigations of claims using competent, properly licensed, and legally authorized individuals to timely evaluate, negotiate, and settle claims based upon all information reasonably available to the insurer. 

The bill was introduced in the Senate on Jan. 23 and is sponsored by five Democratic senators. It was sent to the Senate Judiciary Committee.

A list of other actions defined as bad faith is written into the bill. 

This includes depreciating the cost of labor or failing to account for consequential damage when calculating and paying actual cash value or replacement cost value. 

Another action deemed to be in bad faith is failing to promptly notify the claimant of their right to invoke the policy’s appraisal provision, regardless of whether the insurer disputes coverage, reserves rights, or asserts that any portion of the claim is not covered. 

Failing to account for overhead and profit, regardless of whether a contractor may be needed to perform the necessary work, is also defined as bad faith in the bill. 

If a court finds an insurer has knowingly and recklessly violated the code, the bill would allow the court to award actual damages, including reasonable attorneys’ fees and costs, and enhanced damages not to exceed twice the actual damages. 

Rhode Island has been supportive of property insurance consumer protection bills in recent years. In 2024, the state passed a bill that requires the use of OEM parts. It followed with the passage of a right-to-appraisal bill in July.

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