The Tennessee legislature has listed certain certain practices which constitute unfair acts or practices in the business of insurance. See T.C.A. § 56-8-105. The statute, known as the Unfair Claims Settlement Practices Act, creates standards and rules by which insurance companies must abide when settling claims. For example, the Unfair Claims Settlement Practices Act provides that it is unfair and deceptive to "[fail] to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed." T.C.A. § 56-8-105(7). Similarly, it is an unfair claims practice to "[fail] to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies." T.C.A. § 56-8-105(2).
Although the Unfair Claims Settlement Practices Act does not provide a private cause of action, that doesn’t necessarily mean that it is irrelevant to a first party claim. Because the Unfair Claims Settlement Practices Act enumerates certain unfair or deceptive practices, it can be bootstrapped into defining violations of the Tennessee Consumer Protection Act, which obviously does provide a private cause of action. Both Acts prohibit "unfair" or "deceptive" practices, and the Unfair Claims Settlement Practices Act just happens to provide some very good guidance as to what constitutes unfair or deceptive practices by an insurance company.
Although I am aware of no Tennessee case addressing this issue head on, courts from other states have held that while there may not be a cause of action under a state’s unfair claims practices act, the terms of such act are properly considered in determining whether an insurer’s conduct amounts to bad faith. See, e.g., MacFarland v. United States Fidelity & Guarantee Co., 818 F.Supp. 108 (E.D. Pa. 1993); Wailua Associates v. Aetna Casualty & Surety Co., 27 F.Supp.2d 1211 (D. Hawaii 1998).
So what’s the lesson? When drafting a complaint for bad faith and for violations of the Tennessee Consumer Protection Act, mimic the language of the Unfair Claims Settlement Practices Act. Although it does not provide a private cause of action, it is strong evidence of activities that reach the threshold of bad faith or unfair/deceptive actions.