Insurance Law

New Hampshire Enacts New Insurance Laws

July 2008

By Donald J. Pfundstein*

Despite the introduction of several bills during the 2007 legislative session that would have negatively impacted New Hampshire insurance buying businesses and consumers, Governor Lynch would not stand for it. The Governor vetoed HB143, presumably because he understood the economic damage it would cause.

HB143, which was heavily promoted by the New Hampshire Trial Lawyers Association, would have permitted a defendant who is only 20% at fault to be liable for 90% of the damages in a civil action! After passing the House quickly, HB143 passed the Senate by a narrow margin and was sent to the Governor for his signature. The Governor met with supporters and opponents of HB143 before vetoing the bill. In his press release explaining the veto, Governor Lynch stated that it was "unfair for a defendant with a low degree of fault to have to pay a disproportionately large share of the damages."

We must constantly watch the legislature whether there is a Democratic or a Republican majority. The potential economic damage of HB143, the goal of creating law suits that even California has now banned, and other measures suggest that businesses and consumers both need to be vigilant.

The following is a summary of the bills that were enacted during the busy 2007 session.

Bills that Impact All Insurers

Unfair Trade Practices - HB169. HB169 makes it an unfair insurance trade practice for an insurer or adjuster representing the insurer to knowingly underestimate the value of any claim.

Identity Theft - HB227. HB227 prohibits any person, including a business, from obtaining, recording or accessing "personal information" or a "financial device" with fraudulent intent.

"Personal information" includes an individual's first and last name, home or physical address, telephone number, social security number, personal identification number, credit or debit card number, access code associated with a credit or debit card, date of birth, birth certificate number, place of birth, password or access code, financial institution account number and driver's license or other governmental identification. A "financial device" includes a credit card, debit card, check or money order.

Insurance Fraud - HB532. HB532 amends several insurance fraud provisions that are part of the Unfair Insurance Trade Practices Act. Under RSA 417:28 as amended by HB532, any person or entity regulated by the New Hampshire Insurance Department ("NHID") which has reason to believe that an insurance fraud or insurance-related criminal activity has been committed must submit a report to the NHID within sixty days of forming such belief.

Prior to the enactment of HB532, RSA 417:30 required insurers to have antifraud initiatives in place, including either fraud investigators or the submission of an antifraud plan to the NHID. HB532 removes the option of having fraud investigators and states that the antifraud plan that insurers are required to submit to the NHID must be in writing.

Examinations and Tax Credits - HB782. HB782 makes minor amendments to RSA 400-A:37, the examination statute. HB782 requires an insurer to pay a professional or specialist retained by the NHID during the course of an examination directly for their costs.

Furthermore, HB782 clarifies that the expense of an examination that an insurer must bear is limited to both the reasonable per diem allowance for compensation and expenses of the state employee examiner and the expense incurred if the NHID retains a professional or specialist to conduct the examination.

Prior to the enactment of HB782, RSA 400-A:34-a permitted a member of a unitary business to use the payment of the business enterprise tax by another member of the unitary business ("the other member") as a credit against the member's premium tax payment. HB782 purports to clarify that in order for the member to use this credit, the other member must also be subject to the premium tax.

HB782 also proposes numerous changes to the reinsurance intermediary statutes.

Workers' Compensation Insurance Bills

Definition of Employee/Independent Contractor - SB92. The presumption that a person who performs services for pay is an employee for purposes of the Workers' Compensation Law may be rebutted by proof that the person meets several criteria set forth in RSA 281-A, VI(b)(1). Prior to SB92, five criteria needed to be satisfied. Now that SB92 has been enacted, twelve criteria must be satisfied before a person will be considered an independent contractor, making it more difficult to classify certain workers as independent contractors.

Some of these new criteria include whether a person has continuing or recurring business liabilities or obligations, whether the person receives compensation for work or services performed and remuneration is not determined unilaterally by the hiring party, and whether the person is responsible for satisfactory completion of work and may be held contractually responsible for failure to complete the work.

Worker's Compensation Compliance Statement - SB154. RSA 281-A:4-a requires building or construction industry contractors, subcontractors, and independent contractors engaged in the nonresidential building or construction industry to submit a workers' compensation compliance statement to the New Hampshire Department of Labor ("DOL") within thirty days of a written request. Under SB154, the compliance statement submitted to the DOL must include the total number of employees employed during the entire prior policy term if a workers' compensation policy was in effect or during a one year period if no policy was in effect or was only partially in effect. The compliance statement must also include the total number of hours for which these employees were compensated and which hours apply to the appropriate National Council on Compensation Insurance classification code applicable to the scope of work performed. Before SB154 was enacted, contractors, subcontractors and independent contractors were only required to provide this information for the four month period preceding the request.

Under SB154, the compliance statements are maintained as public records in accordance with the Right-to-Know Law.

Training for Appeals Board Members - HB101. As a condition of maintaining eligibility to hear appeals, workers' compensation appeals board members must participate in annual training and briefing in the area of workers' compensation and relevant disciplines. HB101 requires appeals board members to have 10 hours of annual training and briefing in order to maintain their eligibility to hear appeals. Before HB101 was enacted, appeals board members were required to participate in 20 hours of annual training.

Employer Notices - HB336. Employers are required to post certain notices that are provided by the DOL. HB336 requires the notices posted by employers to include information about the criteria for classifying an employee as an employee or as an independent contractor.

Penalties for Failure to Secure Coverage - HB337. Under RSA 281-A:7, an employer that fails to secure workers' compensation coverage is subject to a civil penalty of up to $2500. The employer may also be subject to a $100 penalty per employee for each day of noncompliance beginning on the date of written notification by the DOL. HB337 amends RSA 281-A:7 and permits the DOL to assess penalties beginning on the first day of the infraction not to exceed one year. In addition, HB337 opens up the possibility of personal liability for the payment of these penalties for any person with control or responsibility over decisions to disburse funds and salaries who knowingly fails "to secure payment of workers' compensation."

Under current law, a workers' compensation insurer that insures an employer and fails to file a notice of coverage with the DOL may be liable for a civil penalty of $10 for each day of noncompliance beginning on the date of the commissioner's written notification to the carrier. HB337 increases the penalty to $50 for each day of noncompliance and removes the phrase "beginning on the date of the commissioner's written notification to the carrier."

DOL Hearings on Independent Contractors - HB426. HB426 permits the DOL to "conduct investigations and hold hearings to resolve disputes between an employer and the employer's workers' compensation carrier regarding whether persons engaged by the employer are employees or independent contractors for the purposes of determining whether an additional premium charge is to be paid by the employer for workers' compensation insurance."

Certification of Workers' Compensation Coverage - HB471. Currently, RSA 281-A:18-a permits corporations and limited liability companies to exclude up to three executive officers or members from workers' compensation coverage. HB471 amends RSA 281-A:18-a so that individuals who are actively engaged in on-site work on any construction site within New Hampshire are not entitled to this exemption.

HB471 also requires all contractors, subcontractors and independent contractors to provide the New Hampshire Department of Transportation with certification of workers' compensation coverage before they begin work on any state transportation project or "major project" as defined by statute.

The penalties for violations of these provisions match the penalties set forth in HB337 so that a contractor, subcontractor or independent contractor who violates these provisions may be subject to a civil penalty of up to $2500 and an additional penalty of $100 per employee for each day of noncompliance. HB471 establishes personal liability for the payment of these penalties. In addition, contractors, subcontractors or independent contractors that violate HB471 may be prohibited from bidding or working on state projects for up to five years.

Auto Insurance Bills

Rejection of UM Coverage - SB38. Under current law, umbrella or excess policies that provide excess limits to motor vehicle liability policies must also provide uninsured motorist coverage equal to the limits of liability purchased, unless the insured rejects such coverage. SB38 requires the insured's rejection of uninsured motorist coverage to be in writing. In addition, SB38 adds the following language to RSA 264:15, I: "Rejection of such coverage by a named insured shall constitute a rejection of coverage by all insureds, shall apply to all vehicles then or thereafter eligible to be covered under the policy, and shall remain effective upon policy amendment or renewal, unless the named insured requests such coverage in writing."

Med Pay Benefits - SB189. SB189 prohibits health insurance carriers from coordinating benefits against medical payments coverage and clarifies that medical payments coverage is not assignable to any healthcare provider. In addition, SB189 states that the insured has the exclusive right to choose whether to submit a claim under a health insurance policy or under medical payments coverage. SB189 further clarifies that an insured is not entitled to duplicate payment from medical payments coverage and a health insurance policy for the same medical expense.

Volunteer Drivers - HB767. HB767 prohibits auto insurers from refusing to issue a policy of insurance to an applicant solely because the applicant is a "volunteer driver." It also prohibits auto insurers from charging a higher premium or imposing a surcharge solely on the basis that the named insured, a member of the insured's household, or a person who customarily operates the insured's vehicle is a "volunteer driver."

A "volunteer driver" is defined as a person who provides services, including transporting individuals or goods, without compensation (above expenses) to a charitable organization.

*Donald Pfundstein is admitted in New Hampshire.

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