Senate committee amends bill to let insurance commissioner order restitution after hearing; passes 5-0

The Senate Industry and Business Committee on a unanimous vote amended Gross House Bill 1088 to let the state insurance commissioner require restitution, after an administrative hearing, for people directly harmed by violations of Title 26.1.

The change breaks the current language into two subsections: subsection 1 preserves the administrative monetary penalty (an administrative fine of up to $10,000 per violation), and subsection 2 — beginning on line 10 of the amendment presented to the committee — authorizes restitution in the amount of a person’s direct financial loss after a hearing. The committee added a sentence to subsection 2 stating that “nothing in this subsection shall be construed to authorize the commissioner to determine or adjudicate whether an obligation is owed under a policy or contract of insurance or require a person to pay a claim or an amount claimed owed under a policy or contract of insurance.”

Deputy Insurance Commissioner John Arnold told the committee the department worked with Blue Cross Blue Shield and other stakeholders to craft the compromise. Arnold said tying restitution to an administrative hearing addresses stakeholders’ concerns about a future commissioner using the restitution authority to resolve coverage disputes. “We felt that that addressed a lot of the concerns,” Arnold said, adding that if a party consents to restitution a hearing would not be forced.

Megan Ruby of Blue Cross Blue Shield of North Dakota said the addition of “after hearing” was a “small step in the right direction” and represented a compromise between the insurer and the department.

John Ward, representing the Association of North Dakota Insurers, pressed for an explicit statutory statement that the commissioner lacks authority to adjudicate coverage disputes and said his members would accept dropping language granting immunity from civil damages if the coverage-protection sentence were included. Ward argued insurers fear an administrative process could be used to require payment of claims that a court or the contract does not require.

Arnold said the department opposes language that would bar a harmed consumer from pursuing civil damages. “We don’t feel it’s appropriate to tell that individual that they now cannot go to the court system,” he said, explaining the department’s consumer-protection rationale.

Senators discussed the compromise on the floor of the committee. Senator Klein moved to adopt the combined amendment (adding the “after hearing” structuring and the subsection-limiting sentence), Senator Kessel seconded, and the committee voted to adopt the amendment. The committee then voted 5-0 on a motion for a due-pass recommendation on Gross House Bill 1088 as amended. The chair took the bill for further action after the committee vote.

Why it matters: The amendment responds to an incident described in committee testimony where a consumer incurred substantially greater direct medical or financial costs than the department’s prior administrative restitution practice (which the department said had a practical cap around $10,000). Supporters said the change preserves administrative due process while enabling larger restitution awards when consumers suffer substantial direct financial loss. Insurers successfully secured a statutory clarification intended to limit the scope of restitution authority so it is not used to determine contractual coverage disputes.

What’s next: With the committee’s due-pass recommendation the amended House Bill 1088 will go to the next stage of consideration in the Legislature.