Insurance Department seeks authority to order restitution for consumers harmed under Title 26.1

The Committee on Industry and Business heard testimony March 4 on House Bill 1088, which would allow the Insurance Commissioner to order restitution to consumers financially harmed by violations of Title 26.1.

John Arnold, deputy insurance commissioner, told the committee HB 1088 would add a restitution option to the department’s existing enforcement tools. The department currently may impose administrative fines “up to $10,000 per violation,” Arnold said, but those fines are paid to the state rather than directly to harmed consumers. He said the department has relied on the threat of that fine to negotiate payments to consumers in small, common cases such as an insurer charging an unapproved rate.

Arnold testified the bill is a response to a recent, “egregious” case in which a family incurred more than $500,000 in medical debt after buying what they believed was self‑insurance; the deputy commissioner said the department’s $10,000 statutory maximum was not sufficient leverage to secure restitution in that matter. He described the proposed restitution as limited to “direct financial loss” and said the department and industry worked on language that appears in the engrossed bill to clarify that limit.

Industry witnesses urged caution. Philip Barnes of the National Association of Mutual Insurance Companies and John Ward of the Association of North Dakota Insurers said the bill’s language is broad and could expose insurers or carriers to regulatory actions beyond established fraud remedies. They noted the insurance code already contains an insurance fraud restitution provision and said disputes about policy coverage are traditionally resolved in court through declaratory-judgment proceedings. Barnes and Ward asked for narrower, fraud-focused language or other guardrails to prevent the commissioner from effectively adjudicating coverage under private insurance contracts.

Christy Schlosser Carlson of Farmers Union Insurance and Megan Ruby of Blue Cross Blue Shield North Dakota said producers and carriers have existing remedies such as errors-and-omissions insurance and criminal or civil fraud statutes, and they asked for clearer definitions of “direct financial loss” and the scope of the department’s authority.

Committee members questioned frequency and history. Arnold said small violations are fairly common and the department frequently encourages self‑reporting, sometimes waiving fines if consumers are made whole. He said the $10,000 figure has been in place since at least 1999, and that the department uses the per-violation language to avoid later statutory interpretation disputes.

Lawmakers also asked procedural questions about due process. Arnold described the administrative process: a consent order or an adjudicatory hearing before an administrative law judge, with further appeal to district court. Industry witnesses said they feared a future commissioner could interpret broad language expansively; the department said the bill is intended to address substantial, demonstrable consumer harm rather than to supplant courts in ordinary coverage disputes.

The committee took no final vote on HB 1088 at the hearing and closed the record while interested parties continued to negotiate amendment language. Chairman Barta asked stakeholders to keep the committee informed of any proposed compromise language.

The hearing record includes testimony from public- and private-sector witnesses and questions from several committee members; the department said it prefers restitution be limited to direct, demonstrable financial loss and not to include punitive damages, pain and suffering, or claims‑process substitutes.