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The examiners reviewed files drawn from the category of Closed Claims for the period February 1, 2002 through January 31, 2003, commonly referred to as the "review period." The examiners reviewed 237 Unitrin Direct Insurance Company closed claim files. The examiners cited 29 claims handling violations of the Fair Claims Settlement Practices Regulations and/or California Insurance Code Section 790.03 within the scope of this report. Further details with respect to the files reviewed and alleged violations are provided in the following table and summary.


The following is a brief summary of the criticisms that were developed during the course of this examination related to the violations alleged in this report. This report contains only alleged violations of Section 790.03 and Title 10, California Code of Regulations, Section 2695 et al. In response to each criticism, the Company is required to identify remedial or corrective action that has been or will be taken to correct the deficiency. Regardless of the remedial actions taken or proposed by the Company, it is the Company's obligation to ensure that compliance is achieved. As a result of the examination, the total amount of money returned to claimants was $238.59 within the scope of this report.

1. The Company failed to provide a written basis for the denial of the claim. In five

instances, the Company failed to provide a written basis for the denial of the claim and shall provide a statement listing all bases for such rejection or denial. The Department alleges these acts to be in violation of CCR §2695.7(b)(1).

Summary of Company Response: The Company states that the referenced violations involved the Company not sending copies of the Medical Payments Coverage reduction statements (EOBs) to insureds when reduced payments were made by Company directly to the medical providers. The Company states that the medical provider's billing for services rendered was reduced to amounts that were usual and customary to the local area, but Company failed to obtain an actual agreement with the subject provider approving the reduced amount. It is the Department's position that without an affirmative agreement between the medical provider and Company, the insured's obligation for the unpaid amount was ongoing. As of the end of May 2003, the Company had conducted training of all responsible staff thereupon instructing them to notify an insured, in writing, when Company reduces a medical provider's billing such that the insured may thereafter advise the Company should the Medical Provider attempt to bill the insured for the difference between the billing and the amount paid by Company. The Company warrants, in writing, to resolve all billing discrepancies directly with the medical providers.

2. The Company required a claimant to travel an unreasonable distance either to inspect a replacement automobile, to conduct an inspection of the vehicle, to obtain a repair estimate or to have the automobile repaired at a specific repair shop. In four instances, the Company required a claimant to travel an unreasonable distance either to inspect a replacement automobile, to conduct an inspection of the vehicle, to obtain a repair estimate or to have the automobile repaired at a specific repair shop. The Department alleges these acts to be in violation of CCR §2695.8(e)(3).

3. The Company failed to document the basis of betterment, depreciation or salvage. The basis for any adjustment shall be fully explained to the claimant in writing. In four instances, the Company failed to document the basis of betterment, depreciation or salvage. The basis for any adjustment shall be fully explained to the claimant in writing. The Department alleges these acts to be in violation of CCR §2695.8(k).

4. The Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In four instances, the Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. The Department alleges these acts to be in violation of CIC §790.03(h)(5).

5. The Company failed to advise the claimant that he or she may have the claim denial reviewed by the California Department of Insurance. In three instances, the Company failed to include a statement in their claim denial that should the claimant believe that the claim had been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance. The Department alleges these acts to be in violation of CCR §2695.7(b)(3).

Summary of Company Response: The Company acknowledges these errors as oversights by claims adjusters adverse to established Company policies and procedures. All applicable letters generated by the Company's system have been updated to include the Department's name, address and telephone number. This modified form has been reviewed by the Department, as part of this examination, to ensure compliance.

6. The Company failed to include, in the settlement, all applicable taxes, license fees and other fees incident to transfer of evidence of ownership of the comparable automobile. In two instances, the Company failed to include in the settlement, all applicable taxes, license fees and any other fees incident to transfer of evidence of ownership of the comparable automobile. The Department alleges these acts to be in violation of CCR §2695.8(b)(1).

7. The Company failed to supply the claimant with a copy of the estimate upon which the settlement is based. In two instances, the Company failed to supply the claimant with a copy of the estimate upon which the settlement is based. The Department alleges these acts to be in violation of CCR §2695.8(f).

8. The Company failed to properly document claim files. In one instance, the Company failed to maintain claim data that was accessible, legible and retrievable for examination. The Department alleges this act to be in violation of CCR §2695.3(a).

Summary of Company Response: The Company acknowledges this violation as an oversight by the claims adjuster adverse to established Company policies and procedures. In this one instance, a copy of the DMV notification was not maintained within the claim file. However, the claim notes indicated that the DMV notification letter had been issued and the Company thereafter confirmed that the DMV was, in fact, in receipt of Company's notice of vehicular total loss.

9. The Company failed to respond to communications within fifteen calendar days. In one instance, the Company failed to respond to communications within fifteen calendar days. The Department alleges this act to be in violation of CCR §2695.5(b).

10. The Company failed to document the determination of value. In one instance, the Company failed to document the determination of value. Any deductions from value, including deductions for salvage, must be discernible, measurable itemized, and specified as well as be appropriate in dollar amount. The Department alleges this act to be in violation of CCR §2695.8(b)(1)(C).

Summary of Company Response: The Company acknowledges this violation as an oversight by the claims adjuster adverse to established Company policies and procedures. The Company has modified its total loss procedures to ensure the use of only those vehicles located within the claimant's local market area. Further, the Company has conducted training seminars for all responsible staff regarding the Fair Claims Settlement Practices to ensure future compliance in this area.

11. The Company directed, suggested or recommended that an automobile be repaired at a specific repair shop. In one instance, the Company directed, suggested or recommended that an automobile be repaired at a specific repair shop, without, (A) the referral being expressly requested by the claimant or, (B) the claimant being informed in writing of the right to select the repair facility. The Department alleges this act to be in violation of CCR §2695.8(e)(2).

12. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. The Company failed to issue notices or issue notices timely or issue notices that included all required benefit information. In one instance, the Company failed to adhere to standard of prompt investigation and processing of claims. The Department alleges this act to be in violation of CIC. §790.03(h)(3).

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