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The examiners reviewed files drawn from the category of Closed Claims for the period June 1, 2002 through May 31, 2003, commonly referred to as the "review period". The examiners reviewed 370 Mercury Insurance Company claims files and 352 Mercury Casualty Company claim files. The examiners cited 37 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 tables and summaries.


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. Money recovered within the scope of this report was $310.66.

1. The Companies 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 ten instances, the Companies 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. The Department alleges these acts are in violation of CCR § 2695.8(b)(1).

Summary of Companies' Response: The Companies acknowledge that in the eleven instances cited they failed to include in the settlement, all applicable license fees and other fees incident to transfer of evidence of ownership of the comparable automobile. In nine of the instances there was a failure to include the salvage certificate fees on owner retained total loss settlements. In two of the instances cited there was a failure to include the unused VLF fees in the claim settlement. The Companies' state "Company procedure is to pay sales tax and the $3.00 salvage certificate fee on owner retained vehicles. This issue came up in the California Insurance Auto Exam last year and all losses mentioned in this Market Conduct Claims Practices Examination were losses that occurred prior to the procedural change made as a result of that exam. On each of the applicable files, the applicable party was contacted regarding this issue and payment of the salvage certificate fee was forwarded to them. Also, it is company procedure to include, in the settlement, all license and other fees associated with the transfer of evidence of ownership of the comparable automobile. We will continue to ensure compliance through our use of training programs, supervisory input and internal audits."

2. The Companies failed to provide written notice of the need for additional time every 30 calendar days. In seven instances, the Company failed to provide written notice of the need for additional time every 30 calendar days. The Department alleges these acts are in violation of CCR § 2695.7(c)(1).

3. The Companies failed to accept or deny the claim within 40 calendar days. In four instances, the Company failed upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Department alleges these acts are in violation of CCR § 2695.7(b).

4. The Companies failed to provide written basis for the denial of the claim. In four instances, the Company failed to provide written basis for the denial of the claim. The Department alleges these acts are in violation of CCR § 2695.7(b)(1).

Summary of Companies' Response: The Companies acknowledge that in the four instances cited the Companies failed to provide written basis for the denial of the claim. The Companies have advised that they have had procedures in place to comply with this section of the Regulations since their inception. They will continue to ensure compliance through training programs, supervisory input and internal audits.

5. The Companies failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In three instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. The Department alleges these acts are in violation of CIC § 790.03(h)(3).

Summary of Companies' Response: The Companies acknowledge that in the three instances cited the Companies failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In the three instances cited it was noted that there were gaps in the handling of the claim files. The Companies have advised that they have had procedures in place to comply with this section of the Regulations since their inception. They will continue to ensure compliance through training programs, supervisory input and internal audits.

6. The Companies failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In two 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 are in violation of CIC § 790.03(h)(5).

Summary of Companies' Response: The Companies acknowledge that in the two instances cited the Companies failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In one file material sales tax was not included in the claim settlement. In the other file a subrogation demand that was received was not paid until 133 days after the subrogation demand was received. The Companies have advised that they have had procedures in place to comply with this section of the Regulations since their inception. They will continue to ensure compliance through training programs, supervisory input and internal audits.


7. The Companies failed to begin investigation of the claim within 15 calendar days. In two instances, the Companies failed to begin investigation of the claim within 15 calendar days. The Department alleges these acts are in violation of CCR § 2695.5(e)(3).
Summary of Companies' Response: The Companies acknowledge that in the two instances cited the Companies failed to begin investigation of the claims within 15 calendar days. The Companies have advised that they have had procedures in place to comply with this section of the Regulations since their inception. They will continue to ensure compliance through training programs, supervisory input and internal audits.

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Last Revised - June 16, 2004
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