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The examiners reviewed files drawn from the category of Closed Claims for the period December 1, 2002 through November 30, 2003, commonly referred to as the "review period". The examiners reviewed 424 claim files. The examiners cited 42 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 $2,912.55.

1. The Company failed to properly document claim files. In 21 instances, the Company's files failed to contain all documents, notes and work papers. While there is a written procedure in place, the majority of errors (18) reflect the failure to document the issuance of estimates to insureds. The Department alleges these acts are in violation of CCR §2695.3(a).

Summary of Company Response: The Company has issued a memorandum to all staff as a reminder to properly document all actions. Supervisors will monitor this requirement in their review of files. The in-house auditor will also be reviewing files to ensure that they are complete and contain all documents, notes and work papers that pertain to the claim.


"Each citation and/or violation will be reviewed with our Managers and Supervisors so that they understand the critical role they play in ensuring compliance. Secondly, we will work together with our Trainer and Auditor so they will support our goals. Finally, each supervisor will meet with their respective adjusters to go over each citation and the action necessary to ensure compliance now and in the future."

2. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In seven instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. Six of these errors involve unexplained gaps in file activity and one file reflected an adjuster failure to request payment letters, as required. The Department alleges these acts are in violation of CIC §790.03 (h)(3).


"Each citation and/or violation will be reviewed with our Managers and Supervisors so that they understand the critical role they play in ensuring compliance. Secondly, we will work together with our Trainer and Auditor so they will support our goals. Finally, each supervisor will meet with their respective adjusters to go over each citation and the action necessary to ensure compliance now and in the future."

3. The Company attempted to settle a claim by making a settlement offer that was unreasonably low. In three instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. These errors involve failure to waive deductible and including special equipment adjustments in settlements. The Department alleges these acts are in violation of CCR §2695.7(g).


"Each citation and/or violation will be reviewed with our Managers and Supervisors so that they understand the critical role they play in ensuring compliance. Secondly, we will work together with our Trainer and Auditor so they will support our goals. Finally, each supervisor will meet with their respective adjusters to go over each citation and the action necessary to ensure compliance now and in the future."

4. The Company failed to advise the claimant that he or she may have the claim denial reviewed by the California Department of Insurance. In two instances, the Company failed to include a statement in its claim denial that, if the claimant believes the claim has been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance. The Department alleges these acts are in violation of CCR §2695.7(b)(3).


"Each citation and/or violation will be reviewed with our Managers and Supervisors so that they understand the critical role they play in ensuring compliance. Secondly, we will work together with our Trainer and Auditor so they will support our goals. Finally, each supervisor will meet with their respective adjusters to go over each citation and the action necessary to ensure compliance now and in the future."

5. The Company failed to provide written notice of the need for additional time every 30 calendar days. In two 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).


"Each citation and/or violation will be reviewed with our Managers and Supervisors so that they understand the critical role they play in ensuring compliance. Secondly, we will work together with our Trainer and Auditor so they will support our goals. Finally, each supervisor will meet with their respective adjusters to go over each citation and the action necessary to ensure compliance now and in the future."
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 other fees incident to transfer of evidence of ownership of the comparable automobile. All DMV fees were not included in the settlement. The Department alleges these acts are in violation of CCR §2695.8(b)(1).
"Each citation and/or violation will be reviewed with our Managers and Supervisors so that they understand the critical role they play in ensuring compliance. Secondly, we will work together with our Trainer and Auditor so they will support our goals. Finally, each supervisor will meet with their respective adjusters to go over each citation and the action necessary to ensure compliance now and in the future."

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. In these files it was clear that no estimates were issued. The Department alleges these acts are in violation of CCR §2695.8(f).

Summary of Company Response: The Company acknowledges the errors and advised the examiners it is normal procedure to send a copy of the estimate with the payment and to note it in the file. In the future, the Company will have all supervisors check for this item when reviewing drafts as will the in-house auditor when reviewing files.

8. The Company failed to comply with the Fair Claims Practices Regulations. In one instance each, the Company failed to comply with the following Fair Claims Practices Regulations: CCR § 2695.7(b), CCR § 2695.7(b)(1), and CCR § 2695.8(k).

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Last Revised - June 23, 2004
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