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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 a total of 512 claim files. The examiners cited 176 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 Companies are 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 Companies, it is the Companies' obligation to ensure that compliance is achieved. Money recovered within the scope of this report was $27,753.01.

1. The Companies failed to properly document claim files. In 37 instances, the Companies' files failed to contain all documents, notes and work papers. The Department alleges these acts are in violation of CCR §2695.3(a).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was planned to incorporate the findings of this examination. This training will involve all staff that handles California claims. The scheduled completion date of this training is August 1, 2004.

2. The Companies failed to accept or deny the claim within 40 calendar days. In 22 instances, the Companies 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).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was planned to incorporate the findings of this examination. This training will involve all staff that handles California claims. The scheduled completion date is August 1, 2004.

3. The Companies failed to provide written notice of the need for additional time every 30 calendar days. In 18 instances, the Companies 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).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was planned to incorporate the findings of this examination. This training will involve all staff that handles California claims. The scheduled completion date of this training is August 1, 2004.

4. The Companies failed to respond to communications within 15 calendar days. In 18 instances, the Companies failed to respond to communications within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(b).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was planned to incorporate the findings of this examination. This training will involve all staff that handles California claims. The scheduled completion date of this training is August 1, 2004.

5. The Companies failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In 14 instances, the Companies failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. Nine instances involved Personal and Commercial Auto and Homeowner claim files where the adjuster handling lacked thorough and/or timely investigation of issues. Five of these instances involved Worker's Compensation claims where the Companies either failed to send timely benefit notices or sent no notice at all or failed to maintain claim file contents and retention. The Department alleges these acts are in violation of CIC §790.03 (h)(3).


Summary of Companies' Response: The Companies acknowledge these errors and contend that the Companies have not failed to adopt and implement reasonable standards but that these were isolated errors on the part of individual adjusters. Each adjuster has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was planned to incorporate the findings of this examination. This training will involve all staff that handles California claims. The scheduled completion date of this training is August 1, 2004.

6. The Companies attempted to settle a claim by making a settlement offer that was unreasonably low. In 14 instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. In seven instances, the Company failed to adjust the settlement amount for lower than average mileage and/or premium equipment package pursuant to CCR § 2695.8(b)(1)(C) resulting in a low settlement. In four instances, the Company failed to refund collision deductibles due to the policy loss waiver collision deductible endorsement. In one instance each, the Company failed to pay towing and storage fees, failed to consider the claimant's car rental expense and miscalculated settlement fees. The Department alleges these acts are in violation of CCR §2695.7(g).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Further, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims. The scheduled completion date is August 1, 2004.

7. The Companies failed to record claim data in the file. In nine instances, the Companies failed to record the date the Companies received, date(s) the Companies processed and date the Companies transmitted or mailed every relevant document in the file. The Department alleges these acts are in violation of CCR §2695.3(b)(2).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

8. The Companies failed to provide written notification to a first party claimant as to whether the insurer intends to pursue subrogation. In seven instances, the Companies failed to provide written notification to a first party claimant as to whether the insurer intends to pursue subrogation of the claim. The Department alleges these acts are in violation of CCR §2695.8(i).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

9. The Companies failed to advise the claimant that he or she may have the claim denial reviewed by the California Department of Insurance. In six instances, the Companies failed to include a statement in their 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).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

10. Upon acceptance of the claim the Companies failed to tender payment within 30 calendar days. In five instances, upon acceptance of the claim, the Companies failed to tender payment within 30 calendar days. The Department alleges these acts are in violation of CCR §2695.7(h).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

11. The Companies failed to begin investigation of the claim within 15 calendar days. In four 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 these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

12. The Companies failed to disclose all policy provisions. In four instances, the Companies failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. The Department alleges these acts are in violation of CCR §2695.4(a).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

13. The Companies failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In three instances, the Companies failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. Two of these instances involved Workers' Compensation claims where the Company failed to calculate and pay benefits in a timely manner. One instance involved payment of rental car expenses in a property damage liability claim. The Department alleges these acts are in violation of CIC §790.03 (h)(5).


Summary of Companies' Response: The Companies acknowledge these errors and contend that the Companies have not failed to effectuate prompt, fair and equitable settlements of claims but that these were isolated errors on the part of individual adjusters. Each adjuster has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

14. The Companies failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. In three instances, the Companies failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(e)(2).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

15. The Company failed to supply the claimant with a copy of the estimate upon which the settlement is based. In three 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 are in violation of CCR §2695.8(f).


Summary of Company Response: The Company acknowledges these errors and indicates they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed scheduled by August 1, 2004.

16. 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. The Department alleges these acts are in violation of CCR §2695.8(b)(1).


Summary of Company Response: The Company acknowledges these errors and indicates they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

17. The Companies failed to acknowledge notice of claim within 15 calendar days. In two instances, the Companies failed to acknowledge notice of claim within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(e)(1).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed scheduled by August 1, 2004.

18. The Company failed to represent correctly to claimants, pertinent facts or insurance policy provisions. In one instance, the Company failed to represent correctly to claimants, pertinent facts or insurance policy provisions relating to a coverage at issue. The Department alleges these acts are in violation of CIC §790.03 (h)(1).


Summary of Company's Response: The Company acknowledges this violation and contends that the Company has not failed to represent correctly to claimants pertinent facts or insurance policy provisions but that this was an isolated error on the part of an individual adjuster. The adjuster has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

19. The Companies failed to comply with the Fair Claims Settlement Practices Regulations. In one instance each, the Companies failed to comply with the following Fair Claims Settlement Practices Regulations: CCR §2695.7(b)(1), CCR §2695.7(d), CCR §2695.8(j), CCR §2695.8(k).


Summary of Companies' Response: The Companies acknowledge these errors and indicate they were errors on the part of individual adjusters. Each has been counseled on the importance of compliance with this regulation. Additionally, although all claims personnel were previously trained on regulatory compliance and provided with copies of the Regulations, special training was scheduled to incorporate the findings of this examination. This training will involve all staff that handles California claims and will be completed by August 1, 2004.

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Last Revised - December 30, 2004
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