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The examiner reviewed files drawn from the category of Closed Claims for the period September 1, 2003 through August 31, 2004, commonly referred to as the "review period". The examiner reviewed 16 NELIC claims files and 106 PALIC claims files. The examiners cited seven 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. There were no recoveries discovered within the scope of this report.

1. The Company failed to properly document claim files. In four instances, the Company's 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 Company Response: The Company acknowledges that in these instances the claim file did not contain all documents relating to the explanation of benefit letter the policyholder received. The Company had a procedure in place for all California claims to insert the reference to the California Department of Insurance with the explanation of benefit letters. A copy of the explanation of benefit is placed in the file along with the inserted language. Due to clerical error the insert was not placed in the file on these claims. As a result of this examination, the Company has revised its explanation of benefits letter to include the appropriate reference to the California Department of Insurance for all California claims.

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

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