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The examiners reviewed files drawn from the category of Closed Claims for the period January 1, 2004 through December 31, 2004, commonly referred to as the "review period". The examiners reviewed 362 UIC claims files and 201 UID claim files. The examiners cited 82 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 $248.58. Pursuant to the findings of the examination referenced in criticisms 10 and 8 below, the Companies are conducting a closed claim survey. The results of the survey and additional payments, if any, shall be reported to the Department and recoveries verified by the Examiners.

1. The Companies failed to properly document claim files. In 22 instances, the Companies' files failed to contain all documents, notes and work papers. In 11 instances, the Companies' file notes failed to document if a copy of the repair estimate was sent to the insured. In five of the instances, the files failed to contain all copies of imaged documents that pertain to the claim. In four of the instances, the claim files contained incomplete documentation to reconstruct the activity or conversation that occurred. In two instances, the Company failed to document the basis for the depreciation amount on a personal effects loss. The Department alleges these acts are in violation of CCR §2695.3(a).

Summary of Companies Response: With regard to the 22 alleged violations, the Companies agree with the findings and state that this is a training issue. The Companies will impress upon their staff the importance of providing full and clear documentation as well as maintaining documentation for the claim files and system notes.

2. The Companies failed to document the determination of value. In 13 instances, the Companies failed to document the determination of value. Any deductions from value, including deduction for salvage, must be discernible, measurable, itemized, and specified as well as be appropriate in dollar amount. The Companies use a third party vendor to determine the vehicle valuation of their total loss vehicles. This vendor's valuation report took baseline adjustments that were not supported in the valuation or file. The Department alleges these acts are in violation of CCR §2695.8(b)(1)(C).

3. The Companies failed to accept or deny the claim within 40 calendar days. In seven 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).

4. The Companies failed to provide written notice of the need for additional time every 30 calendar days. In seven 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).

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

Summary of Company Response: The Company agrees to the finding and states failure to pay timely falls outside its expectations and that in these instances, the undisputed portion of the claim was not paid in a timely manner. The Company will re-emphasize to its staff the importance and requirement of paying bills timely upon acceptance of the claim.

6. The Companies failed to respond to communications within 15 calendar days. In four 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 agree that in these instances the adjusters failed to respond to communications within 15 days, even though it is each Companies' normal practice and guideline to comply with this regulation. All claims staff will be reminded of this regulation to ensure timely communications.

7. The Companies failed to advise the claimant that he or she may have the claim denial reviewed by the California Department of Insurance. In four 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 agree. It is the policy of the Companies to reference the CDI in denial letters, and therefore any errors are unintentional. The Companies will remind claims staff of this regulation to ensure compliance.

8. 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 four 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).

9. 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).

10. The Companies failed to supply the claimant with a copy of the estimate upon which the settlement is based. In three instances, the Companies failed to supply the claimant with a copy of the automobile repair estimate upon which the settlement is based. The Department alleges these acts are in violation of CCR §2695.8(f).

11. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In two instances, Unigard Insurance 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).

12. The Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In two instances, Unigard Insurance 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).

As a result of this examination, the Company is conducting a self-review to determine any missed fees that might have been underpaid. The self-review period for the salvage certificate fees will be the entire year of 2004. The Company will provide the Department with evidence of completion of the review and policyholder notification by July 31, 2005.

13. The Companies failed to provide the written basis for the denial of the claim. In two instances, the Companies failed to provide the 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 in two instances they failed to provide a written basis for the denial of claims in question. The Companies will re-emphasize to the adjusters the importance of timely written denials.

14. The Company failed to begin investigation of the claim within 15 calendar days. In one instance, Unigard Insurance Company failed to begin investigation of the claim within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(e)(3).

15. The Company failed to provide written notice of any statute of limitation 60 days prior to the expiration date. In one instance, Unigard Insurance Company failed to provide written notice of any statute of limitation or other time period requirement not less than 60 days prior to the expiration date. The Department alleges this acts is in violation of CCR §2695.7(f).

16. The Company failed to provide written notification to a first party claimant as to whether the insurer intends to pursue subrogation. In one instance, Unigard Insurance Company 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 this act is in violation of CCR §2695.8(i).

Summary of Company Response: The Company states its standard procedure is to notify the insured when it intends to pursue subrogation. The Company will remind its staff of the importance of adhering to this regulation and to send all appropriate letters as required.

17. 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 one instance, Unigard Insurance Company failed to document the basis of betterment, depreciation, or salvage in the handling of an automobile claim. The basis for any adjustment shall be fully explained to the claimant in writing. The Department alleges this act is in violation of CCR §2695.8(k).

Summary of Company Response: The Company acknowledges this violation and states it did provide a written explanation but it lacked detail. The Company will impress upon its adjusters that they must provide complete explanations of any deduction applied.

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Last Revised - July 07, 2005
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