PUBLIC REPORT OF THE MARKET CONDUCT EXAMINATION
OF THE CLAIMS PRACTICES OF THE
TABLE OF CONTENTS
May 13, 2005
The Honorable John Garamendi
Insurance Commissioner
State of California
45 Fremont Street
San Francisco, California 94105
Hereinafter referred to as TIG or the Company.
This report is made available for public inspection and is published on the California Department of Insurance web site ( www.insurance.ca.gov) pursuant to California Insurance Code section 12938.
The examiners reviewed files drawn from the category of Closed Claims for the period April 1, 2001 through March 31, 2002, commonly referred to as the "review period". The examiners reviewed 662 TIG Insurance Company claim files. The examiners cited 193 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.
1. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In 36 instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. Specifically, files fell off diary with long periods of inactivity. The Department alleges these acts are in violation of CIC §790.03(h)(3).
Summary of Company Response: The Company acknowledges there were instances in which the files do not reflect that the claims staff properly employed the Company procedure to promptly investigate and process claims arising under insurance policies. The Company states the findings were a result of improper diary maintenance and file documentation. The Company has reviewed with its claims staff the importance of and need for proper diary control and file documentation. Compliance will be measured through supervisor review and the company self-audit process.
2. The Company failed to properly document claim files. In 24 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 there were instances in which the files do not reflect that they contain all possible documents, notes and work papers. Company procedures for proper file documentation have been reviewed with all adjusters.
3. The Company failed to provide written notice of the need for additional time every 30 calendar days. In 22 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).
Summary of Company Response: The Company acknowledges there were instances in which the files do not reflect that a written notice of the need for additional time was provided every thirty-calendar days. The Company states the instances were a result of improper diary maintenance and documentation by the claims staff. The Company has reviewed with its claims staff the importance of and need for proper diary control and file documentation. Compliance will be monitored through supervisor review and the company self-audit process.
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 13 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).
Summary of Company Response: The Company acknowledges that some denial letters did not advise the claimants of their right to have the Department of Insurance review denied claims. To ensure future compliance, the Company has reviewed with its staff the proper language to be included in denial letters. Additionally, supervisors will monitor compliance on over-diary and through the self-audit process.
5. The Company failed to accept or deny the claim within 40 calendar days. In 12 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).
Summary of Company Response: The Company acknowledges that there were instances in which the files do not reflect that, upon receiving proof of claim, the claim was accepted or denied within forty calendar days. The Company states that these instances were a result of improper diary maintenance and documentation by the claims staff. The Company has reviewed with its claims staff the importance of and need for proper diary control and file documentation. Compliance will be monitored through the supervisory review and self-audit process.
6. The Company failed to acknowledge notice of claim within 15 calendar days. In 11 instances, the Company 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 Company Response: The Company acknowledges that there were instances in which the files do not reflect that the claim was acknowledged within fifteen calendar days from receipt of notice. In order to assure compliance with this regulation, the Company procedures have been reiterated to the claims staff to make sure timely initial contact is made and documented in the file. Supervisory file review will be employed to verify that Company procedures are being followed.
7. The Company failed to provide the written basis for the denial of the claim. In 11 instances, the Company 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 Company Response: The Company acknowledges that there were instances in which the files do not reflect that the claims staff provided the written basis of the denial of the claim. Proper procedures for issuing a written denial have been reviewed with the claims staff. Compliance with the regulation will be monitored through the supervisory file review and self-audit process.
8. The Company failed to respond to communications within 15 calendar days. In eight instances, the Company failed to respond to communications within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(b).
Summary of Company Response: The Company acknowledges that there were instances in which the files do not reflect that the claims staff responded to communications within fifteen days. It is against company policy not to respond to communications within 15-days. The Company has re-emphasized this requirement with the claim handlers, and supervisors will monitor this on over-diary and through our self-audit program.
9. The Company failed to provide written notice of any statute of limitation 60 days prior to the expiration date. In eight instances, the 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 these acts are in violation of CCR §2695.7(f).
Summary of Company Response: The Company acknowledges that there were instances in which the files do not reflect that the written notice of any statue of limitation or other time period requirement was issued. The Company has reviewed this requirement with the claim handlers, and supervisors will monitor this on over-diary and through our self-audit program.
10. The Company failed to begin investigation of the claim within 15 calendar days. In seven instances, the Company 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 Company Response: The Company acknowledges that there were instances in which the files do not reflect that the claims staff began the investigation of the claim file within fifteen calendar days. These instances are not consistent with company procedure. The Company has reviewed all contact and documentation requirements with the claim handlers. Supervisors will monitor compliance through over-diary and our self-audit program.
11. The Company failed to record claim data in the file. In six instances, the Company failed to record the date the Company received, date 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).
Summary of Company Response: The Company acknowledges the findings. It is standard company procedure to date stamp all materials. Date stamping and documentation requirements have been reviewed with the claim handlers and clerical staff.
12. Upon acceptance of the claim the Company failed to tender payment within 30 calendar days. In six instances, upon acceptance of the claim, the 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 acknowledges the findings. It is Company procedure to pay the claim within 10 business days of receipt of the documentation for payment. The Company has re-emphasized this requirement with the claim handlers. Supervisors will monitor compliance through over-diary and its self-audit program.
13. The Company's claims agent failed to immediately transmit notice of claim to the insurer. In six instances, the Company's claims agent failed to immediately transmit notice of claim to the insurer. The Department alleges these acts are in violation of CCR §2695.5(d).
Summary of Company Response: The Company provides the Agent with information about Company requirements for timely reporting of claims. If the Agent continues to not comply with Company requirements their contract is terminated. The Company is not writing business any longer.
14. The Company failed to disclose all policy provisions. In five instances, the Company 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 Company Response: The Company acknowledges that there were instances in which the files do not reflect that all policy provisions were disclosed. The Company states its policy is to handle claims fairly and promptly. The need to communicate applicable coverages and to document the claim file with this information has been reviewed with the claim handlers. Supervisors will verify compliance through over-diary and the self-audit process.
15. The Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. In five instances, the Company 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 Company Response: The Company acknowledges there were instances in which the files do not reflect that the claims staff provided necessary forms, instructions, and reasonable assistance within fifteen calendar days. The Company procedures have been reviewed with the claims staff to assure direction is provided at the beginning of the claims process. Supervisors will monitor compliance through supervisory file review and the self-audit process.
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 or the Company failed to explain in writing for the claimant the basis of the fully itemized cost 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 and in three instances, the Company failed to explain in writing for the claimant the basis of the fully itemized cost 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 that while it always verbally reviewed the total loss settlement, the files do not reflect that it provided an explanation in writing for the basis of the fully itemized cost of the comparable automobile. The Company has developed a mandatory pattern letter for total losses that fully itemizes the total loss settlement. The file will also document that the claimant was provided with a copy of the basis of the cost of the comparable auto.
The Company acknowledges the two instances in which it unintentionally overlooked the additional fees due to the insured. The Company has issued the additional payments due to the claimants. The proper procedure for payments of the required additional fees has been reviewed with the claim handlers. Compliance will be measured through supervisor review and the self-audit process.
17. 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. In one instance, the Company failed to cover an item purchased to provide security for the business owner's business; in another instance, there were two bills, a hospital bill ($14,666.00) and a physician treatment bill ($2,000.00). The maximum coverage available for both bills was $2,000.00. On the first bill submitted ($2,000.00), the Company paid only $500.00 rather than pay the $2,000.00 maximum benefit. In the last instance, the Company verified a loss amount of one amount but issued payment on a smaller amount. The Department alleges these acts are in violation of CCR §2695.7(g).
Summary of Company Response: The Company acknowledges the findings. In the instance in which the Department is alleging an underpayment, the Company contends that a settlement amount was agreed to with the insured and the proper payment was made, but the file was not documented to reflect this agreement. As a result of the examination, the Company has issued a payment of $46.14 to the insured. In the other instance, the Company paid $1,500.00 of the $14,666.00 bill. The Company now understands bills are to be paid to the maximum benefit available when submitted. This has been explained to the staff.
18. The Company failed to represent correctly to claimants, pertinent facts or insurance policy provisions. In two instances, the Company failed to represent correctly to claimants, pertinent facts or insurance policy provisions relating to a coverage at issue. In one instance, the adjuster told an insured the loss was less than the deductible, when, in fact, the deductible had already been met. In the other instance, the Company misrepresented the term of medical payments in the acknowledgement letter. The Department alleges these acts are in violation of CIC §790.03 (h)(1).
Summary of Company Response: The Company acknowledges these isolated incidents. Payment to the insured has been issued for the deductible oversight. The findings have been reviewed with the claim handlers.
19. The Company failed to provide written notification to a first party claimant as to whether the insurer intends to pursue subrogation. In one instance, the 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 acknowledges the isolated incident. Proper procedures for subrogation notification have been reviewed with the claim handler.
20. The Company failed to supply the claimant with a copy of the estimate upon which the settlement is based. 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 each, the Company failed to: supply the claimant with a copy of the estimate upon which the settlement is based; and document the basis of betterment, depreciation, or salvage. The basis for any adjustment shall be fully explained to the claimant in writing. The Department alleges these acts are in violation of CCR §2695.8(f) and CCR §2695.8(k).
Summary of Company Response: The Company acknowledges that the files do not reflect that a copy of the estimate upon which the settlement was based or written documentation of the basis of betterment, depreciation or salvage was provided. These issues have been addressed with the claim handlers. The Company will monitor compliance through supervisor review and the self-audit process.
