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The examiners reviewed files drawn from the category of Closed Claims for the period January 1, 2003 through December 31, 2003, commonly referred to as the "review period". The examiners reviewed 223 USAA claims files, 160 USAA CIC claim files, and 75 USAA GIC claim files. The examiners cited 12 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 Companies failed to provide the written basis for the denial of the claim. In six instances, the Companies failed to provide written basis for the denial of the claim. Three of

the claims cited involved medical bills submitted under the auto medical payments coverage. The Companies denied coverage for payment of these bills and did not provide the claimant with a statement listing the factual basis for such rejection or denial. Two of the claims cited involved denial of rental car/loss of use benefits without providing a written explanation to the claimant. One claim cited involved a verbal denial of unrelated mechanical damages. The Department alleges these acts are in violation of CCR § 2695.7(b)(1).

Summary of Companies' Response: In the three instances relating to medical bills, the Companies explained that the Explanation of Reimbursement is not in fact a denial letter but rather a request for additional information. This additional information is needed in order for the Companies to make an informed decision relating to payment. The Companies acknowledge that the Explanation of Reimbursement should provide adequate information so that a claimant or medical provider clearly understands what is needed to make a reimbursement decision. To further improve their process, the Companies have modified the wording of the reason codes to be more factual as to the reason payment could not be recommended and deleted those reasons that were no longer applicable. The Companies will no longer use "frequency" as a general reason code for a medical bill that is not considered for reimbursement. In addition, the Companies have agreed to include the name address and phone number of the California Department of Insurance on the Explanations of Reimbursement as a courtesy to claimants and medical providers. The Companies acknowledge that in the three other instances, the adjusters handling the claims did not provide written basis for the denial. The Companies have conducted training with their staff on this issue as a result of this examination.

2. The Companies failed to properly document claim files. In three instances, the Companies' files failed to contain some documents, notes and work papers. Two instances involved undocumented depreciation applied to homeowner structure claims involving Actual Cash Value settlements. One claim failed to contain a copy of the auto damage estimate. The Department alleges these acts are in violation of CCR §2695.3(a).

3. 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 explain in writing for the claimant the basis of the fully itemized cost of the comparable automobile. There was no indication that the electronic evaluation or other written itemization reflecting the cost determination of a comparable vehicle was provided to the claimant. The Department alleges these acts are in violation of CCR §2695.8(b) (1).

4. Upon acceptance of the claim the Company failed to tender payment within thirty calendar days. In one instance, upon acceptance of the claim, the Company failed to tender payment within 30 calendar days. The Department alleges this act to be in violation of CCR§2695.7(h).

Summary of Company Response: The Company acknowledges that in this single instance, payment was not tendered pursuant to the Regulation and Company procedures. As a result of this examination, the Company has conducted training with its staff to reinforce procedures and Department of Insurance regulation.

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Last Revised - July 21, 2005
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