The examiners reviewed files drawn from the category of Closed Claims for the period February 1, 2003 through January 31, 2004, commonly referred to as the "review period". The examiners reviewed 353 Met Direct claim files. The examiners cited 94 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 $2,960.00.

1. The Company failed to document the determination of value. In 15 instances, the Company failed to document the determination of value. Baseline adjustments were deducted from automobile total loss settlements without being discernible, measurable, itemized and specified. The Department alleges these acts are in violation of CCR §2695.8(b)(1)(C).

Summary of Company Response: The Company respectfully disagrees with these findings and contends that it met the requirements of CCR §2695.8(b)(1)(C) in its payments of these claims. Baseline/condition adjustments were not deducted from automobile total loss settlements without being discernible, measurable, itemized and specified.

Met Direct utilized a vendor to establish valuation of its total loss vehicles through a comprehensive comparison of pricing of comparable vehicles. In order to fairly evaluate the value of a vehicle, the vehicle is inspected to determine (1) the year, make, and model, (2) options, (3) mileage, and (4) condition. Met Direct provided this vehicle-specific information to the vendor which utilized an electronic database to process the evaluation.

The baseline adjustment reflected the condition of the loss vehicle compared to the predominant condition of vehicles insured by Met Direct. To more fairly reflect the market value of the vehicle, the actual condition of the loss vehicle was documented and reflected separately in the Vehicle Condition of the Market Valuation Report. This equating process for condition was based upon the comprehensive conditioning survey periodically performed by the vendor to reflect prevailing market conditions.

Nevertheless, as of September 11, 2004, the Market Valuation Reports received no longer use "take" prices and instead use sold price information from the California Department of Motor Vehicles. In addition, so-called baseline adjustments are no longer taken.

2. The Company failed to properly document claim files. In 14 instances, the Company's files failed to contain all documents, notes and work papers. 12 instances involved the failure to document that the claimant was provided with a copy of the appraisal of damages. The other two instances involved correspondence or documents that were noted as having been received, but copies were not in the files. The Department alleges these acts are in violation of CCR §2695.3(a).

Summary of Company Response: The Company "acknowledges that the files did not reflect the action taken or contain the documentation in question in the instances referenced in this criticism. It is Met Direct's established practice to maintain all documents, notes and work papers in the files. Met Direct will place additional emphasis on the importance of documenting files and system notes in its refresher training sessions for personnel on California Claim procedures and regulations."

3. The Company failed to accept or deny the claim within 40 calendar days. In 11 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 it did not accept or deny the claim, upon receiving proof of claim, within 40 calendar days in the instances referenced in this criticism. It is the established procedure of Met Direct to accept or deny a claim upon receiving proof of claim, in whole or in part, and affirm or deny liability, within 40 days. Met Direct will further emphasize this practice during training sessions for personnel on California claim handling procedures."

4. The Company failed to respond to communications within 15 calendar days. In seven 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 it did not respond to communications within 15 days in the instances referenced in this criticism. It is Met Direct's established practice to respond to communications within 15 days. The practice will be reinforced with the appropriate personnel and included in training sessions on California claim procedures and regulations."

5. The Company failed to provide the written basis for the denial of the claim. In five 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 it did not provide a written basis for the denial of the claims in question in the instances referenced in this criticism. It is the established procedure of Met Direct to send a written declination on all files in which coverage is denied or rejected. Met Direct will continue to perform internal audits to monitor this issue. In addition, Met Direct will further emphasize this issue in the next training session on California claim handling procedures."

6. The Company failed to provide written notice of the need for additional time every 30 calendar-days. In five 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 that it did not provide written notice of the need for additional time every 30 calendar days in the instances referenced in this criticism. Met Direct has established procedure that requires written notice every 30 calendar days when additional time is needed to either accept or deny a claim. Met Direct will continue to monitor this practice and perform internal audits that review this issue. In addition, Met Direct will further emphasize this issue in the next training session on California claim handling procedures."

7. 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 five instances, 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. The Department alleges these acts are in violation of CCR §2695.8(k).

Summary of Company Response: The Company "acknowledges that it did not explain to the claimant in writing the basis of betterment, depreciation, or salvage in the instances referenced in this criticism. Met Direct will further emphasize this issue in its refresher training sessions on California claim procedures and regulations."

8. The Company failed to disclose all policy provisions. In four 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 it did not disclose all benefits, coverage, time limits or other provisions of the insurance policy in the instances referenced in this criticism. Met Direct has established procedures that require full disclosure and explanation of the applicable coverage and benefits. Met Direct will further emphasize this procedure in its refresher training sessions on California claim procedures and regulations."

9. The Company 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 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 it did not 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 in the instances referenced in this criticism. Met Direct will further emphasize this issue in its refresher training sessions on California claim procedures and regulations."

10. The Company attempted to settle a claim by making a settlement offer that was unreasonably low. In four instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. Three instances involved invoices that were overlooked. The fourth incident involved a deductible that was applied in error. The Department alleges these acts are in violation of CCR §2695.7(g).

Summary of Company Response: The Company "acknowledges that it attempted to settle a claim by making a settlement offer that was unreasonably low in the instances referenced in this criticism. The claims were reopened and supplemental payments made totaling $620.00. Personnel have been further reminded to review all invoices for accuracy and apply the appropriate deductibles. In addition, Met Direct will further emphasize this issue in its refresher training sessions on California claim procedures and regulations."

11. The Company failed to provide written notice of any statute of limitation 60 days prior to the expiration date. In three 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 it did not provide written notice of any statute of limitation 60 days prior to the expiration date in the instances referenced in this criticism. Met Direct has established procedures that require providing written notice of any statute of limitation 60 days prior to the expiration date. Met Direct will further emphasize this procedure in its refresher training sessions on California Claim procedures and regulations."

12. The Company failed to explain in writing for the claimant the basis of the fully itemized cost of the comparable automobile. 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 it did not explain in writing for the claimant the basis of the fully itemized cost of the comparable automobile in the instances referenced in this criticism. Met Direct has established procedures that require sending the total loss evaluations to the claimant. Met Direct will further emphasize this issue in its refresher training sessions for personnel on California claim procedures and regulations."

13. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In three instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. Two instances involved time delays in investigation. The other incident involved an invoice that was erroneously placed in the wrong claim file. The Department alleges these acts are in violation of CIC §790.03 (h)(3).

Summary of Company Response: The Company "acknowledges that it did not implement reasonable standards for the prompt investigation and processing of claims in the instances referenced in this criticism. Met Direct will further emphasize this issue in its refresher training sessions on California claim procedures and regulations. Met Direct also retrieved the misplaced invoice, matched it to the correct claim and a supplemental payment of $2,090.00 was made."

14. The Company failed to record claim data in the file. In two instances, the Company failed to record the date the Company received relevant documents. The Department alleges these acts are in violation of CCR §2695.3(b)(2).

Summary of Company Response: The Company "acknowledges that it did not record the date Met Direct received relevant documents in the two instances referenced in this criticism. Met Direct has an established procedure for personnel handling incoming correspondence. In these two instances, personnel did not follow procedures for date stamping all items received. Met Direct has reinforced the importance of date stamping all incoming documents with the appropriate personnel."

15. Upon acceptance of the claim the Company failed to tender payment within 30 calendar days. In two 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 that, upon acceptance of the claim, it did not tender payment within 30 calendar days in the instances referenced in this criticism. It is the established procedure of Met Direct to tender payment within 30 calendar days upon acceptance of a claim. Met direct views these acts as oversights and not a pattern of practice and will further emphasize this practice during training sessions on California claim handling procedures for its personnel."

16. The Company required the use of non-original equipment manufacture replacement crash parts and failed to warrant that such parts are of like kind, quality, safety, fit and performance as original equipment manufacturer replacement crash parts. In two instances, the Company required the use of non-original equipment manufacture replacement crash parts and failed to issue the required warranty. The Department alleges these acts are in violation of CCR §2695.8(g)(3).

Summary of Company Response: The Company "acknowledges that it required the use of non-original equipment manufacture replacement crash parts and did not issue the required warranty in the instances referenced in this criticism and notes that each instance was the result of human error. Met Direct has counseled the involved adjusters and has further emphasized the need to issue the required warranty through additional supervision and training."

17. The Company failed to acknowledge notice of claim within 15 calendar days. In one instance, the Company failed to acknowledge notice of claim within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(e)(1).

Summary of Company Response: The Company "acknowledges that timely contact was not made to a first report in the instance referenced in this criticism. Met Direct considers this instance an isolated incident attributed to the fact that the report was made to an independent adjuster who was handling a first party claim for the same insured. Regardless, all adjusters, both staff and independent, have been instructed to adhere to procedures when information about a new claim is received."

18. The Company failed to provide written notification to an insured as to whether the insurer intends to pursue subrogation, and failed to notify an insured of its decision to abandon subrogation. In one instance, the Company failed to notify the insured of its intent to subrogate, and its decision to abandon subrogation. The Department alleges this act is in violation of CCR §2695.8(i).

Summary of Company Response: The Company "acknowledges that the insured was not notified of the subrogation activity as required by procedure and the regulations in the instance referenced in this criticism. Met Direct considers this an isolated incident attributed to human error. Met Direct will include this issue in its refresher training sessions on California claim procedures and regulations."

19. The Company, upon making a full recovery from the adverse party, failed to reimburse the insured the collision deductible. In one instance, the Company failed to reimburse the insured's deductible. The Department alleges this act is in violation of CCR §2695.8(j).

Summary of Company Response: The Company "acknowledges that the deductible was not reimbursed to the insured in the instance referenced in this criticism and considers this an isolated incident attributed to human error. The claim has been reopened for a supplemental payment of $250.00. Met Direct will include this issue in its refresher training sessions on California claim procedures and regulations."

20. 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 incident involved an insured who was advised that his Medical Payments coverage did not extend to his occupancy of a non-owned vehicle. The Department alleges this act is in violation of CIC §790.03 (h)(15).

Summary of Company Response: The Company "acknowledges that it did not represent correctly to claimants pertinent facts or insurance policy provisions in the instance referenced in this criticism. Met Direct notes that this was an isolated instance resulting from human error. The involved employee was counseled, and Met Direct will continue to train and monitor compliance via internal audits performed by supervisors and managers."

21. The Company failed to represent correctly to claimants the applicable statute of limitations. In one instance, a claimant was advised that the statute of limitations was one year, when in fact the statute is two years. The Department alleges this act is in violation of CIC §790.03 (h)(1).

Summary of Company Response: The Company "acknowledges that it did not represent correctly the applicable statute of limitations. Met Direct notes that this instance was the result of human error. The involved employee was counseled, and Met Direct will continue to train and monitor compliance via internal audits performed by supervisors and managers."

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Last Revised - July 26, 2005
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