Previous PageNext Page

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 246 claims files. The examiners cited 232 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 $9,023.49. Following the findings of the examination, a closed claim survey conducted by the Company resulted in additional payments of $1,386.90. As a result of the examination, the total amount of money returned to claimants within the scope of this report was $10,410.39.

1. The Company failed to disclose all policy provisions. In 42 instances, the Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. In 38 of the 42 instances, the incorrect transportation benefit was provided to the insured. In four of the 42 instances, the Company did not send the acknowledgement letter which advised the insured of the coverages. The Department alleges these acts are in violation of CCR §2695.4(a).

Summary of Company Response: The Company acknowledges that the correct acknowledgement letter was not sent in 38 instances. The letters did not disclose the transportation benefit available under the policy. The letters mistakenly referred to rental reimbursement coverage. The confusion was due to a mid-year policy language change. Corrected acknowledgments were sent to insureds identified during the examination. In order to make the insureds whole the Company will send new letters to the insureds identified stating that they should contact QBE if they or anyone on their behalf incurred any monetary loss for their transportation expenses pertaining to the claim presented. Further, this letter will indicate that should they have lost their receipts or other written documentation QBE will consider other forms of documentation for expenses incurred such as a written affidavit. The Company expects to complete sending these letters by September 1, 2005, and will report any results from the mailing to the Department.

The Company has changed the acknowledgement letters so that the coverage is specifically stated in the letter and retrained its staff to send the required acknowledgement letter. In April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

2. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In 33 instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In 15 of the 33 instances, there were gaps of 30 days or more when there was no activity in the file. In 16 instances, the Company did not follow its own procedures for confirmation of coverage; correspondence with the subrogation vendor; at fault letters and other required correspondence from the Company; ten day follow up diary system which includes follow up procedures required during and after a claim has been finalized; and liability issues. In two instances, the Company was not consistent in determining the Actual Cash Value (ACV) of a Total Loss Vehicle. The Company's procedure of using a vendor valuation to establish the ACV was not utilized in these two instances. Specifically, the Company accepted the ACV amount but then settled the claim for an amount lower than the ACV. The Department alleges these acts are in violation of CIC §790.03 (h)(3).

Summary of Company Response: The Company acknowledges that its own procedures were not followed. The Company has retrained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004. The Company also implemented routine audit requirements for use by managers and supervisors.

3. The Company failed to provide written notice of the need for additional time every 30 calendar days. In 31 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 the Company standard practices were not followed. Adjusters were retrained and in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004. The Company has established routine audit forms and audits of staff. In addition, the claims system has been reprogrammed to generate reports of no or minimal activity.

4. The Company failed to explain in writing for the claimant the basis of the fully itemized cost of the comparable automobile or the Company failed to include, in the settlement, all applicable taxes, license fees and other fees incident to the transfer of evidence of ownership of the comparable automobile. In six instances, the Company failed to explain in writing for the claimant the basis of the fully itemized cost of the comparable automobile. In 16 instances, the Company failed to include, in the settlement, all applicable taxes, license fees and other fees incident to the transfer of evidence of ownership 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 the Company standard practices were not followed in providing the written basis of an estimate to the claimant and the manner in which necessary fees and taxes were calculated. Adjusters were retrained. In April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004. The Company has established routine audit forms and audits of staff.

In the future, the total loss letter will note that the valuation was attached.

The Company acknowledges that 16 of the files did not reflect all necessary fees and taxes at the time of a total loss settlement. As a result of the examination, the Company has paid $1,212.19 to these 16 claimants.

The Company also conducted two self-audits in this regard. The Company identified 24 total loss files in which miscalculations or absences of taxes paid on owner-retained salvage might have occurred and 24 total loss files in which miscalculations or absences of fees paid might have occurred. Claims were reviewed from the inception of the Personal Automobile Program in June 2003 through March 2004 and additional payments of $1,386.90 were made to insureds.

5. The Company failed to document properly claim files. In 16 instances, the Company's files failed to contain all documents, notes and work papers. In five instances, the files had no documentation of the basis of settlement. In 11 instances, attorney letters, faxes, check copies or other necessary file documentation 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 may not have contained copies of the estimates or variance sheets sent to claimants. It is the Company's procedure to send those estimates and variances to claimants. The Company has retrained its staff accordingly.

6. The Company attempted to settle a claim by making a settlement offer that was unreasonably low. In 11 instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. In one instance, the payment was reduced with no explanation. In another instance, the Company informed the insured that the deductible under collision coverage would be waived but did not waive the deductible at the time of payment. In another instance, the claim was paid without the vehicle condition sheet filled out by the claimant. In eight other instances, car stereo, medical bills, storage charges, sales tax, salvage certificate, title fees, rental car and LOU (loss of use) benefits were either not paid or not paid correctly. The Department alleges these acts are in violation of CCR §2695.7(g).

Summary of Company Response: The Company acknowledges that payments totaling $2,783.62 were paid to these claimants as a result of this examination.

In regard to the method of calculation of taxes on owner retained salvage the Company notes that its prior method has been deemed proper by insurance regulations that became effective in October 2004.

The Company will be conducting additional training with staff regarding the proper settlement of total loss claims.

In addition to this scheduled training, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

In one instance, the Company acknowledges that the Company standard practices were not followed in documenting the reason for reduction of claimant's LOU from $25 per day to $15 per day when the claimant did not rent a vehicle. This is due to adjuster error. The adjuster was a temporary adjuster and Company cannot determine the adjuster's thought process in this regard. Adjusters were retrained in handling LOU and documenting files.

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

Summary of Company Response: The Company acknowledges that the files may not have contained copies of the estimates or variance sheets sent to the claimants. It is the Company's procedure to send those estimates and variances to the claimants. The Company has retrained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

8. 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 eight 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. In one of these instances, the Company alleges it sent the evaluation but the cover letter is dated prior to the date of the evaluation. The Department alleges these acts are in violation of CCR §2695.8(k).

Summary of Company Response: The Company acknowledges that the files may not have contained copies of the estimates or variance sheets sent to the claimants. It is the Company's procedure to send those estimates and variances to the claimants. The Company has retrained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

9. The Company failed to accept or deny the claim within 40 calendar days. In seven 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 the files may not have contained copies of the 40-day acceptance or denial letters. It is company procedure to send those letters within the required time period and maintain copies of those letters in the files. The Company has retrained it staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

10. The Company failed to provide written notification to a first party claimant as to whether the insurer intends to pursue subrogation. In six instances, 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 these acts are in violation of CCR §2695.8(i).

Summary of Company Response: The Company acknowledges that the files may not have contained copies of the carrier's subrogation intent letters. It is company procedure to maintain those letters in the files. The Company has retrained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

11. Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In five instances, the Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In two of the five instances, the transportation benefit was not paid. In two other of the five instances, the Department of Motor Vehicle (DMV) fees were not paid. In one instance, the policy had a $5,000.00 maximum. The claimant submitted $10,832.50 in bills and the Company only paid $3,180.00. The Department alleges these acts are in violation of CIC §790.03 (h)(5).

Summary of Company Response: The Company acknowledges that the files may not have reflected payments for transportation or DMV fees and has made additional payments in the amount of $2,106.30. It is company procedure to maintain those letters in the files. The Company has retrained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

12. The Company persisted in seeking unnecessary information. In five instances, the Company persisted in seeking information not reasonably required for or material to the resolution of a claim dispute. In four instances, the Company required the claimant to complete a W-9 form before it would release the benefit check. In one instance, the Company agreed that the insured could "rent" a vehicle from a friend and be reimbursed under the policy Transportation benefit. At a future date, the Company demanded a notarized statement, which was not a part of the original agreement. The Department alleges these acts are in violation of CCR §2695.7(d).

Summary of Company Response: The Company acknowledges that in five instances, the adjusters did not follow procedures. In four instances, the Company had a procedure in which a completed W-9 form was required prior to benefits being paid. The Company required the completion of this form for either fraud or accounting purposes. This is no longer a Company procedure except for those payees requiring such forms by the Internal Revenue Service.

13. The Company failed to acknowledge notice of claim within 15 calendar days. In four 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 the files may not have reflected acknowledgment letters within 15 calendar days. It is Company procedure to acknowledge all claims within 15 calendar days. The Company has retrained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

14. The Company failed to begin investigation of the claim within 15 calendar days. In four 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's procedure is to begin an investigation within 15 days. The Company has retrained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

15. Upon acceptance of the claim the Company failed to tender payment within 30 calendar days. In four 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 the files may not have reflected payments tendered within 30 calendar days. It is Company procedure to tender payment within 30 calendar days. The Company has retrained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

16. The Company failed to document the determination of value. In four instances, the Company 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. In one instance, the file is not documented as to how a $100.00 salvage amount was determined. In another instance, the Company took an additional $75.00 deduction for a worn tire and also determined the vehicle options after reviewing the estimate and photos. In two instances, the Company accepted the ACV and then settled for a lesser amount, which is not its standard procedure. The Department alleges these acts are in violation of CCR §2695.8(b)(1)(C).


Summary of Company Response: The Company acknowledges that the files may not have reflected documentation of value determination. It is the Company's procedure to document valuation. It is company procedure that no betterment is taken without a physical inspection of the subject automobile or part. The Company has retrained its staff accordingly.
17. The Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. In three 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 that the files may not have reflected that the claimants were provided with reasonable assistance within 15 calendar days. It is the Company's procedure to provide assistance within 15 calendar days. The Company has retrained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

18. 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. In one of the three instances, the file had a statute letter for property damage but not bodily injury. The Department alleges these acts are in violation of CCR §2695.7(f).

Summary of Company Response: The Company acknowledges that these three files may not have reflected a written notice of statute of limitations. It is company procedure to provide written notice of statute of limitations or other time period requirements not less than 60 days prior to the expiration date. The Company has trained its staff accordingly. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

19. The Company 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. In three instances, the Company failed to document the determination of value. The Department alleges this act is in violation of CCR §269538(k)(1)(2).

Summary of Company Response: The Company acknowledges that the files may not have reflected documentation of the betterment determination. It is the Company's procedure to document valuation. It is the Company's procedure that no betterment is taken without a physical inspection of the subject automobile or part. The Company has retrained its staff accordingly. In addition the Company returned $275.55 to the three claimants.

20. The Company failed to record claim data in the file. In two instances, the Company failed to record the date the Company received every relevant document in the file. In both instances, the documents were not date stamped with the received date. The Department alleges these acts are in violation of CCR §2695.3(b)(2).

Summary of Company Response: The Company agrees that in two instances, the documents received were not date stamped. Employees will be retrained to ensure compliance. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

21. The Company failed to respond to communications within 15 calendar days. In two 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 standard procedures were not followed. Staff were retrained to ensure compliance. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

22. The Company's claims agent failed to immediately transmit notice of claim to the insurer. In two instances, the Company's claims producers or brokers failed to immediately transmit notice of claim to the insurer. In one instance, the agent received notice but did not notify the Company until four months later. In the other instance, the agent did not date the Acord form. The Department alleges these acts are in violation of CCR §2695.5(d).

Summary of Company Response: The Company acknowledges these citations. Claims agents will be reminded to notify the Company immediately when notice is received.

23. The Company failed to provide the written basis for the denial of the claim. In two 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 both instances. Staff were retrained to be in compliance. In addition, in April 2004, the Company established a Training and Auditing unit that conducts internal audits to ensure proper training and compliance. This unit started with one Training Manager and increased to six employees by June 2004.

24. The Company failed to ensure that a comparable vehicle is available for retail purchase in the local market area within 90 calendar days of the settlement offer. In two instances, the Company failed to ensure that a comparable vehicle is available for retail purchase in the local market area within 90 calendar days of the settlement offer. The Department alleges these acts are in violation of CCR §2695.8(a)(2).

Summary of Company Response: The Company acknowledges both instances. The Company will contact and discuss this issue with the independent appraisal companies used.

25. The Company recommended that a third party claimant make a claim under his or her own policy to avoid paying the claim. In one instance, the Company referred the claimant to her own insurance carrier for deductible and loss of use reimbursement. The Department alleges this act is in violation of CCR §2695.8(d).

Summary of Company Response: The Company acknowledges that the file may not have reflected full documentation as to the reason for the referral to the claimant carrier.  It is the Company's procedure to handle incoming claimant claims without referral to their own carriers.  At times, there may be exceptional claims involving multiple claimants under a minimal policy or questionable liability claims during which the insureds cannot be reached for verification, which would warrant the claimants to go through own carriers for expeditious payments.  The Company has retrained its staff to document all communications in claim files to clearly set forth activity and conversations with claimants.

26. The Company failed to warrant that non-original equipment manufacturer replacement crash parts were of like, kind, quality, safety, fit, and performance as original equipment manufacturer replacement crash parts. In one instance, the Company failed to warrant that non-original equipment manufacturer replacement crash parts were of like, kind, quality, safety, fit, and performance as original equipment manufacturer replacement crash parts. In one instance, the repair shop estimates do not warrant the replacement parts. The Department alleges this act is in violation of CCR §2695.8(g)(3).

Summary of Company Response: The Company acknowledges that this file may not reflect the warranty provided by the body shop.  The Company implemented a new acknowledgment letter for insureds notifying the insureds of the Company's warranty for parts used by its preferred provider bodyshops as required by this regulation.  The Company began using this letter on July 13, 2005. The Company retrained its staff accordingly. 

Previous PageTop Of PageNext Page


Last Revised - October 24, 2005
Copyright California Department of Insurance
Disclaimer