PUBLIC REPORT OF THE MARKET CONDUCT EXAMINATION

OF THE CLAIMS PRACTICES OF THE


UNIVERSAL UNDERWRITERS INSURANCE COMPANY
NAIC # 41181 CDI # 2854-8

AS OF MAY 31, 2005


STATE OF CALIFORNIA


DEPARTMENT OF INSURANCE

MARKET CONDUCT DIVISION

FIELD CLAIMS BUREAU

TABLE OF CONTENTS

SALUTATION.......................................................................................1


SCOPE OF THE EXAMINATION...............................................................2
CLAIMS SAMPLE REVIEWED AND OVERVIEW OF FINDINGS......................3
TABLE OF TOTAL CITATIONS.................................................................4
TABLE OF CITATIONS BY LINE OF BUSINESS...........................................5
SUMMARY OF RESULTS.........................................................................7

STATE OF CALIFORNIA	John Garamendi,	Insurance Commissioner
DEPARTMENT OF INSURANCE
Consumer Services and Market Conduct Branch Field Claims Bureau, 11th Floor 300 South Spring Street Los Angeles, CA 90013

January 6, 2006

The Honorable John Garamendi

Insurance Commissioner

State of California

45 Fremont Street

San Francisco, California 94105


Honorable Commissioner:
Pursuant to instructions, and under the authority granted under Part 2, Chapter 1, Article 4, Sections 730, 733, 736, and Article 6.5, Section 790.04 of the California Insurance Code; and Title 10, Chapter 5, Subchapter 7.5, Section 2695.3(a) of the California Code of Regulations, an examination was made of the claims practices and procedures in California of:

Universal Underwriters Insurance Company
NAIC # 41181
Group NAIC # 0212

Hereinafter referred to as UUIC 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.

SCOPE OF THE EXAMINATION


The examination covered the claims handling practices of the aforementioned Company during the period June 1, 2004, through May 31, 2005. The examination was made to discover, in general, if these and other operating procedures of the Company conform with the contractual obligations in the policy forms, to provisions of the California Insurance Code (CIC), the California Code of Regulations (CCR), the California Vehicle Code (CVC) and case law. This report contains only alleged violations of Section 790.03 and Title 10, California Code of Regulations, Section 2695 et al. The alleged violations of other relevant laws which resulted from this examination are included in a separate report which will remain confidential subject to the provisions of CIC Section 735.5.

To accomplish the foregoing, the examination included:

1. A review of the guidelines, procedures, training plans and forms adopted by the Company for use in California including any documentation maintained by the Company in support of positions or interpretations of fair claims settlement practices.
2. A review of the application of such guidelines, procedures, and forms, by means of an examination of claims files and related records.
3. A review of consumer complaints received by the California Department of Insurance (CDI) in the most recent year prior to the start of the examination.
The examination was conducted primarily at the offices of the Company in Irvine, California.
The report is written in a "report by exception" format. The report does not present a comprehensive overview of the subject insurer's practices. The report contains only a summary of pertinent information about the lines of business examined and details of the non-compliant or problematic activities or results that were discovered during the course of the examination along with the insurer's proposals for correcting the deficiencies. When a violation is discovered that results in an underpayment to the claimant, the insurer corrects the underpayment and the additional amount paid is identified as a recovery in this report. All unacceptable or non-compliant activities may not have been discovered. Failure to identify, comment on or criticize activities does not constitute acceptance of such activities.
Any alleged violations identified in this report and any criticisms of practices have not undergone a formal administrative or judicial process.

CLAIM SAMPLE REVIEWED AND OVERVIEW OF FINDINGS

The examiners reviewed files drawn from the category of Closed Claims for the period June 1, 2004, through May 31, 2005, commonly referred to as the "review period". The examiners reviewed 400 UUIC claim files. The examiners cited 27 claim 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.

Universal Underwriters Insurance Company
LINE OF BUSINESS / CATEGORY	CLAIMS FOR REVIEW PERIOD	REVIEWED	CITATIONS
Commercial Automobile Liability	1,052	63	3
Commercial Automobile Collision	714	62	6
Commercial Automobile Comprehensive	384	51	6
Commercial Fidelity	71	34	0
Commercial General Liability	281	54	0
Commercial Building	101	41	7
Commercial Property Contents	209	48	3
Workers Compensation	148	47	2
TOTALS	2,960	400	27

TABLE OF TOTAL CITATIONS
Citation	Description	Universal Underwriters Insurance Company
CCR §2695.7(c)(1)	The Company failed to provide written notice of the need for additional time every 30 calendar days.	16
CCR §2695.3(a)	The Company's claim file failed to contain all documents, notes and work papers that pertain to the claim.	3
CCR §2695.8(g)(3)	The Company failed to warrant that non-original equipment manufacturer replacement crash parts are of like kind, quality, safety, fit and performance as original equipment manufacturer replacement crash parts.	3
CIC § 790.03(h)(3)	The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies.	2
CCR §2695.7(b)(3)	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.	1
CCR §2695.8(b)(1)(a)	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.	1
CCR § 2695.7(b)	The Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days.	1
Total Citations		27

TABLE OF CITATIONS BY LINE OF BUSINESS
COMMERCIAL AUTOMOBILE	NUMBER OF CITATIONS
CCR §2695.7(c)(1)	9
CCR §2695.8(g)(3)	3
CCR §2695.7(b)(3)	1
CCR §2695.7(b)	1
CCR §2695.8(b)(1)(a)	1
SUBTOTAL	15
FIDELITY	NUMBER OF CITATIONS
	0
SUBTOTAL	0
COMMERCIAL GENERAL LIABILITY	NUMBER OF CITATIONS
	0
SUBTOTAL	0

COMMERCIAL BUILDING AND CONTENTS	NUMBER OF CITATIONS
CCR §2695.7(c)(1)	7
CCR §2695.3(a)	3
SUBTOTAL	10
WORKERS COMPENSATION	NUMBER OF CITATIONS
CIC §790.03(h)(3)	2
SUBTOTAL	2
TOTAL	27

SUMMARY OF RESULTS

Summary of Company Response: It is the Company's procedure to provide written notice of the need for additional time every 30 calendar days. The Company acknowledges these instances which were the result of unintentional oversight. The individuals involved have been made aware of this compliance issue.

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

Summary of Company Response: As a result of the findings of the examination, the Company has agreed to provide a detailed explanation of the use of non-original equipment manufacture replacement crash parts and to provide written information regarding the warranty provided by the Company. All claims handling staff will be made aware of this compliance issue.

Summary of Company Response: It is the Company's procedure to include a statement in a claim denial regarding a review by the California Department of Insurance. The Company acknowledges this instance which was the result of an unintentional oversight. The individual involved has been made aware of this compliance issue.

4. In one instance, the Company failed to accept or deny the claim within 40 calendar days. The Department alleges this act is in violation of CCR §2695.7(b).

Summary of Company Response: The handling of this claim was not in line with standard Company procedures. This error was the result of unintentional oversight. The individual involved has been made aware of this compliance issue.

5. In one instance, 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. An error was made in the calculation of total loss fees in this instance. Sales tax was not included in the settlement. The Department alleges this act is in violation of CCR §2695.8(b)(1)(a).

Summary of Company Response: As a result of the findings of the examination, the Company issued a payment in the amount of $297.08 to the claimant. It is the Company's procedure to include all applicable taxes and fees when settling claims on total loss vehicles. The Company agrees that there was a miscalculation in the amount of fees paid on this total loss claim. This was an isolated error. The individual involved has been made aware of this compliance issue.

Summary of Company Response: It is the Company's normal procedure to provide written notice of the need for additional time every 30 calendar days. These instances were inadvertent oversights. The individuals involved have been made aware of this compliance issue.

Summary of Company Response: The Company acknowledges that in the first instance there were documents missing from the claim file. It is the Company's procedure to maintain proper documentation in its claim files. In the remaining two instances, the Company acknowledges the lack of explanation in the files in regard to the depreciation that was applied and states that they were the result of unintentional oversights. The individuals involved have been made aware of this compliance issue.

8. In two instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In two instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In the two instances cited the claim files did not contain a copy of the First Report of Injury Form (5020). The Department alleges these acts are in violation of CIC §790.03(h)(3).

Summary of Company Response: The Company agrees that the files did not contain a copy of the First Report of Injury Form (5020). These are isolated incidents. The individuals involved have been made aware of this compliance issue.

Last Revised - March 17, 2006
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