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The examiners reviewed files drawn from the category of Closed Claims for the period July 31, 2001 through August 1, 2002, commonly referred to as the "review period".* The examiners reviewed 177 SCP claims files. The examiners cited 29 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.

*In addition to the claims closed during the one year window period, the examiners reviewed other claims that were filed on the same bond as those in the window period. The aggregate coverage limit under the Contractors License Bond applies to all claims filed against the bond. This affects the claims in the window period as the Surety may have gathered information on surrounding claims that relate to the claim within the window period.


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 Company failed to pursue diligently an investigation of a claim, or persisted in seeking unnecessary information not reasonably required for or material to the resolution of a claim dispute . In 16 instances, the Company failed to pursue diligently an investigation of a claim. The Company failed to investigate claims for damages resulting from a violation of the Contractor's License Law. The Contractor's License Bond is to provide coverage to contracting homeowners and others damaged per Section 7071.5 of the Business and Professions Code. The Company kept requesting more information from claimants while not performing their own investigation of the claim. The Department alleges these acts are in violation of CCR § 2695.10(d).

Summary of Company Response: The Company acknowledges two inadvertent violations of CCR § 2695.10(d). The Company has held training sessions reemphasizing the importance of thoroughly reviewing all documentation received. The Company respectfully disputes the remaining 14 instances cited as violations. The Company believes that the violations stem from subjective interpretations of the facts of the files and that there is a good faith difference of opinion. However, the Company has changed its policies and procedures in response to the CDI's concerns.

2. The Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In 11 instances, the Company failed to effectuate prompt, fair and equitable settlement of claims in which liability had become reasonably clear. The Surety had sufficient proof of claim to validate payment on the bond but failed to make payment or notify the principal of their intention to validate the claim. The Department alleges these acts are in violation of CIC §790.03(h) (5).

3. 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 coverage at issue. The Department alleges these acts are in violation of CIC §790.03(h) (1).

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Last Revised - March 17, 2006
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