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The examiners reviewed files drawn from the category of Closed Claims for the period May 1, 2004 through April 30, 2005, commonly referred to as the "review period". The examiners reviewed 287 Horace Mann Insurance Company claim files, 218 Horace Mann Property & Casualty Insurance Company claim files, and 38 Horace Mann Life Insurance Company claim files. The examiners cited 151 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 Companies are 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 Companies, it is the Companies' obligation to ensure that compliance is achieved. Money recovered within the scope of this report was $8,746.32. Following the findings of the examination, a closed claim survey conducted by the Companies resulted in additional payments of $52,382.87 and is reflected under items #3 and #5 below. As a result of this examination, the total amount of money returned to claimants within the scope of this report was $61,129.19.
1. Upon acceptance of the claim the Companies failed to tender payment within 30 calendar days. In 33 instances, upon acceptance of the claim the Companies failed to tender payment within 30 calendar days. Twenty-two of these cases pertain to auto claims, with sixteen of the payment delays on the medical payment coverage only. The eleven other cases pertain to homeowners/property payment delays on ALE, depreciation holdback, emergency services, estimates and supplement repairs. The Department alleges these acts are in violation of CCR §2695.7(h).

Summary of Companies' Response: "It is the Companies' procedure to tender payment or otherwise take action to perform its claim obligation within 30 calendar days as required by CCR §2695.7(h). The Companies will reemphasize this requirement with all claims staff, and conduct regular supervisory audits to be in compliance with CCR§2695.7(h). Additional claims training was completed September 20-22, 2005 to reinforce this requirement."

2. The Companies failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In 22 instances, the Companies failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. There were delays in expediting claims settlement, failure to set up an appropriate claim diary system, as well as gaps in claim file activities. The Company's external communication system also failed to reflect the transmittal date on their letters to various recipients, including those communications with time-bar or response requirements. The Department alleges these acts are in violation of CIC §790.03 (h)(3).

3. The Companies 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. In 18 instances, the Companies 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. The vehicle license fees and other transfer/miscellaneous fees were not consistently paid. The Department alleges these acts are in violation of CCR §2695.8(b)(1).

Summary of Companies' Response: The Companies state that it is their procedure to include in the settlement, all taxes, license fees and other fees incident to transfer of evidence of ownership of the comparable automobile as required by CCR §2695.8(b)(1). This requirement was reemphasized during training conducted September 20-22, 2005. The Companies have completed a self-survey involving automobile total loss claims for the period July 1, 2002- June 30, 2005. The total number of claim files identified for the review was 1,094, of these files, 727 had incorrect fee calculations or had missing vehicle registration fee reports. Appropriate reimbursement checks with explanation letters were sent to insureds totaling $51,882.87. The Companies have also contracted with the California Department of Motor Vehicles (DMV) to obtain computerized vehicle registrations (CVRs) to automate their process and ensure compliance.

4. The Companies failed to explain in writing for the claimant the basis of the fully itemized cost of the comparable automobile. In 16 instances, the Companies failed to explain in writing for the claimant the basis of the fully itemized cost of the comparable automobile. Although the Companies' claim files contained copies of the valuation reports, the adjusters did not follow through with company procedures and no valuation reports or breakdown of settlement letters were provided to the insured. The Department alleges these acts are in violation of CCR §2695.8(b)(1).

5. The Companies failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In 12 instances, the Companies failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. Six cases involved non-payment or delayed payment of the collision deductible waiver when the Uninsured Motorist Property Damage exposure has been confirmed. The other six instances involved non-payment of sales taxes on personal property claims. The Department alleges these acts are in violation of CIC §790.03 (h)(5).

As a result of this examination, the Companies also completed a self-survey of its claims with UMPD exposures. This review covered the period July 1, 2002- June 30, 2005. A total of 166 files were identified and reviewed. There were two claims where the appropriate collision deductibles had not been returned to the insureds. Reimbursement checks totaling $500.00 were issued with explanation letters to the insureds."

6. The Companies failed to properly document claim files. In nine instances, the Companies' files failed to contain all documents, notes and work papers. The Department alleges these acts are in violation of CCR §2695.3(a).

7. The Companies failed to accept or deny the claim within 40 calendar days. In eight instances, the Companies failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Companies did not respond, or delayed acceptance or denial of third party subrogation claims and bodily injury claims/demands. The Department alleges these acts are in violation of CCR §2695.7(b).

8. The Companies failed to advise the claimant that he or she may have the claim denial reviewed by the California Department of Insurance. In eight instances, the Companies 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).

9. The Companies failed to provide written basis for the denial of the claim. In seven instances, the Companies failed to provide written basis for the denial of the claim. This pertains to claims with disputed damages or reduced payments on medical invoices, personal property claims, or claims with no legal basis specified for the denial. The Companies were unable to provide proof of any attempt to contact medical providers to negotiate or resolve differences in reduced or unpaid invoices. It is also the Companies' contention that that they will work with medical providers with regard to reduced payment on medical charges or invoices. However, there were no documented cases that the Company negotiated these reductions, or explained the basis in an appropriate denial letter. The Department alleges these acts are in violation of CCR §2695.7(b)(1).

10. The Companies failed to provide written notice of the need for additional time every 30 calendar days. In six instances, the Companies failed to provide written notice of the need for additional time every 30 calendar days. There were five cases in homeowner/property claims which were delayed for processing/settlement yet no status updates were sent to the insured. One claim involved failure to update a claimant on the status of his bodily injury claim. The Department alleges these acts are in violation of CCR §2695.7(c)(1).

11. The Companies failed to conduct and diligently pursue a thorough, fair and objective investigation, and shall not persist in seeking information not reasonably required for or material to the resolution of a claim dispute. In four instances, the Companies failed to conduct and diligently pursue a thorough, fair and objective investigation, and persisted in seeking information not reasonably required for, or material to the resolution of a claim dispute. The Companies requested duplicative documentation, failed to secure the appropriate investigative reports, and closed the claim without any diligent effort to settle claim. In particular, one disability claim was terminated for payment after the Company's repeated requests to an insured to submit duplicative claim forms. The Company made no attempt to contact the insured or her physician directly for proper investigation. The named insured has been a paraplegic for more than 30 years (since 1974) and has been wheelchair-bound since then, with no anticipated change in medical condition. The insured sent claim forms to the Company on 6/15/04, 8/5/04, and 9/15/04. The Department alleges these acts are in violation of CCR §2695.7(d).

With regard to one disability claim cited, the Companies disagree with the department's conclusions that the Companies requested duplicative information, failed to secure the appropriate investigative reports, and closed the claim without any diligent effort to settle the claim. In this case the Companies requested information to verify continued disability, and ample time was provided to respond to each regular request for information. Three requests were made before benefits were terminated, and upon subsequent receipt of the information, benefits were reinstated retroactive to the termination date. As a result of this examination, the claim has been transferred to a unit specializing in stable and mature claims situations, and less-frequent reviews will be requested."

12. The Company failed to respond to communications within 15 calendar days. In three instances, the Company failed to respond to communications within 15 calendar days. These cases pertain to correspondence from the insured and the insured's attorney. The Department alleges these acts are in violation of CCR §2695.5(b).

13. The Company failed to provide written notice of any statute of limitation 60 days prior to the expiration date. In two 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. These cases involved bodily injury claims of non-represented claimants (or with no legal representation). The Department alleges these acts are in violation of CCR §2695.7(f).

14. The Companies failed to comply with the Fair Claims Settlement Practices Regulations. In one instance each, (for a total of three instances), the Companies failed to comply with the following Fair Claims Settlement Regulations: (1) CCR § 2695.5(e)(1) for failure to acknowledge notice of claim within 15 calendar days; (2) CCR§ 2695.5(e)(3) for failure to begin investigation of the claim within 15 calendar days; and (3) CCR § 2695.8(k) for failure to document the basis of betterment, depreciation, or salvage. The Department alleges these acts are in violation of various fair claims practices regulations.

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Last Revised - April 04, 2006
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