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The examiners reviewed files drawn from a listing of total loss claims files from the firestorms as identified by the Company. The examiners reviewed 51 Allstate claims files. The examiners cited six 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 Company's firestorm catastrophe loss procedure was to have adjusters from the independent adjusting firm, Pilot, handle the dwelling total loss claims. In most of the claims reviewed, the adjuster would inspect the loss within 7 to 10 days. Upon loss inspection, the adjuster would measure the foundation footprint, gather as much information as possible regarding the destroyed structure, complete a Marshall & Swift replacement cost evaluation and submit all to the Company. Once the Marshall & Swift replacement cost evaluation was received, the dwelling portion of the claim could be paid up to the policy limits. In cases where the insured wanted to rebuild, but did not have a contractor, the Company would send out an Alacrity contractor to write a rebuild estimate. (Alacrity is a third party administrator which is used to manage a National Contractor Network for Allstate. This network of contractors may be used to complete repairs on homes when they incur a loss covered by their current homeowner policy). If the insured had a contractor, and the insured's contractors rebuild cost was above the Marshall & Swift replacement cost evaluation amount, an Alacrity contractor would be contacted to write a rebuild estimate to compare to the insured's contractors estimate.
Dwelling policy limits, in most cases, were not reformed. If the insured was underinsured on the dwelling coverage, an investigation would be conducted to find out if the agent had made some error causing the underinsurance situation. If so, the policy would be reformed. If not, the limits would remain as written, and the insured would be advised of their rights to contact FEMA for assistance. The file review revealed a few instances in which an insured expressed concern that they were underinsured on their dwelling coverage and no underinsurance investigation was conducted to address the situation. The Company advised that they would contact the insureds to verify that they have addressed the insured's concerns regarding the adequacy of their dwelling coverage.
A separate adjuster would be assigned to handle the contents coverage's of the claim. The contents adjuster would meet regularly with the insured to assist the insured in completing their contents inventory list. Upon completion of the contents inventory list, the list would be sent to the contents estimating system where the prices on the list would be checked, depreciation calculated and a settlement figure determined. The Company was allowing for extensions beyond the 180 day time limit to replace contents items if the insured submitted a request in writing to the Company to extend the time limit. In the majority of the claims reviewed the insured was underinsured on their contents coverage.
The Company, in most cases, issued Additional Living Expense (ALE) advances in the range of $2,500 to $10,000 within one week of receiving the loss, depending on the insured's needs situation. The insurance contract limits ALE to 12 months. On the files reviewed, no extensions of ALE were granted beyond the 12 month period regardless of how long it took to reach a settlement agreement, or how long it would take the insured to rebuild.


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 adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies. In four instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance polices. The Department alleges these acts are in violation of CIC §790.03(h)(3). In two of the instances cited, the insured was underinsured on the dwelling portion of their claim. No underinsurance investigation was conducted to determine the reason for the underinsurance situation. In these two instances, the Company admitted there was no investigation conducted into how the policy limits were established. As a result of the referrals received, the Company made contact with the insured's to "verify that we have addressed their concerns regarding the adequacy of insurance". After review of both files, it was determined that no additional payments should be made. In the third instance the dwelling limit on the insured's policy was $224,568 and the cost to rebuild the dwelling was estimated to be around $326,000. Although the insured agreed to settle his claim for the policy limits, the insured still was underinsured by approximately $100,000 and no underinsurance investigation was conducted. In the fourth instance, the dwelling limit on the insured's policy was $300,000 and the cost to rebuild that was provided by the Company's Alacrity contractor was estimated to be $396,641. The Company paid the policy limit of $300,000 to settle the claim. No underinsurance investigation was conducted to determine the reason for the underinsurance situation.

Summary of Company Response: "In four instances, the CDI alleges violations of CIC 790.03(h)(3) for what it terms is the failure by Allstate to conduct an "underinsurance investigation". The position of the CDI is premised on the notion that an "underinsurance investigation", a term that is not defined in the code, the regulations or by bulletin from the CDI, is a required component of the claims handling process. The CDI alleges the violations without regard to the facts or circumstances surrounding the alleged underinsurance, nor does it cite to any instance in the files where the insured complained about being "underinsured". The CDI has set a standard that in all instances where there is difference between the dwelling limits and an estimate to repair, an investigation into how the dwelling limits were set must be undertaken. There is no reference in the CDI descriptions of the claim files cited as to (i) whether the policyholder's construction estimate was reasonable, (ii) whether the policyholder's estimate was to rebuild a house that was like, kind and quality to the house that was lost, (iii) whether the characteristics of the house the policyholder insured with Allstate were accurate, and (iv) why the policyholder did not have enough money to rebuild the house that was lost.  Our experience is that many policyholders submitted construction estimates to build houses that were substantially larger and contained upgraded amenities (e.g., central air conditioning, granite countertops, etc.)."

2. The Company persisted in seeking unnecessary information. In two instances, the Company persisted in seeking information not reasonably required for or material to the resolution of a claim dispute. The Department alleges these acts are in violation of CCR §2695.7(d). In the first instance, there was a delay in approving the contents settlement payment. The completed contents list was submitted by the insured to the Company on 3/2/04. The Replacement Cost Value (RCV) of the contents list submitted by the insured was $147,000. The insured's contents limit was $36,185. The Company sent the contents list submitted by the insured to their contents estimating system to review and determine the appropriate amount to pay. Six weeks later, on 4/13/04, the contents list was received back from the Company's contents estimating system with a recommendation to pay the policy limit of $36,185.In the second instance the insured was required to complete an exhaustive inventory detailing every item lost even after the initial contents inventory form that was submitted by the insured to the Company exceeded the contents policy limits. The insured had a personal property coverage limit of $115,509. The contents inventory list submitted by the insured on 1/8/04 listed an RCV of approximately $168,000. The Company required that the insured continue working on his contents list until he had listed all of the items destroyed in the fire which totaled $193,000 before they would submit the contents inventory list to the Company's contents estimating system. Payment of the policy limit of $115,509 was made five weeks later on 2/13/04.

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