PUBLIC REPORT OF THE MARKET CONDUCT EXAMINATION

OF THE CLAIMS PRACTICES OF THE


AMERICAN RELIABLE INSURANCE COMPANY
NAIC # 19615 CDI # 3154-2

AS OF DECEMBER 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.................................................................5
TABLE OF CITATIONS BY LINE OF BUSINESS...........................................6
SUMMARY OF RESULTS.........................................................................8

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

May 10, 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:

American Reliable Insurance Company
NAIC # 19615
Group # 0019

Hereinafter referred to as 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 January 1, 2005, through December 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 Scottsdale, Arizona.
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 January 1, 2005, through December 31, 2005, commonly referred to as the "review period". The examiners reviewed 178 claim files. The examiners cited six 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.

American Reliable Insurance Company
LINE OF BUSINESS / CATEGORY	CLAIMS FOR REVIEW PERIOD	REVIEWED	CITATIONS
Homeowners / Dwelling Liability	22	5	0
Homeowners / Dwelling Property	200	37	2
Homeowners / Homeowners Liability	29	4	1
Homeowners / Homeowners Property	389	40	1
Homeowners / Mobile Home Liability	14	2	0
Homeowners / Mobile Home Property	485	40	1
Homeowners / Renters Liability	27	6	0
Homeowners / Renters Property	192	40	1
Commercial Multiple Peril / Commercial Fire	1	1	0
Accident and Disability / Accidental Death and Dismemberment	7	3	0
TOTALS	1366	178	6

TABLE OF TOTAL CITATIONS
Citation	Description	American Reliable Insurance Company
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.	2
CCR §2695.4(a)	The Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy.	1
CCR §2695.7(c)(1)	The Company failed to provide written notice of the need for additional time every 30 calendar days.	1
CCR §2695.7(f)	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.	1
CCR §2695.7(g)	The Company attempted to settle a claim by making a settlement offer that was unreasonably low.	1
Total Citations		6

TABLE OF CITATIONS BY LINE OF BUSINESS
HOMEOWNERS	NUMBER OF CITATIONS
CCR §2695.7(b)(3)	2
CCR §2695.4(a)	1
CCR §2695.7(c)(1)	1
CCR §2695.7(f)	1
CCR §2695.7(g)	1
SUBTOTAL	6
DISABILITY	NUMBER OF CITATIONS
	0
SUBTOTAL	0

COMMERCIAL MULTIPLE PERIL	NUMBER OF CITATIONS
	0
SUBTOTAL	0
TOTAL	6

SUMMARY OF RESULTS

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 these instances which was the result of unintentional oversight. In each case, the Company sent a follow-up letter to the insured including the referral to the California Department of Insurance. A memo was sent to all claims staff on April 12, 2006 to remind them to comply with the regulation.

2. In one instance, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. The insured identified six similar personal property items. The adjuster paid for only one of the items instead of the six. The Department alleges this act is in violation of CCR §2695.7(g).

Summary of Company Response: As a result of the findings of the examination, the Company issued payment to the insured as compensation of the unpaid amount. It is the Company's procedure to make settlement offers that are fair and reasonable. This instance was an isolated error. The individual involved has been made aware of the compliance issue.

4. The Company failed to comply with the Fair Claims Practices Regulations. In one instance each, the Department alleges that the Company failed to comply with the following Fair Claims Practices Regulations: CCR §2695.4(a), CCR §2695.7(c)(1), CCR §2695.7(f).

Summary of Company Response: It is the Company's policy and procedure to comply with the Fair Claims Practices Regulations. These instances involved inadvertent oversights on the part of the claims staff. The staff was reminded to comply with the regulations by Management in a memo sent on April 12, 2006.

Last Revised - June 30, 2006
Copyright © California Department of Insurance
Disclaimer