Next Page

The examiners reviewed files drawn from the category of Closed Claims for the period August 1, 2004, through July 31, 2005, commonly referred to as the "review period". The examiners reviewed 350 Infinity Insurance Company, 13 Infinity Select Insurance Company, 22 Infinity National Insurance Company, seven Atlanta Casualty Company, five Atlanta Specialty Company and 151 Leader Insurance Company claim files. The examiners cited 463 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.


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. Money recovered within the scope of this report was $24,606.66. Pursuant to the findings of the examination referenced in items 1, 12 and 28 below, the Companies are conducting closed claim surveys. The results of the surveys and additional payments, if any, shall be reported to the Department by December 31, 2006.
PERSONAL AUTOMOBILE

1. In 53 instances, the Companies failed to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. a) In 14 instances, the Companies limited the cost of paint materials in the adjustment of first-party physical damage claims. The Companies employ a procedure to determine the limit, or the "anticipated cost", that they will pay for paint materials. The limit is based on two factors: the type of paint process required to restore the finish and the location of the damaged vehicle. The Companies categorize the paint process as a one-, two-, or three-stage process and they further differentiate paint labor costs between northern and southern California. The Department alleges the setting of limits is arbitrary and is not supported by a method of appraisal recognized by the automotive repair industry. The Department alleges these acts are in violation of CIC §790.03(h)(5).


c) In 10 instances, the Companies failed to effectuate the Collision Deductible Waiver provision of the policy. Specifically, the Companies failed to recognize that the collision deductible should have been waived or refunded to the named insured following verification that the at-fault driver was uninsured. The Department alleges these acts are in violation of CIC §790.03(h)(5).
d) In six instances, the Company failed to pay, or it underpaid, tow charges and storage fees. Specifically, in four instances, the Company deducted the tow and storage fees from the settlement and then failed to reimburse the insured for the charges. In two instances, the Company underpaid the tow charges and the storage fees. The Department alleges these acts are in violation of CIC §790.03(h)(5).

i) In one instance, the Company failed to pay the salvage certificate fee to a claimant who retained the salvage of the total loss vehicle. Specifically, the Company failed to follow its procedure to include the salvage certificate fee in settling a third party property damage claim. The Department alleges this act is in violation of CIC §790.03(h)(5).

Summary of Companies Response: a) The Companies disagree with the Department's allegation that setting a limit to paint and materials is arbitrary. The method calculates a fair and reasonable estimate of the cost of paint and materials. It establishes a threshold that, if exceeded, will be rejected by the Company unless the repair shop provides documented proof that additional materials are required for a particular repair. The method is a practice accepted by the automobile repair industry and it takes into account that automobile repair shops purchase paint materials in bulk which are then used on multiple vehicles. The repair shops know that if more paint materials are needed, they may submit a supplement to cover the additional cost and the Companies will pay the additional amount. The automobile repair shops that completed the repair work in these instances have accepted the total estimated repair cost, including the flat amount of paint materials.

"The method does not violate California law and has not been prohibited by the Department in the past. No regulations were in place which arguably applied to the imposition of paint and material thresholds during the period covered by this examination."

Nonetheless, the Companies recognize that it may be possible to develop alternative ways of imposing the paint and material threshold that might be more acceptable to both the Department and the automotive repair industry. It is the Companies' intent to cooperate with the Department and to facilitate an acceptable alternative to this prevailing practice. The Companies commit to modifying the criticized practice by applying a more tiered approach to imposing the paint and materials' threshold. The Companies will commit their resources to working with the Department and with the automotive repair industry to develop a more acceptable method for implementing the threshold.

b) The underpayment of the established paint materials is not in line with the Companies' standard procedures and training will be provided. Prior to the conclusion of the examination, the Companies compensated the 11 repair shops a combined total of $606 for the underpayment of paint supplies. The Companies are in the process of updating the estimating software profiles with the current payment levels for paint and materials appropriate to the type of paint process and to the geographic location. The Companies will review the profiles with all of their adjusters and appraisers. They also plan to include this subject in future property training classes.

c) The failure to waive or reimburse the collision deductible is not in line with the Companies' standard procedures and training will be provided. Prior to the conclusion of the examination, the Companies paid the 10 claimants a combined total of $5,750 in non-waived or non-reimbursed policy deductibles. The Companies have offered to complete a closed claim survey of California collision and uninsured motorist claims that they resolved between August 1, 2002 and July 31, 2005 to identify claims in which the Companies failed to waive or reimburse the collision deductible. If such errors are found, the Companies will reimburse the insured the deductible at that time. The Companies expect to complete the survey by December 31, 2006 and will report the results to the Department upon completion.

As an additional remedy, the Companies are adding an audit function such that a project manager will review all uninsured motorist claims to ensure reimbursement of the collision deductible where applicable.

d) The failure to pay the proper tow charges and/or storage fees is not in line with the Company's procedures and training will be provided. Prior to the conclusion of the examination, the Company paid the six claimants a combined total of $1,457.50 in unpaid tow charges and/or storage fees. The Company has offered to complete a closed claim survey of California first-party physical damage claims, separated by policy type, to identify unpaid tow charges and/or storage fees during the three-year period of August 1, 2002 through July 31, 2005. The Company will reimburse the insured any unpaid fees discovered during the survey. The Company expects to complete the survey by December 31, 2006 and it will report the results to the Department upon completion.

As an additional remedy, all partial denials of tow and storage fees will be subject to review by managers for the correct application of the policy provision and for the appropriate payment of such fees.

e) The low settlement of total loss theft claims is not in line with the Company's standard procedures and training will be provided. Prior to the conclusion of the examination, the Company re-valued the four total loss vehicles using the odometer reading either as stated on the Affidavit of Vehicle Theft or as documented by an inspection. As a result, the Company paid the four claimants a combined total of $2,227.44 for the devalued vehicles. The Company has offered to conduct a closed claim survey of both recovered and un-recovered automobile theft claims in California that it resolved between August 1, 2002 and July 31, 2005. If the Company finds that such a claim was settled using an arbitrary or modified odometer reading, it will re-value the vehicle and refund the difference, if any, to the insured. The Company expects to complete the survey by December 31, 2006 and it will report the results to the Department upon completion.

Furthermore, the Company is changing its procedure as follows: if the vehicle is available for inspection, the Company will not allow the use of "unknown mileage" when completing the valuation. If the vehicle is unavailable for inspection, due to an un-recovered theft or a total strip or burn, the Company will request maintenance records from the owner to document the mileage. If such documentation is unavailable, the Company will accept the mileage figure stated on the theft affidavit or fire claim form.

f) The Department requested payment of the four unpaid medical bills because of the alleged inconsistency in requiring signed proof of loss forms prior to payment and the Company complied. Prior to the conclusion of the examination, the Company paid a combined total of $3,546.11 in unpaid medical bills to the four claimants or to the medical service providers. The Company has offered to complete a closed claim survey of California Medical Payment claims that it closed between August 1, 2002 and July 31, 2005 to determine if other medical bills remain unpaid. The Company expects to complete the survey by December 31, 2006 and it will report the results to the Department upon completion.

As an additional remedy, the Company is instituting an electronic diary system that is specific to the Medical Payment department. The diary becomes operational upon the receipt of an incoming document related to Medical Payment coverage, such as a medical bill. The diary reminds the adjuster to respond appropriately within seven days of receipt of such a document or correspondence.

g) The failure to apply the UMPD deductible to the loss rather than to the limit is not in line with the Company's standard procedures and training will be provided. The Company is aware that an inconsistency exists among its claims adjusters as to the correct application of the deductible to UMPD claims. This will be addressed in training. Prior to the conclusion of the examination, the Company reimbursed the insured's $100 deductible.

The Company has offered to conduct an internal survey of California claims in the Uninsured Motorist Property Damage category that were resolved between August 1, 2002 and July 31, 2005. The Company will review settlements of $3,400 or more to determine if the Company applied the deductible to the limit rather than to the loss. The Company expects to complete the survey by December 31, 2006 and will report the results to the Department upon completion.

As an additional remedy, the Company is adding an audit function such that a project manager will review all uninsured motorist claims to ensure that the deductible is applied to the limit rather than to the loss.

h) The withholding of a claim payment for one year is not in line with the Company's standard procedures and training will be provided.

i) The underpayment of the salvage certificate fee in connection with a property damage claim is not in line with the Company's standard procedures and training will be provided. Prior to the conclusion of the examination, the Company paid the claimant $12 to compensate the underpaid salvage certificate fee.

Additional Remedial Action Applicable to All of These Issues: The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, these issues are being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.

2. In 45 instances, the Companies failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies. a) In 25 uninsured motorist claims, the Companies failed to follow up on outstanding issues in order to move the claim to a conclusion. Specifically, delays are noted in completing the inspection and appraisal of the loss vehicle until the uninsured motorist status was verified. Delays are also noted in the process of obtaining proof that the adverse driver is an uninsured motorist. Specifically, a delay is noted in the Companies' process to obtain the police report. In addition, the Companies delayed the approval of the repair estimate, delayed the request for medical records and delayed the evaluation of medical specials to arrive at a settlement offer. The Department alleges these acts are in violation of CIC §790.03(h)(3).

Summary of Companies Response: A delay in processing and the failure to follow up on outstanding issues are not in line with the Companies' standard procedures and training will be provided.

a) Although the Companies agree that delays occurred in processing two uninsured motorist claims, the Companies disagree that they shifted the burden to prove the at-fault driver was uninsured onto the insured driver. The Companies' procedure is to instruct the insured to file a Traffic Accident Report (form SR-1) with the DMV. The Companies then submit DMV form SR-19C, which is the request to show financial responsibility, in order to obtain the Uninsured Motorist Certificate. In response to this criticism, the Companies write, "Part of the managers' directives in response to this audit is that they must ensure, through use of their diary, that the proper DMV forms are being ordered timely. In addition we provided them with the expectations of the Companies and a checklist of items required verifying the uninsured status of the other driver. This was covered extensively in our follow up training."

b) In the last quarter of 2005, and continuing into 2006, the Company changed the workflow of claims handling. Prior to the change, the initial adjuster would handle all aspects of the claim in its entirety up to the point of litigation for bodily injury. As a result of the change, the burden of investigation and resolution of the bodily injury portion of a claim has been lifted from the "initial adjuster unit" and placed with the "continuing adjuster unit." The purpose is to enable a more efficient inspection, investigation and resolution of the physical damage claim for the first 60 days. If appropriate, the claim is then transferred to a "continuing unit" which will handle the bodily injury claim to its conclusion or prepare for litigation. The Company currently has three established continuing units in operation to service 70% of its field offices. Due to the fact that the initial adjuster does not have to handle a bodily injury claim in addition to a physical damage claim, the Company expects improved service.

c) The Companies' current procedure to follow-up on outstanding issues is to monitor a report that lists, by adjuster, all open claim features. The manager reviews the report monthly and develops an action plan that is communicated to the adjuster. The Companies are modifying the procedure such that the manager places the file on his or her own diary system for follow-up to oversee the prompt completion of the vehicle inspection and investigation.

The Companies have added two positions to their dispatch department to provide better service in their non-staffed areas that use independent adjusters. The dispatch unit is on a three-day diary system to ensure the vehicle inspection has been completed. The Companies have also developed a program that allows independent adjusters to upload appraisals and photographs directly into the claims system.

The failure to name both the insured and the repair shop on the settlement check is not in line with the Company's standard procedures and training will be provided.

d) The Company disagrees with the Department's criticism of inconsistently following its own procedure to not pay a [medical] claim prior to receipt of the required loss forms. "At the most, the [Company] could be accused of not properly documenting the claim file prior to paying the claimant. It is the [Company's] practice to not pay claims prior to receiving a properly executed proof of loss form and the examination certainly reflected that practice. These particular claim files do not reflect any kind of pattern or practice..." The Company erred by issuing the payment prior to obtaining all of the properly signed proof-of-loss forms. By doing so, the Company acted to the benefit of the claimant.

The Department responds that this is an unresolved issue and may result in administrative action.

Additional Remedial Action Applicable to All of These Issues: The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, these issues are being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


3. In 31 instances, the Companies failed to supply the claimant with a copy of the estimate upon which the settlement is based. The Department alleges these acts are in violation of CCR §2695.8(f).
Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedure to provide a copy of the repair estimate, plus a copy of any supplement, to each claimant. Some of the errors are attributed to the adjuster's failure to document the file as such.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.


The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.
4. In 30 instances, the Companies failed to provide written notice of the need for additional time every 30 calendar days. The Department alleges these acts are in violation of CCR §2695.7(c)(1).
Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.


The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.
5. In 27 instances, the Companies failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Department alleges these acts are in violation of CCR §2695.7(b).
Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.


The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.
6. In 25 instances, the Companies failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. In 15 instances, the Companies failed to send the medical claim forms to the insured within 15 calendar days of receipt of the claim. In seven instances, the Company failed to provide prompt assistance and instructions to a claimant of a bodily injury or property damage claim. In two instances, the Company failed to provide prompt assistance to the insured who presented an uninsured motorist claim. In one instance, the Company failed to instruct the claimant how to be reimbursed for the difference in cost if the replacement of the child restraint system exceeds $50.00. The Department alleges these acts are in violation of CCR §2695.5(e)(2).

Summary of Companies Response: With one exception, the handling of these claims is not in line with the Companies' standard procedures and training will be provided.

"We continue to train and teach [adjusters] the importance of prompt handling for all customers. In addition we have made a large investment to enhance our phone system to allow the caller to transfer to a call center staffed with bilingual personnel that are trained to provide assistance to the customer."

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.

In one instance, the Company disagrees that it failed to instruct the claimant how to claim full reimbursement for a child restraint system. "The Company notes numerous conversations with the claimant regarding the property damage and the car seats. There is no indication that the claimant felt our offer was inadequate and we see no violation."

The Department responds that this is an unresolved issue and may require administrative action.


7. In 22 instances, the Companies failed to maintain all documents, notes and work papers in the claim file. The Companies failed to maintain documents and notes which reasonably pertain to the claim in such detail that pertinent events and the dates of the events can be reconstructed. In 10 instances, the Companies failed to document the facts of loss and the investigative activity conducted on the claim. Specifically, the date of contact with the claimant, notes of conversations with the claimant, decisions about vehicle repairs, notes as to injuries sustained or details of receiving proof of loss documents are not found in the file. In six instances, the Companies failed to retain a copy of the repair estimate, a copy of the total loss valuation, a medical bill or a record of the payment. In three instances, the Company failed to retain correspondence either sent to or received from a claimant attorney. In three instances, the Companies failed to retain a copy of the denial letter. The Department alleges these acts are in violation of CCR §2695.3(a).

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, the documentation issues identified above are being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.

Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


9. In 18 instances, the Companies failed to explain in writing the determination of the cost of a comparable vehicle. The Department alleges these acts are in violation of CCR §2695.8(b)(1) and CCR §2695.8(b)(3).
Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedure to send the total loss settlement documents to the insured via U.S. Mail or via the Internet. Training will be provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.


The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.
10. In 16 instances, the Companies failed, upon acceptance of the claim, to tender payment within 30 calendar days. In 10 instances, the Companies failed to tender payment of a medical bill within 30 calendar days following receipt of proof and acceptance of the claim. In four instances, the Companies failed to tender payment of a repair bill or repair supplement within 30 calendar days. In one instance, the Company failed to pay the total loss settlement within 30 calendar days following receipt of the title documents. In one instance, the Company failed to pay the subrogation demand within 30 calendar days. The Department alleges these acts are in violation of CCR §2695.7(h).

Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

The Companies are instituting an electronic diary system that is specific to the Medical Payment department. The diary becomes operational upon the receipt of an incoming document related to Medical Payment coverage, such as a medical bill. The diary reminds the adjuster to respond appropriately within seven days of receipt of such a document or correspondence.

As a result of the examination, the Companies have developed a program that allows independent adjusters to upload appraisals and photographs directly into the claims system. They have also added a "claims payer" position whose responsibility is focused on timely payment of outstanding invoices from body shops and vendors.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


11. In 15 instances, the Companies failed to provide the written basis for the denial of the claim. In four instances, the Companies failed to issue a written denial for the tow charges and storage fees that are in excess of the policy limit. In four instances, the Companies failed to issue a written denial for equipment that is found on the loss vehicle and which is excluded under the policy. In two instances each, the Companies failed to issue a written denial for a medical claim and for an uninsured motorist claim. In one instance each, the Company failed to issue a written denial for damages unrelated to the claim, for rental car charges in excess of the rental contract and for an uncovered property damage loss. The Department alleges these acts are in violation of CCR §2695.7(b)(1).

Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


12. In six instances, the Company failed to notify the insured in writing that it must report the salvage retention to the Department of Motor Vehicles and this may affect the resale and/or insured value of the vehicle. In five instances, the Companies failed to include, in the settlement, all applicable taxes and other fees incident to transfer of the insured's vehicle to salvage status. In three instances, the Company failed to inform the insured of his or her right to seek a refund of the unused vehicles fees from the Department of Motor Vehicles. In one instance, the Company failed to provide the insured with the name, address and telephone number of the salvage dealer who will buy the salvage. In nine combined instances, the Companies failed to provide the insured with the proper written notices associated with retaining a salvage vehicle. In five instances, the Companies underpaid or failed to pay the correct salvage certificate fee associated with the transfer of the vehicle to owner-retained salvage status and, in one of the five instances, the Company also failed to pay the applicable sales tax. In one instance, the insured challenged the salvage amount deducted from the settlement and the Company failed to provide the insured with identity of the salvager. The Department alleges these acts are in violation of CCR §2695.8(b)(1)(A).

Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

Prior to the conclusion of the examination, the Companies paid the five claimants a combined total of $124 in unpaid salvage certificate fees and sales tax. The Companies have offered to complete closed claim survey of owner-retained salvage settlements in California resolved between August 1, 2002 and July 31, 2005 to identify and reimburse unpaid and underpaid salvage certificate fees and sales tax. The Companies expect to complete the survey by December 31, 2006 and will report the results of their findings to the Department upon completion.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, the issues identified above are being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.


The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.
13. In 12 instances, the Companies failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. In four instances, the Company failed to disclose the medical payment limit to the insured. In three instances, the Company failed to disclose the uninsured motorist property damage limit and/or the policy deductible. In two instances, the Company failed to disclose the policy's Cost of Transportation benefit that is available following a theft of the insured vehicle. In one instance, the Company failed to disclose the policy limit on towing. In one instance, the Company failed to explain the collision deductible waiver provision of the policy. The Department alleges these acts are in violation of CCR §2695.4(a).

Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, the issues identified above are being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


14. In 10 instances, the Companies attempted to settle a claim by making a settlement offer that was unreasonably low. In three instances, the Company applied betterment to a partial paint process. In two instances, the Company failed to pay the approved supplemental repair bill. In one instance, the Company failed to pay the holdback amount from a total loss settlement once the required title documents were received. In one instance, the Company applied the collision deductible to a comprehensive claim which carries a lower deductible. In one instance the Company paid the amount of damages for claimant vehicle #2 based on the estimate to repair claimant vehicle #1. In one instance, the Company failed to include all equipment found on the vehicle in the total loss settlement. In one instance, the Company based the vehicle license fee on the wrong vehicle. The Department alleges these acts are in violation of CCR §2695.7(g).

Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

Prior to the conclusion of the examination, the Companies paid the 10 claimants a combined total of $8,063.51 for the low settlements as described.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, the issues identified above are being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


15. In 10 instances, the Companies failed to document the determination of value. The Companies failed to document the basis of betterment, depreciation, or salvage. The basis for any adjustment shall be fully explained to the claimant in writing. Although the Companies advise the insured in writing that betterment is applied, the Companies failed to explain the basis for the calculation and failed to document the file with the basis for the betterment. The Department alleges these acts are in violation of CCR §2695.8(b)(1)(C) and CCR §2695.8(i).

Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

The Companies are changing their standard betterment letter to include language that will prompt the claims adjuster to provide an explanation of the basis for the deduction. The Companies will also instruct adjusters to document the file as such.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


16. In seven instances, the Company failed to acknowledge notice of claim within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(e)(1).

Summary of Company Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

"We continue to train and teach [adjusters] the importance of prompt handling for all customers. In addition we have made a large investment to enhance our phone system to allow the caller to transfer to a call center staffed with bilingual personnel that are trained to provide assistance to the customer."

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


17. In seven 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).

Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


18. In six instances, the Company failed to begin investigation of the claim within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(e)(3).

Summary of Company Response: The handling of these claims is not in line with the Company's standard procedures and training will be provided.

The Company's current procedure to follow-up on outstanding issues is to monitor a report that lists, by adjuster, all open claim features. The manager reviews the report monthly and develops an action plan that is communicated to the adjuster. The Company is modifying the procedure such that the manager places the file on his or her own follow-up diary system to oversee the prompt completion of the vehicle inspection and investigation.

The Company has added two positions to its dispatch department to provide better service in their non-staffed areas that use independent adjusters. The dispatch unit is on a three-day diary system to ensure the vehicle inspection has been completed. The Companies have also developed a program that allows independent adjusters to upload appraisals and photographs directly into the claims system.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of its 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.

19. In five instances, the Companies misrepresented to claimants pertinent facts or insurance policy provisions relating to any coverages at issue. In one instance, the Company denied coverage for dealer-installed equipment that is covered by the policy. In one instance, the Company advised the insured that no coverage is available for tow services. In one instance, the Company advised the insured that the most it would pay under the Uninsured Motorist Property Damage provision of the policy is $3,400, rather than $3,500. In one instance, the Company sent the insured a letter quoting Connecticut law rather than California law. In one instance, the Company advised the insured that medical payment coverage does not extend to the passenger in the insured vehicle. The Department alleges these acts are in violation of CIC §790.03(h)(1).

Summary of Companies Response: The handling of these claims is not in line with the Companies' standard procedures and training will be provided.

Prior to the conclusion of the examination, the Company paid the insured $550 for the dealer-installed equipment.

In the final instance, the Company disagrees that the insured was ill-advised as to the medical payment coverage for the passenger and that the discussion in the file notes relates to a potential bodily injury claim rather than to a claim for medical payment. The Company believes the error suggests a documentation error, for which training has been provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, the issues identified above are being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


20. In five instances, the Companies failed to record the date the Companies received, date the Companies processed and date the Companies transmitted or mailed every relevant document in the file. The Department alleges these acts are in violation of CCR §2695.3(b)(2).

Summary of Companies Response: Most often, documents are received in batches and are imaged into the system immediately upon receipt. The failure to record the date a document is received may occur if it is received in person. The handling of these claims is not in line with the Companies' standard procedure for file maintenance and training will be provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


21. In four instances, the Companies failed to notify the insured that the file will be reopened if the Companies are notified within 35 days that the insured cannot purchase a comparable automobile for the settlement amount offered or paid. The Department alleges these acts are in violation of CCR §2695.5(8)(c).

Summary of Companies Response: The Companies' procedure is to provide a written notice, which complies with the referenced regulation, along with the total loss paperwork. The handling of these claims is not in line with the Companies' standard procedure and training will be provided.

The Companies have allocated additional resources to their internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Companies conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


22. In two instances, the Company failed to maintain hard copy files or claim files that are accessible, legible and capable of duplication to hard copy for five years. The Department alleges this act is in violation of CCR §2695.3(b)(3).

Summary of Company Response: The Company retrieved the files from storage for the examination and misplaced them at an unknown point. The handling of these claim files is not in line with the Company's standard procedures and training will be provided.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of its 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.

23. In two instances, the Company persisted in seeking information not reasonably required for or material to the resolution of a claim dispute. Specifically, the Company persisted in obtaining an uninsured motorist certificate from the California Department of Motor Vehicles as proof that the at-fault driver was uninsured despite having sufficient evidence as such based on its investigation. The Department alleges these acts are in violation of CCR §2695.7(d).

Summary of Company Response: The handling of these claim files is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of its 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.

24. 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. In one instance, the Company is not able to prove it sent a written notice to the claimant. In one instance, the Company advised the claimant of the statute during a telephone conversation. The Department alleges these acts are in violation of CCR §2695.7(f).

Summary of Company Response: The handling of these claim files is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of its 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Companies' management staff. The course material focused on the findings of the examination.


25. In one instance, the Company failed, upon receiving proof of claim, to accept or deny the claim within 80 calendar days. The claim was under investigation for fraud by the Company's Special Investigative Unit and the Company failed to notify the insured that it could not accept or deny the claim within 80 calendar days. The Department alleges this act is in violation of CCR §2695.7(k)(1).

Summary of Company Response: The handling of this claim file is not in line with the Company's standard procedures and training will be provided.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of its 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


COMMERCIAL AUTOMOBILE

27. In 10 instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies. In six instances, the Company delayed the inspection of the loss vehicle. In two instances, the Company delayed the resolution of a coverage question. In two instances, gaps in investigative activity of at least 14 calendar days or more are noted. The Department alleges these acts are in violation of CIC §790.03(h)(3).

Summary of Company Response: The handling of these claim files is not in line with the Company's standard procedures and training will be provided.

The Company's current procedure to follow-up on outstanding issues is to monitor a report that lists, by adjuster, all open claim features. The manager reviews the report monthly and develops an action plan that is communicated to the adjuster. The Company is modifying the procedure such that the manager places the file on his or her own follow-up diary system to oversee the prompt completion of the vehicle inspection and investigation.

The Company has added two positions to its dispatch department to provide better service in their non-staffed areas that use independent adjusters. The dispatch unit is on a three-day diary system to ensure the vehicle inspection has been completed. The Companies have also developed a program that allows independent adjusters to upload appraisals and photographs directly into the claims system.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


28. In eight instances, the Company failed to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. a) In three instances, the Company limited the cost of paint materials in the adjustment of first-party physical damage claims. Specifically, the Company employs a procedure to determine the limit, or the "anticipated cost", that it will pay for paint materials. The limit is based on two factors: the type of paint process required to restore the finish and the location of the damaged vehicle. The Company categorizes the paint process as a one-, two-, or three-stage process and it further differentiates paint repair costs between northern and southern California. The Department alleges the setting of limits is arbitrary and is not supported by a method of appraisal recognized by the automotive repair industry. The Department alleges these acts are in violation of CIC §790.03(h)(5).
b) In three instances, the Company failed to follow its stated procedure of estimating paint materials. Specifically, the Company allowed a lower amount for paint supplies than the limit it established for the type of paint needed for the vehicle and for the location of the vehicle. The inconsistency resulted in an inequitable settlement and an underpayment to the repair facility. The Department alleges these acts are in violation of CIC §790.03(h)(5).
c) In one instance, the Company failed to reimburse the insured for storage and tear down charges. The Department alleges this act is in violation of CIC §790.03(h)(5).
d) In one instance, the Company failed to pay a medical bill submitted by the insured or by a medical provider for reimbursement under the Medical Payment provision of the policy. The Department alleges this act is in violation of CIC §790.03(h)(5).

Summary of Companies Response: a) The Companies disagree with the Department's allegation that setting a limit to paint materials is arbitrary. The method calculates a fair and reasonable estimate of the cost of paint and materials. It establishes a threshold that, if exceeded, will be rejected by the Companies unless the repair shop provides documented proof that additional materials are required for a particular repair. The method is a practice accepted by the automobile repair industry and it takes into account that automobile repair shops purchase paint materials in bulk which are then used on multiple vehicles. The repair shops know that if more paint materials are needed, they may submit a supplement to cover the additional cost and the Companies will pay the additional amount. The automobile repair shops that completed the repair work in these instances have accepted the total estimated repair cost, including the flat amount of paint materials.

"The method does not violate California law and has not been prohibited by the Department in the past. No regulations were in place which arguably applied to the imposition of paint and material thresholds during the period covered by this examination."

Nonetheless, the Companies recognize that it may be possible to develop alternative ways of imposing the paint and material threshold that might be more acceptable to both the Department and the automotive repair industry. It is the Companies' intent to cooperate with the Department and to facilitate an acceptable alternative to this prevailing practice. The Companies commit to modifying the criticized practice by applying a more tiered approach to imposing the paint and materials' threshold. The Companies will commit their resources to working with the Department and with the automotive repair industry to develop a more acceptable method for implementing the threshold.

b) The underpayment of the established paint materials is not in line with the Company's standard procedures and training will be provided. Prior to the conclusion of the examination, the Company compensated the three repair shops a combined total of $178.90 for the underpayment of paint supplies. The Company is in the process of updating the estimating software profiles with the current payment levels for paint and materials appropriate to the type of paint process and to the geographic location. The Company will review the profiles with all of its adjusters and appraisers. The Company also plans to include this issue in future property training classes.

c) The non-payment of storage and tear down fees is not in line with the Company's standard procedures and training will be provided. Prior to the conclusion of the examination, the Company paid the insured $630 for unpaid storage and tear down fees. In addition, the Company has offered to complete an internal survey of California first-party physical damage claims, separated by policy type, to identify unpaid tow, storage and tear down fees during the three-year period of August 1, 2002 through July 31, 2005. The Company will reimburse the insured any unpaid fees discovered during the survey. The Company expects to complete the review by December 2006 and it will report the results to the Department upon completion. The Company will include a review of the policies' provisions and restrictions with regard to payment of tow and storage fees in its claims practices training course to be held in June 2006.

As an additional remedy, all partial denials of tow and storage fees will be subject to review by managers for the correct application of the policy provision and for the appropriate payment of such fees.

d) The failure to pay a medical bill is not in line with the Company's standard procedures and training will be provided. Prior to the conclusion of the examination, the Company paid a $70 medical bill to the claimant or to the medical service provider. The Company has offered to complete a closed claim survey of California Medical Payment claims that it closed between August 1, 2002 and July 31, 2005 to determine if other medical bills remain unpaid. The Company expects to complete the survey by December 31, 2006 and it will report the results to the Department upon completion.

As an additional remedy, the Company is instituting an electronic diary system that is specific to the Medical Payment department. The diary becomes operational upon the receipt of incoming correspondence related to Medical Payment coverage. The diary reminds the adjuster to respond appropriately within seven days of receipt of each incoming correspondence.

Additional Remedial Action Applicable to All of These Issues: The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, the issues identified above are being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of their 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


29. In eight instances, the Company failed to respond to communications within 15 calendar days. In five instances, the Company failed to respond timely to the demand from the claimant attorney or failed to respond timely to a letter of representation. In one instance, the Company failed to respond timely to an inquiry from the insured. In one instance each, the Company failed to respond timely to receipt of proof of loss documents and to the subrogation demand. The Department alleges these acts are in violation of CCR §2695.5(b).

Summary of Company Response: The handling of these claim files is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, the issues identified above are being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


30. In six instances, 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. The Department alleges these acts are in violation of CCR §2695.7(b)(3).

Summary of Company Response: The handling of these claim files is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


31. In six instances, the Company failed, upon acceptance of the claim, to tender payment within 30 calendar days. In three instances, the Company failed to issue the settlement check for repairs within 30 calendar days. In two instances, the Company failed to pay the charges for the claimant's rental car within 30 calendar days. In one instance, the Company failed to issue the settlement within 30 days following receipt of the signed release. The Department alleges these acts are in violation of CCR §2695.7(h).

Summary of Company Response: The handling of these claim files is not in line with the Company's standard procedures and training will be provided.

As a result of the examination, the Companies have developed a program that allows independent adjusters to upload appraisals and photographs directly into the claims system. They have also added a "claims payer" position whose responsibility is focused on timely payment of outstanding invoices from body shops and vendors.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


32. In five instances, the Company failed to supply the claimant with a copy of the estimate upon which the settlement is based. The Department alleges these acts are in violation of CCR §2695.8(f).

Summary of Company Response: The handling of these claim files is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


33. In four instances, the Company failed to maintain all documents, notes and work papers in the claim file. The Company failed to maintain documents and notes which reasonably pertain to the claim in such detail that pertinent events and the dates of the events can be reconstructed. In the first instance, the independent appraisal does not indicate the date the vehicle inspection was completed. In the second instance, the file notes lack pertinent details of conversations with the insured. In the last two instances, the final estimate and the total loss valuation are not found in the claim files. The Department alleges these acts are in violation of CCR §2695.3(a).

Summary of Company Response: The handling of these claims is not in line with the Company's standard procedure for file maintenance and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


34. In four instances, the Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Department alleges these acts are in violation of CCR §2695.7(b).

Summary of Company Response: The handling of these claims is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


35. In four 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. In three instances, in which the claim was not settled by payment, the Company failed to send the written notice of any statute of limitation. In one instance, the Company's notice failed to identify the correct date of loss upon which the time period is based. The Department alleges these acts are in violation of CCR §2695.7(f).

Summary of Company Response: The Company's procedure is to adhere to all Department of Insurance Regulations and to California Civil Regulations, including the issuance of the statute letter.

The Company had a computerized system in place at the time of the examination that performs periodic computer runs to identify files that require a statute letter. The report allows the Company to issue the statute letter within the legal time frame.

In three instances, the Company disagrees that it is non-compliant with the referenced regulation, as the time period has not yet expired. Prior to the conclusion of the examination, the Company issued a statute letter to the three claimants identified. As a result of this criticism, the Company isolated liability claims in California that were denied or closed without payment within the review period of this examination and issued a statute letter to each claimant, when appropriate. The issuance of the statute letter brings the Company into compliance with the regulation since it has been sent out not less than 60 days prior to the expiration date.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of quarterly and annual internal audits conducted at the managerial level, the branch level and the corporate level.

The failure to state the correct date of loss in the statute of limitation letter is not in line with the Company's standard procedures and training will be provided.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


36. In three instances, the Company failed to provide the written basis for the denial of the claim. In the first instance, the Company failed to issue a written denial of the loss of use claim. In the second instance, the Company failed to issue a written denial for equipment that is found on the loss vehicle and which is excluded under the policy. In the third instance, the Company failed to state the basis for the denial. The Department alleges these acts are in violation of CCR §2695.7(b)(1).

Summary of Company Response: The handling of these claims is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


37. In three instances, the Company failed to provide written notice of the need for additional time every 30 calendar days. The Department alleges these acts are in violation of CCR §2695.7(c)(1).

Summary of Company Response: The handling of these claims is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


38. In three instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. In two instances, the Company failed to pay the approved supplemental repair bills. In one instance, the Company failed to include all equipment found on the vehicle in the total loss valuation and this resulted in a low settlement. The Department alleges these acts are in violation of CCR §2695.7(g).

Summary of Company Response: The handling of these claims is not in line with the Company's standard procedures and training will be provided. Prior to the conclusion of the examination, the Company paid the three claimants a combined total of $1,291.20 to compensate for the low settlements as described.

As a result of the examination, the Companies have developed a program that allows independent adjusters to upload appraisals and photographs directly into the claims system. They have also added a "claims payer" position whose responsibility is focused on timely payment of outstanding invoices from body shops and vendors.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


39. In one instance, the Company misrepresented to claimants pertinent facts or policy provisions relating to any coverages at issue. Specifically, the Company misinformed the insured about the policy limit on tow and storage fees. The Department alleges this act is in violation of CIC §790.03(h)(1).

Summary of Company Response: The handling of this claim is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


40. In one instance, the Company failed to record the date the Company received, date the Company processed and date the Company transmitted or mailed every relevant document in the file. The Department alleges this act is in violation of CCR §2695.3(b)(2).

Summary of Company Response: Most often, documents are received in batches and are imaged into the system immediately upon receipt. The failure to record the date a document is received may occur if it is received in person. The handling of this claim is not in line with the Company's standard procedure for file maintenance and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


41. In one instance, the Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. Specifically, the Company failed to follow its procedure to issue an acknowledgement of claim letter that summarizes the insured's coverage. The Department alleges this act is in violation of CCR §2695.4(a).

Summary of Company Response: The handling of this claim is not in line with the Company's standard procedure and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


42. In one instance, the Company failed to acknowledge notice of claim within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(e)(1).

Summary of Company Response: The handling of this claim is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


43. In one instance, the Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(e)(2).

Summary of Company Response: The handling of this claim is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


44. In one instance, the Company failed to provide written notification to a first party claimant as to whether the insurer intends to pursue subrogation. The Department alleges this act is in violation of CCR §2695.7(p).

Summary of Company Response: The Company has a designated subrogation unit that handles all required communication with the insured. The handling of this claim is not in line with the Company's standard procedures and training will be provided.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


45. In one instance, the Company failed to explain in writing the determination of the cost of a comparable vehicle. The Department alleges this act is in violation of CCR §2695.8(b)(3).

Summary of Company Response: The handling of this claim is not in line with the Company's standard procedure to send the total loss settlement documents to the insured via U.S. Mail or via the Internet.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.


46. In one instance, the Company failed to document the basis of betterment, depreciation, or salvage. The basis for any adjustment shall be fully explained to the claimant in writing. Although the Company advised the insured in writing that betterment was applied, the Company failed to explain the basis for the calculation and failed to document the file with the basis for the betterment. The Department alleges this act is in violation of CCR §2695.8(i).

Summary of Company Response: The handling of this claim is not in line with the Company's standard procedures and training will be provided. The Company is changing its letter to include language that will prompt the claims adjuster to provide an explanation of the basis for the deduction.

The Company has allocated additional resources to its internal audit procedures to ensure compliance. Specifically, this issue is being addressed on a Company-wide basis by means of internal audits conducted quarterly and annually at the managerial level, at the branch level and at the corporate level.

The Company conducted a claims practices training course in June 2006 for all claims personnel in each of the 27 branch offices located within California and in one office in Tempe, Arizona that handles California losses. The multiple training sessions were conducted by the Company's management staff. The course material focused on the findings of the examination.

Top Of PageNext Page


Last Revised - November 29, 2006
Copyright California Department of Insurance
Disclaimer