PUBLIC REPORT OF THE MARKET CONDUCT EXAMINATION

OF THE CLAIMS PRACTICES OF THE


SAFEWAY INSURANCE COMPANY
NAIC # 12521 CDI # 3595-6
SAFEWAY DIRECT INSURANCE COMPANY
NAIC # 10939 CDI # 4536-9

AS OF MARCH 31, 2006


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.........................................................................7

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

August 14, 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:

Safeway Insurance Company
NAIC # 12521
Safeway Direct Insurance Company
NAIC # 10939
Group NAIC # 0257

Hereinafter referred to as The Companies, SIC and SDIC

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 Companies during the period April 1, 2005 through March 31, 2006. The examination was made to discover, in general, if these and other operating procedures of the Companies 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 Companies for use in California including any documentation maintained by the Companies 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 Companies in Monrovia, California.
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 April 1, 2005, through March 31, 2006 commonly referred to as the "review period". The examiners reviewed 314 SIC claim files and 56 SDIC claim files. The examiners cited eight 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.

Safeway Insurance Company
LINE OF BUSINESS / CATEGORY	CLAIMS FOR REVIEW PERIOD	REVIEWED	CITATIONS
Private Passenger Automobile Bodily Injury Liability	1641	59	0
Private Passenger Automobile Property Damage Liability	3113	59	0
Private Passenger Automobile Uninsured/Underinsured Motorist Protection	398	47	2
Private Passenger Automobile Medical Payments	521	52	0
Private Passenger Automobile Collision	1919	54	2
Private Passenger Automobile Comprehensive	228	43	3
TOTALS	7820	314	7

Safeway Direct Insurance Company
LINE OF BUSINESS / CATEGORY	CLAIMS FOR REVIEW PERIOD	REVIEWED	CITATIONS
Private Passenger Automobile Bodily Injury Liability	206	7	0
Private Passenger Automobile Property Damage Liability	418	8	0
Private Passenger Automobile Uninsured/Underinsured Motorist Protection	62	8	0
Private Passenger Automobile Medical Payments	92	9	0
Private Passenger Automobile Collision	431	12	0
Private Passenger Automobile Comprehensive	64	12	1
TOTALS	1273	56	1

TABLE OF TOTAL CITATIONS
Citation	Description	Safeway Insurance Company	Safeway Direct Insurance Company
CCR § 2695.5(e)(1)	The Company failed to acknowledge notice of claim within 15 calendar days.	1	0
CCR § 2695.7(b)	The Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days.	1	0
CCR § 2695.7(c )(1)	The Company failed to provide written notice of the need for additional time every 30 calendar days.	0	1
CCR § 2695.7(d)	The Company failed to conduct and diligently pursue a thorough, fair and objective investigation of a claim.	1	0
CCR § 2695.7(h)	The Company failed, upon acceptance of the claim, to tender payment within 30 calendar days.	2	0
CCR § 2695.7(p)	The Company failed to provide written notification to a first party claimant as to whether it intended to pursue subrogation.	1	0
CCR § 2695.85(a)	The Company failed to provide the insured with the Auto Body Repair Consumer Bill of Rights.	1	0
Total Citations		7	1

TABLE OF CITATIONS BY LINE OF BUSINESS

PERSONAL AUTO	NUMBER OF CITATIONS
CCR § 2695.5(e)(1)	1
CCR § 2695.7(b)	1
CCR § 2695.7(c )(1)	1
CCR § 2695.7(d)	1
CCR § 2695.7(h)	2
CCR § 2695.7(p)	1
CCR § 2695.85(a)	1
TOTAL	8

SUMMARY OF RESULTS

1. In two instances, the Companies failed, upon acceptance of the claim to tender payment within 30 calendar days. The Department alleges these acts are in violation of CCR § 2695.7(h).

Summary of Companies' Response: The Companies acknowledge these criticisms and states the adjuster did not follow procedure. Upon acceptance of claims and required releases, the Companies procedure is to immediately issue payment. Individual counseling will take place as needed in order to avoid future delays. Further, claims adjusters will be trained in August 2006 to reinforce compliance with claims handling procedures, California Insurance Code and Fair Claims Settlement Practices Regulations.

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

Summary of Companies' Response: The Companies acknowledges this criticism. They will address the department's concern with the individual claim handler and will continue to assure compliance through use of training, internal audits and supervisory oversight.

3. In one instance, the Companies' failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Department alleges this act is in violation of CCR § 2695.7(b).

Summary of Companies' Response: The Companies acknowledge the Examiner's findings. The claims handler was individually counseled to ensure future compliance.

4. In one instance, the Companies failed to provide written notice of the need for additional time every 30 calendar days. The Department alleges this act is in violation of CCR § 2695.7(c) (1).

Summary of Companies' Response: The Companies acknowledge that they failed to send status letters in this instance. The claims handler was individually counseled to ensure future compliance.

5. In one instance, the Companies failed to conduct and pursue a thorough, fair and objective investigation of a claim. The Department alleges this act is in violation of CCR § 2695.7(d)

Summary of Companies' Response: The Companies agree with the finding. The Companies addressed this noncompliance issue with the individual claims handler. The Companies reinforce compliance with claims handling staff through continuous training, internal audits and supervisory oversight.

6. In one instance, the Companies 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 Companies' Response: The Companies agree with the findings. The individual adjuster has been counseled to provide written notification to first party claimants when subrogation will be pursued or discontinued.

7. In one instance, the Companies failed to provide the insured with the Auto Body Repair Bill of Rights, either at the time of application for automobile insurance, at the time a policy is issued, or following an accident. The Department alleges this act is in violation of CCR § 2595.85(a)

Summary of Companies' Response: The Companies agree with the findings and state that this is an isolated incident. The adjuster has been counseled. Further, the Companies held an August 2006 meeting to emphasize compliance with the Fair Claims Settlement Practices Regulations.

Last Revised - December 08, 2006
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