Previous PageNext Page

The examiners reviewed files drawn from the category of Closed Claims for the period March 1, 2005, through February 28, 2006, commonly referred to as the "review period". The examiners reviewed 436 AMIC claim files and 15 ALIC claim files. The examiners cited 51 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 $1,718.17.
PERSONAL AUTOMOBILE

1. In seven instances, the Company 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)(3).

Summary of Company Response: The Company acknowledges that they failed to itemize and explain in writing to the insured the determination of the cost of a comparable vehicle at the time the offer is made to settle a total loss. As a result of the examination, the Company has agreed to provide an explanation to the insured by forwarding a copy of the ACV (actual cash value) report or incorporate it into the settlement letter. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

2. In five instances, the Company required the use of non-original equipment manufacture replacement crash parts without warranting that such parts are of like kind, quality, safety, fitness and performance as original manufacturer replacement crash parts. The Department alleges these acts are in violation of CCR §2695.8(g)(3).

Summary of Company Response: The Company acknowledges that they did not provide warranty information when requiring the use of non-original equipment manufacture (OEM) replacement crash parts. As a result of the examination, the Company has instructed the appraisal companies to include appropriate language to warrant that all non-OEM parts are of like kind, quality, safety, fitness and performance as OEM parts.

3. In four instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. In two instances, the full amount of the Salvage Certificate fee on owner retained total losses were not paid. In one instance, a medical bill was not paid. In one instance, the full amount of a medical bill was not paid. 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 standard Company procedures. These errors were the result of unintentional oversight. As a result of the examination, the claimants have been compensated for any unpaid amounts due. The individuals involved have been made aware of this compliance issue. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

4. In four instances, the Company 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).

5. In three 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. In these instances, the requested files were unavailable for examination. The Department alleges this act is in violation of CCR §2695.3(b)(3).

Summary of Company Response: The Company acknowledges that the claim files requested for examination in these instances were not available for review. Substitute files were provided in each instance for purposes of the examination. The handling of these claim files is not in line with standard Company procedures, and was the result of unintentional oversight. The Company will begin training on this issue at their adjuster meeting on March 7, 2007.

6. In three instances, the Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In two instances, the salvage certificate fee was not paid and in one instance, the transfer fee was not paid according to Company procedure on a third party total loss claim. The Department alleges these acts are in violation of CIC §790.03(h)(5).

Summary of Company Response: The handling of these claims is not in line with standard Company procedures. These errors were the result of unintentional oversight. As a result of the examination, the claimants have been paid the appropriate total loss fee amount due. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

7. In three instances, the Company required the use of non-original equipment manufacture replacement crash parts that were not equal to the original equipment manufacturer parts in terms of kind, quality, safety, fitness and performance. These instances involved the use of non-original equipment manufacture (OEM) replacement crash parts without specifying that the part is of like kind, quality, safety, fitness and performance. The Department alleges these acts are in violation of CCR §2695.8(g)(1).

Summary of Company Response: The Company acknowledges that the handling of these claims is not in line with standard Company procedures. As a result of the examination, the Company has instructed the appraisal companies to include appropriate language specifying that the non-OEM parts used were of like kind, quality, safety, fitness and performance as OEM parts. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

8. In two instances, the Company failed to include, in the settlement, sales tax and/or fees incident to the transfer of the vehicle to salvage status. In these instances, the Company failed to pay the Salvage Certificate fee when the insured retained the total loss vehicle. The Department alleges these acts are in violation of CCR §2695.8(b)(1)(A).

Summary of Company Response: The Company acknowledges that they did not pay the Salvage Certificate fee when the insured retained the total loss vehicle in these instances. The handling of these claims is not in line with standard Company procedures, and was the result of unintentional oversight. As a result of the examination, the claimants have been paid the Salvage Certificate fee amount due. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

9. In two instances, 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. In these instances, the Actual Cash Value (ACV) was not fully explained to the claimant in writing when settling the total loss claim. The Department alleges these acts are in violation of CCR §2695.8(i).

Summary of Company Response: The Company acknowledges that they failed to fully explain the basis of the total loss settlement in writing to the claimant in these instances. As a result of the examination, the Company will provide a copy of the ACV report (the Company uses either ADP or Autotrac) to the claimant prior to settlement of the total loss claim. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

10. In two instances, the Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. In these instances, the insured was not provided with an explanation of Uninsured Motorist coverage upon notice of exposure. The Department alleges these acts are in violation of CCR §2695.4(a).

Summary of Company Response: The Company acknowledges that they failed to disclose the provisions of the Uninsured Motorist coverage of the insurance policy in these instances. The handling of these claims is not in line with standard Company procedures. These errors were the result of unintentional oversight, and the individuals involved have been made aware of this compliance issue. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

11. In one instance, the Company failed to provide written basis for the denial of the claim. The Department alleges this act is in violation of CCR §2695.7(b)(1).

Summary of Company Response: The Company acknowledges that the written basis for the denial of a portion of this claim should have been provided. The handling of this claim is not in line with standard Company procedures. This error was the result of unintentional oversight, and the individual involved has been made aware of this compliance issue. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

12. 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. In this instance, the receipt date of a police report was not recorded. The Department alleges this act is in violation of CCR §2695.3(b)(2).

Summary of Company Response: The handling of this claim is not in line with standard Company procedures. This error was the result of unintentional oversight, and the individual involved has been made aware of this compliance issue. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.


13. In one instance, the Company failed to respond to communications within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(b).

Summary of Company Response: The handling of this claim is not in line with standard Company procedures. This error was the result of unintentional oversight, and the individual involved has been made aware of this compliance issue. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.


14. In one instance, the Company 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 Company Response: The handling of this claim is not in line with standard Company procedures. This error was the result of unintentional oversight, and the individual involved has been made aware of this compliance issue. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.


15. In one instance, the Company 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 Company Response: The handling of this claim is not in line with standard Company procedures. This error was the result of unintentional oversight, and the individual involved has been made aware of this compliance issue. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.


16. In one instance, the Company failed to include, in the settlement, the license fee and other annual fees, computed based upon the remaining term of the registration. In this instance, the one time transfer fee was not included in settlement of a first party total loss claim. The Department alleges this act is in violation of CCR §2695.8(b)(1).

Summary of Company Response: The Company acknowledges that they did not pay the one time transfer fees due upon settlement of the total loss claim in this instance. The handling of this claim is not in line with standard Company procedures, and was the result of unintentional oversight. As a result of the examination, the insured was paid the appropriate one time fees due. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.


17. In one instance, the Company failed to conduct and pursue a thorough, fair and objective investigation of a claim. In this instance, the claim was closed prior to conducting a complete uninsured motorist investigation. The Department alleges this act is in violation of CCR §2695.7(d).

Summary of Company Response: The Company acknowledges that they did not complete an adequate uninsured motorist investigation prior to closing the file in this instance. The handling of this claim is not in line with standard Company procedures, and the individual involved has been made aware of this compliance issue. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.


HOMEOWNERS

18. In three instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. In one instance, tax was not included in the settlement. In one instance, the recoverable depreciation owed was not paid. In one instance, the settlement was calculated incorrectly. The Department alleges these acts are in violation of CCR §2695.7(g).

Summary of Company Response: The Company acknowledges that they did not pay the full amount of the claim due the claimant in these instances. The handling of these claims is not in line with standard Company procedure, and was the result of unintentional oversight. As a result of the examination, the individuals involved have been made aware of the compliance issues and the claimants were paid the appropriate amounts due. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

19. In two instances, the Company failed to provide the written basis for the denial of the claim. These instances involved failure to provide the written basis for partial denial of claims. The Department alleges these acts are in violation of CCR §2695.7(b)(1).

Summary of Company Response: The Company acknowledges that they did not provide the written basis for partial denial of these claims. The handling of these claims is not in line with standard Company procedure, and was the result of unintentional oversight. As a result of the examination, the individuals involved have been made aware of the compliance issue. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

20. In two instances, the Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. In these instances, there was no explanation given to the insured for recovering depreciation taken. The Department alleges these acts are in violation of CCR §2695.4(a).

Summary of Company Response: The Company acknowledges that they did not provide the insured with the method by which depreciation may be recovered in these instances. The handling of these claims is not in line with standard Company procedure, and was the result of unintentional oversight. As a result of the examination, the Company sent a letter of explanation to the insured in one instance. In one instance, the recoverable depreciation was paid to the insured. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

21. In one instance, the Company settled the claim on the basis of a written scope and/or estimate without supplying the insured with a copy of each document upon which the settlement is based. The Department alleges this act is in violation of CCR §2695.9(d).

Summary of Company Response: The Company acknowledges that they did not supply the insured with a copy of the estimate in this instance. The handling of this claim is not in line with standard Company procedure, and was the result of unintentional oversight. As a result of the examination, the Company has added language to their payment letter indicating the attached estimate. The Company will begin training on this issue at their adjuster meeting on March 7, 2007. In addition, management will begin an auditing program of examining 10 claim files per month in connection with their current ongoing audit program to ensure future compliance with the law.

22. In one instance, 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. In this instance, the requested file was unavailable for examination. The Department alleges this act is in violation of CCR §2695.3(b)(3).

Summary of Company Response: The Company acknowledges that the claim file requested for examination in this instance was not available for review. A substitute file was provided in this instance for purposes of the examination. The handling of this claim file is not in line with standard Company procedures, and was the result of unintentional oversight. The Company will begin training on this issue at their adjuster meeting on March 7, 2007.

Previous PageTop Of PageNext Page


Last Revised - June 29, 2007
Copyright California Department of Insurance
Disclaimer