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The examiners reviewed files drawn from the category of Closed Claims for the period May 1, 2005, through April 30, 2006, commonly referred to as the "review period". The examiners reviewed 74 VFLIC claim files. The examiners cited 39 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. There were no recoveries discovered within the scope of this report.

1. In 36 instances, the Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. In these instances the Company did not disclose the settlement options offered in the policy to beneficiaries at the time of settlement. In addition, the Company failed to inform beneficiaries of the policy provision which required the beneficiaries provide the Company with a written request in order to select a settlement option. The Department alleges these acts are in violation of CCR §2695.4(a).

Summary of Company Response: In response to this criticism, the Company revised its Claimant Statement form it provides to beneficiaries upon notice of claim. The revised form now informs beneficiaries of the various settlement options that are available in the policy and allows the beneficiary to choose a settlement option.

2. In two instances, the Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. In these isolated instances the Company failed to correspond with beneficiaries regarding the status of their claims within 40 calendar days of receiving proof of claim. The Department alleges these acts are in violation of CCR §2695.7(b).

3. In one instance, the Company failed to maintain all documents, notes and work papers in the claim file. The Company places the explanation and computation of benefits on its check stubs. In this instance the Company was unable to produce a copy of the check stub containing an explanation and computation of benefits as required in CCR §2695.11(b). The Department alleges this act is in violation of CCR §2695.3(a).

Summary of Company Response: It is the Company's procedure to maintain all documents, notes, work papers, and accounting records relative to all claim payments. This isolated error was the result of unintentional oversight. An explanation and computation of benefits as required by CCR 2695.3(a) is provided on the check stub attached to each benefit payment check. A check voucher sheet identifying this information can be generated for each benefit payment made.

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Last Revised - July 13, 2007
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