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The examiners reviewed files drawn from the category of Closed Claims for the period February 1, 2004 through January 31, 2005, commonly referred to as the "review period". The examiners reviewed 404 Sterling Casualty Insurance Company claims files. The examiners cited 49 claims 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 $9,662.90.

1. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In 10 instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. Four of these cases reflect failure to maintain a claims diary resulting in gaps in file activity. Three of the claims reflect delays in extending total loss offers to the insureds. The last three cases involved deviations from company policy and procedure with respect to claims processing and other investigative procedures. The Department alleges these acts are in violation of CIC §790.03 (h)(3).

2. Upon acceptance of the claim the Company failed to tender payment within 30 calendar days. In nine instances, upon acceptance of the claim the Company failed to tender payment within 30 calendar days. Two claims with complete proof of claims/release were omitted for payment. Four claims were delayed for payment while awaiting auto repair shop information while three other claims were not promptly handled for payment. The Department alleges these acts are in violation of CCR §2695.7(h).

3. The Company failed to accept or deny the claim within 40 calendar days. In five instances, the Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Companies did not respond promptly, or closed the files without providing basis for claims handling decision and determination. The Department alleges these acts are in violation of CCR §2695.7(b).

Summary of Company Response: The Company acknowledges these findings and attributed them to adjuster errors. While some claims staff were temporary employees who are no longer with the company, reinforcement of company procedures will be emphasized in subsequent trainings and staff meetings for compliance with CCR§ 2695.7(b). The Company will also review its closure procedures to include confirmation letters to the insureds or claimants as to the final outcome of the claim presented.

4. The Company failed to properly document claim files. In five instances, the Company's files failed to contain all documents, notes and work papers. In four cases, the Direct Repair Program (DRP) shop failed to document that a copy of the repair estimate was sent to the insured. On one claim, the adjuster failed to produce documentation of the claims handling actions pertinent to an insured's inquiry/complaint. The Department alleges these acts are in violation of CCR §2695.3(a).

5. The Company failed to include, in the settlement, all applicable taxes, license fees and other fees incident to transfer of evidence of ownership of the comparable automobile. In four instances, the Company failed to include in the settlement, all applicable taxes, license fees and other fees incident to transfer of evidence of ownership of the comparable automobile. Three total loss claims were not paid the miscellaneous transfer fees while in one claim, the sales tax was not properly calculated on the total loss vehicle. The Department alleges these acts are in violation of CCR §2695.8(b)(1).

6. The Company failed to provide written notice of the need for additional time every 30 calendar days. In four instances, the Company failed to provide written notice of the need for additional time every 30 calendar days. The insureds and/or claimants were not apprised in writing of the current pending status of the claim. The Department alleges these acts are in violation of CCR §2695.7(c)(1).

7. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In two instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In one case, a delay in extending a total loss offer resulted in additional lienholder payoff charges. On the other case, storage charges advanced by the insured were not reimbursed. The Department alleges these acts are in violation of CIC §790.03 (h)(5).

8. The Company failed to record claim data in the file. In two instances, 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 these acts are in violation of CCR §2695.3(b)(2).

9. The Company failed to respond to communications within 15 calendar days. In two instances, the Company failed to respond to communications within 15 calendar days. Both instances pertain to delayed responses to claimant attorney letters. The Department alleges these acts are in violation of CCR §2695.5(b).

10. 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 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. Both cases involved betterment reductions which were not fully explained and documented. The Department alleges these acts are in violation of CCR §2695.8(k).

11. The Company failed to comply with the Fair Claims Settlement Practices Regulations. In one instance each, (for a total of four instances), the Company failed to comply with the following Fair Claims Settlement Regulations: (1) CCR§ 2695.7(b)(3) for failure to include a statement in its claim denial that if a claimant believes the claim has been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance; (2) CCR § 2695.8(b)(1)(c) for failure to document the determination of value, including deduction for salvage, that is discernible, measurable, itemized, and specified as well as be appropriate in dollar amount; (3) CCR §2695.8(f) for failure to supply the claimant with a copy of the estimate upon which the settlement is based; and (4) CCR § 2695.4(a) for failure to disclose all benefits, coverages, time limits or other provisions of the insurance policy. The Department alleges these acts are in violation of various fair claims practices regulations.

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