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The examiners reviewed files drawn from the category of Closed Claims for the period November 1, 2004, through October 31, 2005, commonly referred to as the "review period". The examiners reviewed 178 FASIC claim files and 63 FAPCIC claim files. The examiners cited 23 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 Companies are 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 Companies, it is the Companies obligation to ensure that compliance is achieved. Money recovered within the scope of this report was $1406.39.
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1. In 13 instances, the Companies failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. When processing theft claims and when a claimant had no receipts, the companies depreciated the item or items stolen by an automatic 50% of RCV until the claimant replaced it with an identical item under the RCV provision. There is neither a written policy that addresses this practice by amendment nor policy provision addressing this practice and the files do not indicate how the depreciation was determined. The Department alleges these acts are in violation of CIC§790.03(h)(3).

Summary of Companies' Response: The Companies state: "We recognize that any depreciation taken on the settlement value of a loss must be discernable and documented. We have taken steps to reinforce the companies' practice of fully documenting all claim files by re-training the claim handlers as well as requiring outside vendors to provide full documentation of the basis of any depreciation taken, all to ensure compliance with the regulations."

2. In three instances, the Company failed, to provide the written basis for the denial of the claim. In three instances, the Company failed to provide written basis for the denial of the claim. The Department alleges these acts are in violation of CCR § 2695.7(b)(1)

Summary of Company Response: The Company accepts the criticism. They will address the Department's concern with the individual claim handler and continue to insure compliance through use of training, internal audits and supervisory input.

3. In two instances, the Companies' failed to maintain all documents, notes and work papers in the claim file. In one instance, an inventory sheet used to determine the settlement amount was missing. In another instance the depreciation was unsupported. The Department alleges these acts are in violation of CCR § 2695.3(a).

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

4. In two instances, the Companies failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. In two 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 Companies acknowledge that they failed to accept the claims within forty calendar days upon receiving proof of claim. In one instance there was a recovery of $1406.39 paid to a consumer for depreciation which had been initially subtracted from the claim payment. The Companies will continue to ensure compliance through training programs, supervisory input and internal audits.

5. In two 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 Company agrees with the finding. The Company addressed the Department's concern with the individual claims handler and will continue to ensure compliance through use of training, internal audits and supervisory input.

6. In one instance, the Company claims agent failed to immediately transmit notice of claim to the insurer. The Department alleges this act is in violation of CCR § 2695.5(d)

Summary of Companies' Response: The Company acknowledges this finding and states that it is an isolated instance. As a result of the examination, the Broker was contacted and reminded to immediately transmit notice of a claim to the Company.

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Last Revised - June 08, 2006
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