The settlement marks the end of a market conduct examination that found numerous violations of the Insurance Code and Regulations for the period May 1, 2005 through Apr. 30, 2006. Specifically, Department examiners reviewed the companies' claims handling practices in automobile, homeowners, and commercial liability lines of insurance, randomly selected 596 claim files closed during the review period and found 661 claim-handling violations.
"Let me be clear - I will continue to pursue and sanction any insurance company that engages in such gross misconduct," Commissioner Poizner said. "The laundry list of violations perpetrated by each of these companies is unacceptable. I am pleased with the work of my department in holding them accountable for their irresponsible actions. This settlement is a victory for policyholders in California, as well as a notice to all insurers that deficient and illegal business practices will not be tolerated."The violations include such acts as failing to provide their policyholders with necessary facts, including policy provisions and other pertinent policy information upon filing of a claim, failing to properly advise the insured of the determination of fault, failing to provide the claimant with a copy of an automobile repair estimate, failing to provide claimant with a written basis for total automobile loss settlement, failing to pay all fees and taxes incident to an automobile total loss settlement, failing to explain the basis for depreciation, failing to effectuate prompt, fair and equitable settlements of claims and failing to adhere to the claims processing laws of the State of Ca.
This is not the first time that these companies were charged with violations the Insurance Code. A prior examination, for the period May 2000 through April 2001, uncovered violations similar to the ones identified in the 2005 - 2006 examination. The companies paid $155,000 to settle those charges. The current settlement was preceded by a two-week hearing in Oakland that was continued for additional testimony to August 2010. The settlement was reached during the recess of the hearing.
The Order, signed Sept. 20, 2010, requires the two companies to cease and desist from the acts in which violations were found and pay a $505,000 monetary penalty, $450,000 of which was applied under CIC Sections 790.03 and 790.035, with the remaining $55,000 applied under CIC Sections 790.05 and 790.07. For more information visit the Department of Insurance web site at www.insurance.ca.gov.
