The examiners reviewed files drawn from the category of Closed Claims for the period February 1, 2005, through January 31, 2006, commonly referred to as the "review period". In addition group long term disability files closed in litigation between November 1, 2004 and June 20, 2006 were reviewed. The examiners reviewed targeted samples of claims closed and denied during these window periods. The examiners reviewed 224 claim files. The examiners cited 57 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. As referenced in section number five below, money recovered within the scope of this report was $137,289.30. The Company indicates that the corrective actions implemented as a result of this exam were taken in all jurisdictions where applicable. 
ACCIDENT AND DISABILITY

1. In 27 instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. The Department alleges these acts are in violation of CIC §790.03(h) (3).

Our policies and procedures are designed to implement this philosophy in strict compliance with California law. While inevitably mistakes will be made, our claims administration largely reflects our philosophy of providing high quality and accurate service to our claimants.

The Company has acknowledged each of the Department's cited violations, even in those situations in which the Company believes that the handling of the claim was consistent with California law and the Company's policies and procedures. In many of the instances cited by the Department, the Company had undertaken corrective steps on the claim prior to or during the course of the Department's examination. On the whole, the Company believes that the cited files reflect isolated instances of failure to diligently follow the Company's policies and procedures that are not indicative of the Company's normal claims processing standards, and thus do not represent a general business practice in violation of CIC §790.03(h)(3).

However, in order to further address the Department's concerns, the Company will re-emphasize the importance of proper claims handling and continue to audit to ensure prompt and reasonable investigations and timely benefits payments. As indicated above, the Company will clarify language in several existing policy statements and letter templates, release new policy and procedures, institute process improvements for requesting and obtaining necessary information for the claim file, and reinforce the obligation of claims personnel to adhere to the Company's existing best practices."

2. In 17 instances, the Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. The Department alleges these are violations of CIC §790.03(h) (5).

However, in order to further address the Department's concerns, the Company will re-emphasize the importance of proper claims handling and continue to audit to ensure prompt and reasonable investigations and timely benefits payments. As indicated above, the Company will clarify language in several existing policy statements and letter templates, release new policy and procedures, institute process improvements for requesting and obtaining necessary information for the claim file, and reinforce the obligation of claims personnel to adhere to the Company's existing best practices."

3. In six instances the Company failed to represent correctly to claimants, pertinent facts or insurance policy provisions relating to a coverage at issue. The Department alleges these acts are violations of CIC §790.03(h) (1).

However, in order to further address the Department's concerns, the Company will take the specific steps described above in order to re-emphasize the importance of proper claims handling to ensure prompt and reasonable investigations and timely benefits payments consistent with the Company's existing best practices."

4. In four instances, the Company compelled insureds to institute litigation to recover amounts under an insurance policy offering substantially less than the amounts ultimately recovered in actions brought by the insureds, when the insureds have made, claims for amounts reasonably similar to amounts ultimately recovered. The Department alleges these acts are in violation of CIC §790.03(h) (6).

All of these files reflected that the Company had failed to perform a proper investigation of the claim or had misapplied policy provisions. These errors were recognized only after the claimant had instituted litigation as follows:

However, in order to further address the Department's concerns, the Company has recently implemented senior claim manager review and sign-off of all adverse claim determinations. The Company has also reduced these senior claim managers' claim loads to ensure they have time to focus on these additional reviews. Additionally, the Company will make efforts to calibrate the senior claim manager staff based on feedback from internal audit reviews. Team Leaders at the Company will review findings from audit reviews and track areas requiring increased focus. Based on findings, the Company will propose training, policy and procedures, or performance management as necessary to ensure consistent compliance with California law."

5. In two instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. In one instance, the Company failed to include an additional 10% to the monthly benefit as the policy allowed an additional 10% when income from other income was offset. The other instance reflected a period of disability during which a two year Mental and Nervous limitation was applied to a period of disability contributed to by a physiological condition. The amount recovered for consumers on these two claims was $137, 289.30. The Department alleges these acts are in violation of CCR §2695.7(g).


6. In one instance, 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 identified one instance, only in which the Company failed to include the California Department of Insurance language on a denial letter. The Department alleges this act is in violation of CCR §2695.7(b) (3).
LIFE
There were no citations alleged or criticisms of insurer practices in this line of business within the scope of this report.

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