Two Insurers Settle Calif. Insurance Code Violations

The California Department of Insurance announced that a settlement has been reached in an enforcement action against Civil Service Employees Insurance Co. and CSE Safeguard Insurance Co. 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 April 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.

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 California, the DOI reported.

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 DOI said. The companies paid $155,000 to settle those charges. The current settlement was preceded by a two-week hearing in Oakland, Calif., that was continued for additional testimony to August 2010. The settlement was reached during the recess of the hearing.

The Order, signed September 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.

Source: CDI