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[IN ACCORDANCE WITH CALIFORNIA INSURANCE CODE (CIC) SECTION 12938, THIS REPORT WILL BE MADE PUBLIC AND PUBLISHED ON THE

CALIFORNIA DEPARTMENT OF INSURANCE (CDI) WEBSITE]

WEBSITE PUBLISHED REPORT OF THE MARKET CONDUCT EXAMINATION OF THE CLAIMS PRACTICES OF

GREAT WEST CASUALTY COMPANY NAIC # 11371 CDI # 2106-3

AS OF AUGUST 15, 2015

ADOPTED JUNE 7, 2019

STATE OF CALIFORNIA

CALIFORNIA DEPARTMENT OF INSURANCE MARKET CONDUCT DIVISION

FIELD CLAIMS BUREAU

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NOTICE

The provisions of Section 735.5(a) (b) and (c) of the California

Insurance Code (CIC) describe the Commissioner’s authority

and exercise of discretion in the use and/or publication of

any final or preliminary examination report or other

associated documents. The following examination report is

a report that is made public pursuant to California Insurance

Code Section 12938(b)(1) which requires the publication of

every adopted report on an examination of unfair or

deceptive practices in the business of insurance as defined

in Section 790.03 that is adopted as filed, or as modified or

corrected, by the Commissioner pursuant to Section 734.1.

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TABLE OF CONTENTS

FOREWORD ................................................................................................................... 1

SCOPE OF THE EXAMINATION ................................................................................... 2

EXECUTIVE SUMMARY ................................................................................................ 4

DETAILS OF THE CURRENT EXAMINATION .............................................................. 5

SUMMARY OF EXAMINATION RESULTS .................................................................. 11

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FOREWORD

This report is written in a “report by exception” format. The report does not

present a comprehensive overview of the subject insurer’s practices. The report

contains a summary of pertinent information about the lines of business examined,

details of the non-compliant or problematic activities that were discovered during the

course of the examination and the insurer’s proposals for correcting the deficiencies.

When a violation that reflects an underpayment to the claimant is discovered and the

insurer corrects the underpayment, the additional amount paid is identified as a

recovery in this report.

While this report contains violations of law that were cited by the examiners,

additional violations of CIC § 790.03 or other laws not cited in this report may also apply

to any or all of the non-compliant or problematic activities that are described herein.

All unacceptable or non-compliant activities may not have been discovered.

Failure to identify, comment upon or criticize non-compliant practices in this state or

other jurisdictions does not constitute acceptance of such practices.

Alleged violations identified in this report, any criticisms of practices and the

Company’s responses, if any, have not undergone a formal administrative or judicial

process.

This report is made available for public inspection and is published on the

California Department of Insurance website (www.insurance.ca.gov) pursuant to

California Insurance Code section 12938(b)(1).

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SCOPE OF THE EXAMINATION

Under the authority granted in Part 2, Chapter 1, Article 4, Sections 730, 733,

and 736, and Article 6.5, Section 790.04 of the California Insurance Code; and Title 10,

Chapter 5, Subchapter 7.5, Section 2695.3(a) of the California Code of Regulations, an

examination was made of the claim handling practices and procedures in California of:

GREAT WEST CASUALTY COMPANY NAIC # 11371

Group NAIC # 0150

Hereinafter, the Company listed above also will be referred to individually as

GWCC or the Company.

This examination covered the claim handling practices of the aforementioned

Company on Commercial Automobile, Inland Marine, and Commercial General Liability

claims closed during the period from August 16, 2014 through August 16, 2015. The

examination was made to discover, in general, if these and other operating procedures

of the Company conform to the contractual obligations in the policy forms, the California

Insurance Code (CIC), the California Code of Regulations (CCR), and case law.

To accomplish the foregoing, the examination included:

1. A review of the guidelines, procedures, training plans and forms adopted by

the Company for use in California including any documentation maintained by the

Company in support of positions or interpretations of the California Insurance Code, Fair

Claims Settlement Practices Regulations, and other related statutes, regulations and

case law used by the Company to ensure fair claims settlement practices.

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2. A review of the application of such guidelines, procedures, and forms, by

means of an examination of a sample of individual claim files and related records.

3. A review of the California Department of Insurance’s (CDI) market analysis

results; and if any, a review of consumer complaints and inquiries about this Company

closed by the CDI during the period August 16, 2014 through August 16, 2015; a review

of previous CDI market conduct claims examination reports on this Company; and a

review of prior CDI enforcement actions.

The review of the sample of individual claim files was conducted at the offices of

the Company in South Sioux City, Nebraska.

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EXECUTIVE SUMMARY

The Commercial Automobile, Inland Marine, and Commercial General Liablity

claims reviewed were closed from August 16, 2014 through August 16, 2015, referred to

as the “review period”. The examiners randomly selected 186 GWCC claim files for

examination. The examiners cited 79 alleged claims handling violations of the

California Insurance Code and the California Code of Regulations from this sample file

review.

Findings of this examination included the failure to effectuate prompt, fair, and

equitable settlements of claims in which liability has become reasonably clear; failure to

include, in the settlement, sales tax associated with the cost of a comparable vehicle,

discounted by the amount of sales tax attributed to the salvage value of the loss vehicle;

failure to include, in the settlement, fees incident to the transfer of the vehicle to salvage

status; failure to explain in writing the determination of the cost of a comparable vehicle

at the time the settlement offer was made; and failure to take reasonable steps to verify

that the determination of the cost of a comparable vehicle was accurate and

representative of the market value in the local market area.

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DETAILS OF THE CURRENT EXAMINATION

Further details with respect to the examination and alleged violations are

provided in the following tables and summaries:

GWCC SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Commercial Automobile / Collision 1,098 44 36

Commercial Automobile / Comprehensive 512 21 21

Commercial Automobile / Property Damage 1,749 26 6

Commercial Automobile / Bodily Injury 1,607 24 0

Commercial Automobile / Medical Payments 7 7 11

Commercial Automobile / Uninsured Motorist Bodily Injury

5 5 0

Inland Marine/ Cargo 424 58 5

Commercial General Liability 4 1 0

TOTALS 5,406 186 79

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TABLE OF TOTAL VIOLATIONS

Citation Description of Allegation

GWCC

Number of Alleged

Violations

CCR §2695.7(g) *[CIC §790.03(h)(5)]

The Company attempted to settle a claim by making a settlement offer that was unreasonably low.

11

CCR §2695.8(b)(1) *[CIC §790.03(h)(5)]

The Company failed to include, in the settlement, all applicable taxes. The Company failed to include, in the settlement, the license fee and other annual fees computed based upon the remaining term of the current registration.

9

7

CCR §2695.8(b)(4) *[CIC §790.03(h)(3)]

The Company failed to explain in writing the determination of the cost of a comparable vehicle at the time the settlement offer was made. Determination of the actual cash value (ACV) was not explained. The Company failed to take reasonable steps to verify that the determination of the cost of a comparable vehicle was accurate and representative of the market value in the local market area. The Company failed to fully itemize in writing the determination of the cost of a comparable vehicle at the time the settlement offer was made. Itemization of all components of the settlement was not provided.

8 5 1

CCR §2695.8(b)(1)(A) *[CIC §790.03(h)(5)]

The Company failed to include, in the settlement, sales tax associated with the cost of a comparable vehicle, discounted by the amount of sales tax attributed to the salvage value of the loss vehicle. The Company failed to include, in the settlement, fees incident to the transfer of the vehicle to salvage status.

6 5

CCR §2695.7(b)(1) [CIC §790.03(h)(3)] CCR §2695.7(b)(1) *[CIC §790.03(h)(13)]

The Company failed to provide in writing the reasons for the denial of the claim in whole or in part including the factual and legal bases for each reason given. The Company failed to provide in its written denial a reference to and explanation of the applications of specific statutes, applicable laws, and policy provisions, conditions or exclusions.

4 1

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Citation Description of Allegation

GWCC

Number of Alleged

Violations

CCR §2695.7(b)(3) *[CIC §790.03(h)(3)]

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.

4

CCR §2695.7(b) *[CIC §790.03(h)(3)] *[CIC §790.03(h)(4)]

The Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days.

4

CCR §2695.7(h) [CIC §790.03(h)(5)]

The Company failed, upon acceptance of the claim, to tender payment within 30 calendar days.

3

CCR §2695.7(c)(1) *[CIC §790.03(h)(3)]

The Company failed to provide written notice of the need for additional time or information every 30 calendar days

3

CCR §2695.5(b) *[CIC §790.03(h)(2)]

The Company failed to respond to communications within 15 calendar days.

1

CIC §1871.3(b) *[CIC §790.03(h)(3)]

The Company failed to properly instruct the insured regarding the signing of the theft affidavit.

2

CCR §2695.8(i)(1) *[CIC §790.03(h)(5)]

The Company failed to reflect a measurable difference in market value attributable to the condition and age of the vehicle in its basis for any adjustment regarding betterment or depreciation.

1

CCR §2695.8(b)(1)(A) *[CIC §790.03(h)(3)]

The Company failed to disclose in writing to the claimant that notice of the salvage retention by the claimant must be provided to the Department of Motor Vehicles and that this notice may affect the loss vehicle’s future resale and/or insured value. The Company failed to deduct a salvage value from the settlement that was determined by the amount for which a salvage pool or a licensed salvage dealer, wholesale motor vehicle auction or dismantler will purchase the salvage.

1 1

CCR §2695.8(f) *[CIC §790.03(h)(3)]

The Company failed to supply the claimant with a copy of the estimate upon which the settlement was based.

1

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Citation Description of Allegation

GWCC

Number of Alleged

Violations

CCR §2695.85(a) *[CIC §790.03(h)(3)]

The Company failed to provide the insured with the Auto Body Repair Consumer Bill of Rights either at the time of application for automobile insurance, at the time a policy was issued, or following an accident.

1

Total Number of Alleged Violations 79

*DESCRIPTIONS OF APPLICABLE UNFAIR CLAIMS SETTLEMENT PRACTICES

CIC §790.03(h)(2) The Company failed to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.

CIC §790.03(h)(3) The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.

CIC §790.03(h)(4) The Company failed to affirm or deny coverage of claims within a reasonable time after proof of loss requirements had been completed and submitted by the insured.

CIC §790.03(h)(5) The Company failed to effectuate prompt, fair, and equitable settlements of claims in which liability had become reasonably clear.

CIC §790.03(h)(13)

The Company failed to provide promptly a reasonable explanation of the bases relied upon in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement.

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TABLE OF ALLEGED VIOLATIONS BY LINE OF BUSINESS

COMMERCIAL AUTOMOBILE 2014 Written Premium: $37,691,744 2015 Written Premium: $48,737,572

AMOUNT OF RECOVERIES $60,064.10

NUMBER OF ALLEGED VIOLATIONS

CCR §2695.8(b)(1) [CIC §790.03(h)(5)] 16

CCR §2695.8(b)(4) [CIC §790.03(h)(3)] 14

CCR §2695.8(b)(1)(A) [CIC §790.03(h)(5)] 11

CCR §2695.7(g) CIC §790.03(h)(5) 11

CCR §2695.7(b)(1) [CIC §790.03(h)(13)] 5

CCR §2695.7(b) [CIC §790.03(h)(3) & CIC §790.03(h)(4)] 4

CCR §2695.7(h) [CIC §790.03(h)(5)] 3

CIC §1871.3(b) [CIC §790.03(h)(3)] 2

CCR §2695.8(b)(1)(A) [CIC §790.03(h)(3)] 2

CCR §2695.7(b)(3) [CIC §790.03(h)(3)] 1

CCR §2695.5(b) [CIC §790.03(h)(2)] 1

CCR §2695.7(c)(1) [CIC §790.03(h)(3)] 1

CCR §2695.85(a) [CIC §790.03(h)(3)] 1

CCR §2695.8(i) CIC §790.03(h)(5) 1

CCR §2695.8(f) [CIC §790.03(h)(3)] 1

SUBTOTAL 74

INLAND MARINE

2014 Written Premium: $5,251,490 2015 Written Premium: $6,552,514

AMOUNT OF RECOVERIES $0

NUMBER OF ALLLEGED VIOLATIONS

CCR §2695.7(b)(3) [CIC §790.03(h)(3)] 3

CCR §2695.7(c)(1) [CIC §790.03(h)(3)] 2

SUBTOTAL 5

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COMMERCIAL GENERAL LIABILITY

2014 Written Premium: $676,214 2015 Written Premium: $826,742

AMOUNT OF RECOVERIES $0

NUMBER OF ALLEGED VIOLATIONS

SUBTOTAL 0

TOTAL 79

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SUMMARY OF EXAMINATION RESULTS

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.

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. The Company

is obligated to ensure that compliance is achieved.

Any noncompliant practices identified in this report may extend to other

jurisdictions. The Company should address corrective action for other jurisdictions

when applicable.

Money recovered within the scope of this report was $60,064.10 as described in

section numbers 1, 2, 3, 4, and 10 below.

COMMERCIAL AUTOMOBILE 1. In 16 instances, the Company failed to comply with the requirements of CCR §2695.8(b)(1) as follows:

1(a). In nine instances, the Company failed to include, in the settlement, the license fee and other annual fees computed based upon the remaining term of the registration. In six instances with stated limit policies, the Company did not pay unused registration and one-time transfer fees on Company-retained total loss claims. In the last three instances, the Company failed to pay the unused registration and one-time transfer fees on Company-retained total loss claims with Actual Cash Value (ACV) settlements.

1(b). In seven instances, the Company failed to include in the settlement all applicable taxes. In six instances with stated limit policies, the Company failed to include sales tax on Company-retained total loss settlements. In one instance, the Company paid taxes at an incorrect rate on an ACV total loss claim.

The Department alleges these acts are in violation of CCR §2695.8(b)(1) and are

unfair practices under CIC §790.03(h)(5).

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Summary of the Company’s Response to 1(a) and 1(b): In three instances

under 1(a) in which the Company settled on ACV total loss claims, the Company issued additional payments of $158.00 for the unused registration and one-time transfer fees. In one instance under 1(b) for using an incorrect sales tax rate, the Company issued an additional payment of $674.46.

With regard to the 12 instances involving stated limit claims under 1(a) and 1(b), the Company amended its settlement practices involving total loss claims wherein the ACV amount exceeds the stated value limit. The Company agrees to pay license fees and other annual fees computed based upon the remaining term of the registration, and applicable sales tax in addition to the stated value of the vehicle.

As a result of the examination, the Company reopened the 12 pertinent claims

and issued additional payments of $35,395.25. 2. In 14 instances, the Company failed to comply with the requirements of CCR §2695.8(b)(4) as described below:

2(a). In eight instances, the Company failed to explain in writing the determination of the cost of a comparable vehicle at the time the settlement offer was made. The Company utilized Kelly Blue Book (KBB), National Auto Dealers Association (NADA), and one comparable vehicle valuation to determine the ACV of the total loss vehicle. These evaluations were not provided to the claimants at the time the offer of settlements were made.

2(b). In five instances, the Company failed to take reasonable steps to

verify that the determination of the cost of a comparable vehicle was accurate and representative of the market value in the local market area. The Company utilized KBB, NADA, and one comparable vehicle valuation to determine the ACV of the total loss vehicles. The Company did not utilize two or more comparable local market vehicles to assure the determination of the cost of a comparable vehicle was accurate and representative of the market value in the local market area. In addition, the base values utilized in the KBB and NADA were not specific to the condition and options on the vehicle, other than the year, make, model, and mileage. There was no process/procedure to document options and condition of the vehicles.

2(c). In one instance, the Company failed to fully itemize in writing the determination of the cost of a comparable vehicle at the time the settlement offer was made. Itemization of all components of the settlement was not provided.

The Department alleges these acts under 2(a), 2(b), and 2(c) are in violation of

CCR §2695.8(b)(4) and are unfair practices under CIC §790.03(h)(3).

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Summary of the Company’s Response to 2(a), 2(b), and 2(c): The Company acknowledged the findings and counseled pertinent staff. The Company reopened pertinent claims and issued additional payments of $4,237.50.

Since the conclusion of the Department’s examination, the Company voluntarily

took prompt action to remind adjusters of California claims handling regulations. The Company issued the following memoranda:

a) Memo dated January 15, 2016 regarding written notice to claimants b) Memo dated January 20, 2016 regarding procedures for valuing total loss

vehicles (this is an Addendum to the January 15, 2016 memo) c) Memo dated December 7, 2016 regarding numerous California requirements

including the valuation process required in total loss claims per 10 CCR §2695.8(b)(4).

The Company provided the Department with copies of these memoranda. The

Company also reminded all adjusters of the claim handling requirements as specified under this regulation.

3. In 11 instances, the Company failed to comply with the requirements of CCR §2695.8(b)(1)(A) as described below:

3(a). In six instances, the Company failed to include, in the settlement, sales tax associated with the cost of a comparable vehicle, discounted by the amount of sales tax attributed to the salvage value of the loss vehicle. In five instances, the Company failed to include sales tax on owner-retained total loss claims paid on a Stated Limit basis. In the last instance, the Company paid taxes at an incorrect rate on an ACV total loss settlement.

3(b). In five instances, the Company failed to include, in the settlement,

fees incident to the transfer of the vehicle to salvage status. The Company failed to pay the salvage certificate fees on owner-retained total loss claims paid on a Stated Limit basis.

The Department alleges these acts under 3(a) and 3(b) are in violation of CCR

§2695.8(b)(1)(A) and are unfair practices under CIC §790.03(h)(5). Summary of the Company’s Response to 3(a) and 3(b): The Company

acknowledged the findings and counseled pertinent staff. The Company reopened pertinent claims to issue payments pertaining to the incorrect sales tax, applicable sales tax added to the stated limit claims, and salvage certificate fees added to the stated limit claims. The Company issued additional payments of $14,203.10. Additionally, the Company issued a directive and instructions to its adjusters advising them to pay applicable sales tax and salvage certificate fees in addition to the stated value/limit on the policy. The Company provided the Department with a copy of this directive.

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4. In 11 instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. The specific instances are as described below. The Department alleges these acts described in 4(a), 4(b), 4(c), 4(d) and 4(e) below are in violation of CCR §2695.7(g) and are unfair practices under CIC §790.03(h)(5).

4(a) On claims under Stated Limit policies in seven (7) instances, the Company subtracted the salvage value from the stated limit (SL) as opposed to the actual cash value (ACV) resulting in low settlements. In these instances, the Company failed to pay the Stated Limit, and/or failed to consider the insured’s option to keep the salvage vehicle when the ACV valuation exceeds the Stated Limit. The Department alleges these acts are in violation of CCR §2695.7(g) and are unfair practices under CIC §790.03(h)(5).

Summary of the Company’s Response to 4(a): The Company believes it

correctly adjudicated these claims based upon the terms of its policy wherein the insured chose to insure their vehicle under a Stated Limit endorsement, and at the time of the loss the Actual Cash Value of the vehicle was more than the amount the insured chose to insure the vehicle. To address the concerns of the Department on a moving-forward basis, the Company has amended/revised its procedures in the handling of Stated Limit policies wherein the Stated Limit is less than the Actual Cash Value to include the following:

1) The Company will deduct the salvage amount from the Actual Cash Value (ACV) and not from the Stated Limit on total loss claims involving non-repairable vehicles.

2) On repairable vehicles, the Company will pay the Stated Limit (SL) if repair costs exceed the SL limits. There is no salvage title in these instances.

3) The Company will update its policy language on its California Motor Carrier Coverage Form to be consistent with the settlement guidelines as revised.

4) These new procedures will be effective and disseminated to all claims staff on or before April 8, 2019.

4(b) In one instance, the Company failed to pay a tow bill for the vehicle’s removal from the scene of a loss.

Summary of the Company’s Response to 4(b): The Company acknowledged the finding and counseled pertinent staff. The Company stated that this was an inadvertent error and the Company reimbursed the insured an additional $1,000.00 for the cost of the tow bill.

4(c) In one instance, the Company reduced the labor rate upon presentation of a

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repair shop estimate.

Summary of the Company’s Response to 4(c): The Company stated that the insured chose to conduct the repairs on his vehicle and acknowledged that the Company reduced the shop labor rate on the estimate. As a result of this finding, the Company reopened the claim and issued additional payment of $407.50 for the difference in labor rates. To ensure future compliance, the Company issued instructions for all adjusters prohibiting a labor rate reduction without cause.

4(d) In one instance, the Company represented and confirmed with an insured that there was coverage for Medical Payment on a policy. Once the medical invoice was submitted for reimbursement, the Company denied coverage for the medical treatment and did not pay the claim. The Company failed to recognize the detrimental reliance of the insured to secure treatment for injuries related to the collision.

Summary of the Company’s Response to 4(d): The Company acknowledged

the error and stated that the policy in force did not provide medical payment coverage. As a result of this finding, the Company reopened this claim and issued payment of $1,289.00 for the medical bills. The Company indicates this was an isolated incident which was addressed with pertinent staff.

4(e) In one instance, the Company failed to pay the whole loss and reduced settlement for an alleged unrelated prior damage (UPD). Summary of the Company’s Response to 4(e): The Company states this was a clerical error and counseled pertinent staff. The Company reopened the claim and issued an additional payment of $60.00. 5. In five instances, the Company failed to comply with the requirements of CCR §2695.7(b)(1) as described below:

5(a) In four instances, the Company failed to provide in writing the reasons for the denial of the claim in whole or in part including the factual and legal bases for each reason given. The Company failed to send partial and/or whole denial letters when proof of loss were received such as repair estimates, medical bills, airfare and car rental invoices.

5(b) In one instance, the Company failed to provide in its written denial a reference to and explanation of the applications of specific statutes, applicable laws, and policy provisions, conditions or exclusions.

The Department alleges these acts under 5(a) and 5(b) are in violation of CCR §2695.7(b)(1) and are unfair practices under CIC §790.03(h)(13).

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Summary of the Company’s Response: The Company acknowledges these findings and states that these instances involved a more recent coverage offered to insureds for payment of miscellaneous expenses. As a remedial measure for all identified instances, the Company reminded all adjusters of the claim handling requirements under CCR §2695.7(b)(1) and issued a memorandum directive to staff.

6. In four instances, the Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. This pertains to three first-party Medical Payments claims and one third-party Property Damage claim. In these instances, the Company received written proof of claim and failed to accept or deny within the required timeframes. The Department alleges these acts are in violation of CCR §2695.7(b) and are unfair practices under CIC §790.03(h)(3) and CIC §790.03(h)(4).

Summary of the Company’s Response: The Company acknowledges the

findings and indicates that it has a procedure in place to timely accept or deny claims. As a remedial measure for all identified instances, the Company reminded all adjusters of the claim handling requirements under CCR §2695.7(b) and issued a memorandum directive to staff.

7. In three instances, the Company failed, upon acceptance of the claim, to

tender payment within 30 calendar days. The Company received medical bills from the medical providers and failed issue payment timely. The Department alleges these acts are in violation of CCR §2695.7(h) and are unfair practices under CIC §790.03(h)(5).

Summary of the Company’s Response: The Company acknowledges the findings and indicates this was due to adjuster error in all instances. The Company issued a directive/reminder to its adjusters emphasizing that non-contested medical bills must be paid within regulatory timelines. The Company provided the Department with a copy of this instruction. 8. In two instances, the Company failed to properly instruct the insured regarding the signing of the theft affidavit. The Company only provided for the option of a notary even though the theft affidavit form can also be signed in the presence of an insurance agent, broker, adjuster, or a claims representative. The Department alleges these acts are in violation of CIC §1871.3(b) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: At the time of the examination, the Company acknowledges that its cover letter on the packet of documents only provided for the option of a notary on a theft affidavit. However, the Company states the theft affidavit includes instructions that allows for both methods of completing the form. As a remedial measure, the Company revised its template cover letter instructing the insured of the alternative methods of signing a theft affidavit.

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9. In two instances, the Company failed to comply with the requirements of CCR §2695.8(b)(1)(A) as described below:

9(a). In one instance, the Company failed to disclose in writing to the claimant that notice of the salvage retention by the claimant must be provided to the Department of Motor Vehicles and that this notice may affect the loss vehicle’s future resale and/or insured value.

9(b). In one instance, the Company failed to deduct a salvage value from

the settlement that was determined by the amount for which a salvage pool or a licensed salvage dealer, wholesale motor vehicle auction or dismantler will purchase the salvage.

The Department alleges these acts are in violation of CCR§2695.8(b)(1)(A) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response to 9(a) and 9(b): The Company

acknowledges the findings.

9(a). The Company states this was an isolated error, which was addressed with pertinent staff. The Company indicates it has a procedure in place to disclose in writing the need to submit a notice of salvage retention to the Department of Motor Vehicles.

9(b). The Company states that it has a standard practice and procedure of

documenting all salvage bids in the file. The Company reports that it obtained one salvage bid from a licensed salvage dealer but unfortunately, it was not included in the claim file. The Company addressed this isolated error with pertinent staff. 10. In one instance, the Company failed to reflect a measurable difference in

market value attributable to the condition and age of the vehicle in its basis for any adjustment regarding betterment or depreciation. The Company prepared a repair estimate for unrelated prior collision damage (UPD). The full amount of this estimate was subtracted from the ACV to determine the net total loss settlement. This reduction in settlement was approximately one third (1/3) of the vehicle’s ACV. The Company stated it had no written instruction or procedure on how to apply a dollar-for-dollar reduction for unrelated damages. The Department alleges this act is in violation of CCR §2695.8(i) and is unfair practices under CIC §790.03(h)(5).

Summary of the Company’s Response: The Company acknowledges that in one claim, the adjuster erred in failing to document the measurable impact of the unrelated prior damage to determine the ACV of the vehicle at the time of loss. The Company acknowledges that it was incorrect to apply a “dollar-for-dollar” deduction in determining the ACV of the vehicle at the time of loss. The Company addressed this matter with pertinent staff.

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As a result of this finding, the Company reopened the claim and determined the

measurable impact of the unrelated physical damage (UPD) pursuant to the requirements of this regulation. The Company issued an additional payment of $2639.29 to the claimant.

11. In one instance, the Company failed to respond to communications within 15 calendar days. The Company failed to respond to communication from an attorney. The Department alleges this act is in violation of CCR §2695.5(b) is an unfair practice under CIC §790.03(h)(2).

Summary of the Company’s Response: In the one instance involving attorney communication, the Company acknowledges this isolated finding. To ensure future compliance, the claims manager counseled the handling adjuster on this requirement. 12. In one instance each (for a total of four instances), the Company failed to comply with Fair Claims regulation Practices as follows: (a) CCR §2695.7(b)(3) for failure to notify the claimant of their right to have a claim denial reviewed by the California Department of Insurance; (b) CCR §2695.7(c)(1) for failure to provide written notice of the need for additional time every 30 days; (c) CCR §2695.8(f) for failure to supply a claimant with a copy of an estimate upon which the settlement was based; and (d) CCR §2695.85(a) for failure to provide the insured with the current version of the Auto Body Repair Consumer Bill of Rights. The Department alleges these acts are in violation of Fair Claims Regulation Practices and are unfair practices under CIC§790.03(h)(3).

Summary of the Company’s Response: The Company acknowledges the

findings and states that the Company has standard practices and procedures in these four instances involving four different claim-handling regulations. The Company issued a memorandum regarding California Claims Practices Requirements to its claims staff. Additionally, the Company amended its template Auto Body Repair Bill of Rights. INLAND MARINE 13. In three 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 Company failed to reference the California Department of Insurance in three denial letters. The Department alleges these acts are in violation of CCR §2695.7(b)(3) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company acknowledges it did not include a reference to the Department in these three instances. As a remedial

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measure, the Company issued a memorandum regarding this requirement to its claims staff. 14. In two instances, the Company failed to provide written notice of the need for additional time or information every 30 calendar days. The Company failed to provide timely status notices in writing on these claims. The Department alleges these acts are in violation of CCR §2695.7(c)(1) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: Although the Company was in verbal contact with the claimants on these claims, the Company acknowledges it inadvertently failed to send written status letters every 30 days. As a remedial measure, the Company issued a memorandum regarding this requirement to its claims staff.