NATIONAL CASUALTY COMPANY NAIC # 11991 CDI # 0127-1 ... Conduct... · 5/31/2016 · SCOTTSDALE INDEMNITY COMPANY NAIC # 15580 CDI # 3940-4 AS OF MAY 31, 2016 ADOPTED OCTOBER 31,

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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

NATIONAL CASUALTY COMPANY NAIC # 11991 CDI # 0127-1

SCOTTSDALE INDEMNITY COMPANY NAIC # 15580 CDI # 3940-4

AS OF MAY 31, 2016

ADOPTED OCTOBER 31, 2018

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

TABLE OF TOTAL ALLEGED VIOLATIONS ................................................................ 7

SUMMARY OF EXAMINATION RESULTS .................................................................. 13

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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 insurers’ 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

Companies’ 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).

http://www.insurance.ca.gov/

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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:

National Casualty Company NAIC # 11991

Scottsdale Indemnity Company

NAIC # 15580

Group NAIC # 0140

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

NCC, SIC, or the Company, and collectively as the Companies.

This examination covered the claims handling practices of the aforementioned

Companies on Commercial Automobile and Commercial Multiple-Peril claims closed

during the period from June 1, 2015 through May 31, 2016. The examination was made

to discover, in general, if these and other operating procedures of the Companies

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 Companies for use in California including any documentation maintained by the

Companies 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 these

Companies closed by the CDI during the period June 1, 2015 through May 31, 2016; a

review of previous CDI market conduct claims examination reports on these

Companies; and a review of prior CDI enforcement actions.

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

the Companies in Scottsdale, Arizona.

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EXECUTIVE SUMMARY

The Commercial Automobile and Commercial Multiple-Peril claims closed during

the period from June 1, 2015 through May 31, 2016 are referred to as the “review

period”. The examiners randomly selected 43 NCC claim files and 167 SIC claim files

for examination. The examiners cited 121 alleged claims handling violations of the

California Insurance Code and the California Code of Regulations and other specified

codes from this sample file review.

Findings of this examination included the Company’s failure to provide written

notice of the need for additional time or information every 30 calendar days; the failure

to comply with the requirements of CCR §2695.8(b)(4) on total loss settlement claims;

the failure to supply the claimants with copies of the estimates upon which the

settlements were based; the failure to maintain all documents, notes and work papers

which reasonably pertain to each claim in such detail that pertinent events and the

dates of the events can be reconstructed; and the failure upon receiving proof of claim,

to accept or deny the claim within 40 calendar days.

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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:

NCC SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Commercial Automobile / Property Damage 236 12 2

Commercial Automobile / Bodily Injury 34 2 7

Commercial Automobile / Uninsured Motorist Bodily Injury

15 13 2

Commercial Automobile / Comprehensive 4 1 0

Commercial Automobile / Collision 58 10 9

Commercial Multi-Peril- CMP Third Party Liability [ Bodily Injury]

3 3 0

Commercial Multi-Peril- CMP First Party Property/ Physical Damage

2 2 0

TOTALS 352 43 20

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SIC SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Commercial Automobile / Property Damage 658 31 19

Commercial Automobile / Bodily Injury 89 5 3

Commercial Automobile / Medical Payments 3 3 4

Commercial Automobile / Comprehensive 67 7 7

Commercial Automobile / Collision 461 52 33

Commercial Multi-Peril-CMP Third Party Liability/ Bodily Injury

121 36 13

Commercial Multi-Peril-CMP Third Party Liability/ Property Damage

32 9 6

Commercial Multi-Peril/ Medical Payments 2 2 0

Commercial Multi-Peril- CMP First Party Property/Structure

13 11 5

Commercial Multi-Peril- CMP First Party Property/ Burglary and Theft

7 6 11

Commercial Multi-Peril- CMP First Party Property/Fire

6 5 0

TOTALS 1,459 167 101

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TABLE OF TOTAL ALLEGED VIOLATIONS

Citation Description of Allegation

NCC Number of

Alleged Violations

SIC Number of

Alleged Violations

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 8

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

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 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.

1 2 0

4 3 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 9

CCR §2695.3(a) *[CIC §790.03(h)(3)]

The Company failed to maintain all documents, notes and work papers which reasonably pertain to each claim in such detail that pertinent events and the dates of the events can be reconstructed.

2 8

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. [3rd party claims] The Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. [1st party claims]

2 2

4 2

CIC §1879.2(a) *[CIC §790.03(h)(3)]

The Company failed to include the California fraud warning on insurance forms.

1 7

CCR §2695.5(b) *[CIC §790.03(h)(2)]

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

0 8

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NCC Number of

Alleged Violations

SIC Number of

Alleged Violations

CIC §880 *[CIC §790.03(h)(3)]

The Company failed to conduct its business in its own name.

0 7

CCR §2695.8(b)(1)(A) *[CIC §790.03(h)(5)] *[CIC §790.03(h)(3)]

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. 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 Company failed to provide, upon a request from the claimant, the name, address and telephone number of the salvage dealer, salvage pool, motor vehicle auction or dismantler who will purchase the salvage.

0 0 0 0

2 2 1 1

CCR §2695.5(e)(1) *[CIC §790.03(h)(2)]

The Company failed to acknowledge notice of claim within 15 calendar days.

0 4

CCR §2695.5(e)(3) *[CIC §790.03(h)(3)]

The Company failed to begin investigation of the claim within 15 calendar days.

0 3

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.

0 0

2 1

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.

0 3

CCR §2695.7(d) *[CIC §790.03(h)(3)]

The Company failed to conduct and diligently pursue a thorough, fair and objective investigation.

1 2

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NCC Number of

Alleged Violations

SIC Number of

Alleged Violations

CCR §2695.7(h) *[CIC §790.03(h)(5)]

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

0 3

CIC §11580.011(e) *[CIC §790.03(h)(3)]

The Company failed to ask if a child passenger restraint system was in use by a child during an accident or was in the vehicle at the time of a loss that was covered by the policy.

0 3

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.

1 1

CCR §2695.4(a) *[CIC §790.03(h)(1)]

The Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy.

0 2

CCR §2695.5(e)(2) *[CIC §790.03(h)(3)]

The Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days.

1 1

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

The Company failed to deny, dispute or reject a third party claim in writing.

0 2

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.

0 2

CCR §2695.8(c) *[CIC §790.03(h)(3)]

The Company failed to notify the insured that the file will be reopened if the Company is notified within 35 days that the insured cannot purchase a comparable automobile for the settlement amount offered or paid.

2 0

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.

0 2

CCR §2695.7(f) *[CIC §790.03(h)(3)]

The Company failed to provide written notice of any statute of limitation or other time period requirement upon which the insurer may rely to deny a claim.

1 0

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

The Company failed to reasonably adjust any written estimates prepared by the repair shop of the claimant’s choice if the claimant contends, based upon a written estimate he or she obtains, that necessary repairs will exceed the written estimate prepared for by the Company.

0 1

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NCC Number of

Alleged Violations

SIC Number of

Alleged Violations

CCR §2695.8(i) *[CIC §790.03(h)(3)]

The Company failed to document the basis of betterment or depreciation. The basis for any adjustment shall be fully explained to the claimant in writing.

0 1

CCR §2695.8(i) *[CIC §790.03(h)(3)]

The Company failed to fully explain the basis for any adjustment to the claimant in writing.

0 1

Total Number of Alleged Violations 20 101

*DESCRIPTIONS OF APPLICABLE UNFAIR CLAIMS SETTLEMENT PRACTICES

CIC §790.03(h)(1) The Company misrepresented to claimants pertinent facts or insurance policy provisions relating to any coverages at issue.

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.

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TABLE OF ALLEGED VIOLATIONS BY LINE OF BUSINESS

COMMERCIAL AUTOMOBILE NCC 2015 Written Premium: $6,971,115.00 SIC 2015 Written Premium: $40,598,316.00 NCC 2016 Written Premium: $6,146,593.00 SIC 2016 Written Premium: $41,902,957.00

AMOUNT OF RECOVERIES : $343,156.16

NUMBER OF ALLEGED VIOLATIONS

CCR §2695.8(b)(4) [CIC §790.03(h)(3)] 10

CCR §2695.8(f) [CIC §790.03(h)(3)] 10

CCR §2695.3(a) [CIC §790.03(h)(3)] 9

CIC §1879.2(a) [CIC §790.03(h)(3)] 8

CCR §2695.7(b) [CIC §790.03(h)(3)] [CIC §790.03(h)(4)] 7

CCR §2695.8(b)(1)(A) [CIC §790.03(h)(3)] [CIC 790.03(h)(5)]

6

CCR §2695.7(c)(1) [CIC §790.03(h)(3)] 5

CCR §2695.5(b) [CIC §790.03(h)(2)] 4

CCR §2695.7(h) [CIC §790.03(h)(5)] 3

CCR §2695.8(b)(1) [CIC §790.03(h)(5)] 3

CIC §11580.011(e) [CIC §790.03(h)(3)] 3

CIC §790.03(h)(3) 2

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

CCR §2695.7(g) [CIC §790.03(h)(5)] 2

CCR §2695.8(c) [CIC §790.03(h)(3)] 2

CCR §2695.8(i) [CIC §790.03(h)(3)] 2

CCR §2695.85(a) [CIC §790.03(h)(3)] 2

CCR §2695.4(a) [CIC §790.03(h)(1)] 1

CCR §2695.5(e)(2) [CIC §790.03(h)(3)] 1

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

CCR §2695.7(d) [CIC §790.03(h)(3)] 1

CCR §2695.7(f) [CIC §790.03(h)(3)] 1

CCR §2695.8(f)(3) [CIC §790.03(h)(3)] 1

SUBTOTAL 86

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COMMERCIAL MULTIPLE-PERIL

NCC 2015 Written Premium: $579,651.00 SIC 2015 Written Premium: $7,068,323.00 NCC 2016 Written Premium: $373,416.00 SIC 2016 Written Premium: $7,963,817.00

AMOUNT OF RECOVERIES $0.00

NUMBER OF ALLEGED VIOLATIONS

CIC §880 [CIC §790.03(h)(3)] 7

CCR §2695.7(c)(1) [CIC §790.03(h)(3)] 6

CCR §2695.5(b) [CIC §790.03(h)(2)] 4

CCR §2695.5(e)(1) [CIC §790.03(h)(2)] 4

CCR §2695.5(e)(3) [CIC §790.03(h)(3)] 3

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

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

CCR §2695.7(d) [CIC §790.03(h)(3)] 2

CCR §2695.3(a) [CIC §790.03(h)(3)] 1

CCR §2695.4(a) [CIC §790.03(h)(1)] 1

CCR §2695.5(e)(2) [CIC §790.03(h)(3)] 1

CCR §2695.8(b)(4) [CIC §790.03(h)(3)] 1

SUBTOTAL 35

TOTAL 121

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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 Companies are required to identify remedial or

corrective action that has been or will be taken to correct the deficiency. The

Companies are obligated to ensure that compliance is achieved.

Any noncompliant practices identified in this report may extend to other

jurisdictions. The Companies should address corrective action for other jurisdictions

when applicable.

Money recovered within the scope of this report was $20,073.91 as described in

section numbers 6, 11, 14, and 16 below. Pursuant to the findings of the examination

as described in sections 6 and 10 below, the Company conducted a self-survey for the

period of February 1, 2013 through January 31, 2017. The Companies reviewed 370

additional total loss claim files which required additional payments for unpaid taxes and

total loss fees totaling $323,082.25. As a result of the examination, the total amount of

money returned to claimants within the scope of this report was $343,156.16.

COMMERCIAL AUTOMOBILE 1. In 10 instances, the Companies failed to comply with the requirements of CCR §2695.8(b)(4).

1(a) In five instances, the Companies 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 Companies failed to transmit a summary total loss settlement letter to the insured outlining the basis and calculation of the total loss settlement. 1(b) In four instances, the Companies failed to explain in writing the

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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 Companies failed to transmit a copy of the valuation reports upon which the settlements were based.

1(c) In one instance, 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 Department alleges these acts are in violation of CCR §2695.8(b)(4) and are unfair practices under CIC §790.03(h)(3).

Summary of the Companies’ Response: The Companies agree with the findings and addressed these instances with pertinent staff for compliance reinforcement. The Companies conducted training sessions at staff meetings in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Companies also provided the Department with a copy of the training agenda incorporating the findings in the examination.

2. In ten instances, the Companies failed to supply the claimant with a copy of the estimate upon which the settlement was based. The Department alleges these acts are in violation of CCR §2695.8(f) and are unfair practices under CIC §790.03(h)(3).


3. In nine instances, the Companies failed to maintain all documents, notes and work papers which reasonably pertain to each claim in such detail that pertinent events and the dates of the events can be reconstructed. In seven instances, the Companies used a third party vendor to determine applicable DMV fees and VLF refunds on total loss claims. The methodology used to calculate the fees owed or the worksheets to explain the determination were not on file. In one instance, the Company secured a second “Proquote” amount of $3,348.72 after determining the initial quote was incorrect. The Company failed to maintain a copy of the second “Proquote” salvage bid. In the last instance, the Company also failed to maintain the salvage bid paperwork for $3,490.00 on file. The Department alleges these acts are in violation of CCR §2695.3(a) and are unfair practices under CIC §790.03(h)(3).

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Summary of the Companies’ Response: In seven instances, the Companies agree with the findings and ceased the use of its third party vendor Claims Force. Effective February 1, 2017, the Companies implemented the use of the California DMV website for all California total loss fee calculations.

In the last two instances, the Companies agree with the findings and state that it

is the Companies’ policy to maintain a copy of salvage paperwork in the claim file. The file handlers have been counseled to retain complete salvage documentation. In addition, the Companies conducted claims staff training on July 31, 2017 and provided an outline of the training agenda to the Department.

4. In eight instances, the Companies failed to include the California fraud warning on insurance forms. One property damage release form did not include the California fraud language. Other written communications contained incorrect fraud language. The Department alleges these acts are in violation of CIC §1879.2(a) and are unfair practices under CIC §790.03(h)(3).


5. In seven instances, the Companies failed to comply with the requirements of CCR §2695.7(b). 5(a) In five third party claims, the Companies failed and/or delayed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. 5(b) In two first party claims, the Companies delayed upon receiving proof of claim, to accept or deny the claim within regulatory guidelines.

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 Companies’ Response to 5(a) and 5(b): The Companies agree with the findings. However, on one bodily injury (BI) claim, the Company maintains the actions of the assigned adjuster were proper. Nevertheless, in an effort to mitigate its risk in the event of future similar claims, the Company has conducted compliance reinforcement training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017.

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6. In six instances, the Company failed to comply with the requirements of CCR §2695.8(b)(1)(A). 6(a) In two 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. Specifically, the Company failed to pay sales tax on owner-retained total loss settlements involving a Stated Amount Policy.

6(b) In two instances, the Company failed to include, in the settlement, fees incident to the transfer of the vehicle to salvage status. In the first instance, the Company paid only $3.00 towards the salvage certificate fee on an owner- retained salvage when the current DMV fee at time of loss is $20.00. In the second instance, the Company did not pay the salvage certificate fee. Specifically, the Company failed to pay the fee incident to the transfer of the vehicle to salvage status on an owner-retained total loss settlement involving a Stated Amount Policy. 6(c) 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 salvage bid was determined at $3,490.00. The file lacked documentation to support the salvage bid. 6(d) In one instance, the Company failed to provide, upon a request from the claimant, the name, address and telephone number of the salvage dealer, salvage pool, motor vehicle auction or dismantler who will purchase the salvage. In this instance on an owner-retained salvage, the Company’s salvage bid document states (in fine print) on the disclosure that “this is not a guaranteed bid” and is rather an “estimate only” of the salvage value.

The Department alleges these acts 6(a-d) are in violation of CCR §2695.8(b)(1)(A) and are unfair practices under CIC §790.03(h)(3) or CIC § 790.03(h)(5).

Summary of the Company’s Response to 6(a) and 6(b): As a result of the examination, the Company has trained all associates handling California claims that under the current policy language all applicable taxes and fees are to be based upon the ACV valuation of California total loss claims and shall be added to the Stated Amount policy limit. The Company (SIC) reopened the pertinent claims and issued payment in the amount of $7,566.78 for unpaid sales taxes and for salvage certificate fees. As a result of the examination, the Company conducted a self-survey for the period February 1, 2013 through January 31, 2017. The details of this Owner-Retained total loss survey are combined under item number 10 for the Company-Retained total loss survey.

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The Company also stated that it is now pursuing changes to the language in its policy and point of sale materials as follows:

Point of Sale materials: • Application: will specifically state coverage option selected and will advise the insured to consider taxes and fees in valuation for stated amount on units. • Materials will be developed (flyer) for general agents to provide to retail agents and educate about the product sold and valuation considerations Regarding Policy language updates: • Development of Company Stated Amount form using ISO language and add a clear definition regarding payment not to include taxes and fees outside of the stated amount. • Notification sheet to be attached to the declarations further defining coverage selected within Stated Amount guideline.

Claims associates will be appropriately trained to consider accurate policy language before adding taxes and fees in the claim settlement amount if the amount exceeds the Stated Amount limit on the policy.

Summary of the Company’s Response to 6(c): 6(c) The Company agrees with the finding and indicates that its file handler failed

to place a copy of the salvage bid on the claim file. The Company states that it is their standard procedure to secure a “Proquote” guaranteed bid from its salvage vendor. This matter was addressed with pertinent staff for compliance reinforcement.

Summary of the Company’s Response to 6(d): 6(d) The Company agrees with the finding and states that due to the age of the

vehicle, the independent adjuster was unable to secure a salvage bid. The independent adjuster secured a “Proquote” amount which was not a guaranteed bid. This was an isolated instance of non-compliance and the Company will track this issue for future enforcement.

The overall issue of compliance with CCR §2695.8(b)(1)(A) has been addressed by the Company in its training sessions at their Minnesota offices on February 15, 2017; and at their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017.

7. In five instances, the Companies failed to provide written notice of the need for additional time or information every 30 calendar days. The Companies failed to

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consistently transmit thirty-day status letters in compliance with regulatory timelines. The Department alleges these acts are in violation of CCR §2695.7(c)(1) and are unfair practices under CIC §790.03(h)(3).


8. In four instances, the Company failed to respond to communications within 15 calendar days. The Company (SIC) did not respond to communications in four instances; and did not respond timely or within the regulatory timeline to correspondence in the last instance. The Department alleges these acts are in violation of CCR §2695.5(b) and are unfair practices under CIC §790.03(h)(2).

Summary of the Company’s Response: The Company agrees with the findings and addressed these instances with pertinent staff for compliance reinforcement. The Company conducted training sessions at staff meetings in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Company also provided the Department with a copy of the training agenda incorporating the findings in the examination.

9. In three instances, the Company failed, upon acceptance of the claim, to tender payment within 30 calendar days. 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 (SIC) agrees with the findings and addressed these instances with pertinent staff for compliance reinforcement. The Company conducted training sessions at staff meetings in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Company also provided the Department with a copy of the training agenda incorporating the findings in the examination.

10. In three instances, the Company failed to comply with the requirements of CCR §2695.8(b)(1). 10(a) In two instances, the Company failed to include in the settlement all applicable taxes. Specifically, the Company (SIC) failed to pay applicable taxes on Company-retained total loss settlements involving a Stated Amount policy.

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10(b) In one instance, the Company failed to include, in the settlement, the license fee and other annual fees computed based upon the remaining term of the registration. Specifically, the Company failed to pay the license fee and other annual fees computed based upon the remaining term of the registration on this Company-retained total loss settlement involving a Stated Amount policy.

The Department alleges these acts are in violation of CCR §2695.8(b)(1) and are unfair practices under CIC §790.03(h)(5).

Summary of the Company’s Response to 10(a) and 10(b): As a result of the

examination, the Company has trained all associates handling California claims that under the current policy language all applicable taxes and fees are to be based upon the ACV valuation of California total loss claims and shall be added to the Stated Amount policy limit. The Company reopened the pertinent claims and issued payment in the amount of $3,806.00 for unpaid sales taxes and license and other annual DMV fees.

As a result of the examination, the Company conducted a self-survey for the

period of February 1, 2013 through January 31, 2017. These surveys pertain collectively to the above-noted section items 6(a), 6(b); and 10(a) and 10(b). The Companies reviewed 370 total loss claim files and issued additional payments for unpaid taxes and fees. The combined payments for items 6(a), 6(b), 10(a) and 10(b) amounted to $323,082.25

The Company also stated that it is now pursuing changes to the language in its

policy and point of sale materials as follows: Point of Sale materials: • Application: will specifically state coverage option selected and will advise the insured to consider taxes and fees in valuation for stated amount on units. • Materials will be developed (flyer) for general agents to provide to retail agents and educate about the product sold and valuation considerations Regarding Policy language updates: • Development of Company Stated Amount form using ISO language and add a clear definition regarding payment not to include taxes and fees outside of the stated amount. • Notification sheet to be attached to the declarations further defining coverage selected within Stated Amount guideline.

Claims associates will be appropriately trained to consider accurate policy language before adding taxes and fees in the claim settlement amount if the amount exceeds the Stated Amount limit on the policy.

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11. In three instances, the Company failed to ask if a child passenger restraint system was in use by a child during an accident or was in the vehicle at the time of a loss that was covered by the policy. The Department alleges these acts are in violation of CIC §11580.011(e) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company SIC agrees with the findings and reopened the three claims to issue additional payments of $50.00 for each claim (or a total of $150.00 reimbursement back to claimants).

The Company addressed these instances with pertinent staff for compliance

reinforcement. The Company also conducted training sessions at staff meetings in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Company also provided the Department with a copy of the training agenda incorporating the findings in the examination.

12. The Companies failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.

12(a) In the first instance, the Company failed to contact the claimant. This loss involved an insured vehicle striking a pedestrian outside of a crosswalk on the roadway. The pedestrian appeared to suffer serious injuries to the leg, stomach, and head lacerations. The Company failed to contact the claimant either verbally or in writing when contact information was available with the claimant’s name, address, and phone number. The Company based its investigation solely on its insured’s statement, passengers of the insured, and the police report.

12(b) In the second instance, the Company did not follow its claims procedures and guidelines as it improperly included out-of-state vehicles in its determination of comparable vehicles for replacement.

The Department alleges these acts are in violation of CIC §790.03(h)(3). Summary of the Company’s Response to 12(a) and (b): The Companies

agree with the findings. However, on one bodily injury (BI) claim, the Company maintains the actions of the assigned adjuster were proper. Nevertheless, in an effort to mitigate its risk in the event of future similar claims, the Company has conducted compliance reinforcement training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017.

13. In two instances, the Company failed to deny, dispute or reject a third party claim in writing. In both instances, the Company denied the claims verbally and failed

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to send written denial letters. The Department alleges these acts are in violation of CCR §2695.7(b)(1) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company SIC agrees with the findings and addressed compliance issues with pertinent staff. The Company mailed the written denial letters on November 11, 2016 and provided copies to the Department.

The Company also conducted training sessions in their Minnesota offices on

February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Company also provided the Department with a copy of the training agenda incorporating the findings in the examination.

14. In two instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. In the first instance, the Company SIC failed to pay the applicable sales taxes. In the second instance, the Company retained salvage and sold it for $4,975.00. The Company failed to reimburse the insured the amount of the salvage proceeds. 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: The Company agrees with the

findings in both instances and indicates these were inadvertent adjuster errors. The Company counseled pertinent adjusters and reopened the claims to issue additional payments of $8,142.63.

15. In two instances, the Company failed to notify the insured that the file will be reopened if a comparable automobile cannot be purchased for the amount offered or paid. The Department alleges these acts are in violation of CCR §2695.8(c) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company NCC agrees with the findings and addressed these instances with pertinent staff for compliance reinforcement. The Company conducted training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Company also provided the Department with a copy of the training agenda incorporating the findings in the examination. 16. In two instances, the Company failed to comply with the requirements of CCR §2695.8(i). 16(a) In one instance, the Company failed to document the basis of betterment or depreciation. The basis for any adjustment shall be fully explained to the claimant in writing. The Company deducted $408.50 in betterment on a radiator that was damaged in the loss.

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16(b) In one instance, the Company failed to fully explain the basis for any adjustment to the claimant in writing. The Department alleges these acts are in violation of CCR §2695.8(i) and are unfair practices under CIC §790.03(h)(3). Summary of the Company’s Response: The Company SIC agrees with the findings and states that these were isolated instances of non-compliance. This issue was addressed with pertinent staff for reinforcement. As a result of the examination, the Company issued an additional payment of $408.50. 17. In two instances, the Company failed to provide the insured with the Auto Body Repair Bill of Rights either at the time of application for automobile insurance, at the time a policy was issued, or following an accident. The Department alleges these acts are in violation of CCR §2695.85(a) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company SIC agrees with the findings and addressed these instances with pertinent staff for compliance reinforcement. The Company provided the Department with a copy of the training agenda incorporating the findings in the examination. The Company conducted training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. 18. In one instance, the Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. The Company failed to provide necessary forms, instructions, and reasonable assistance to an injured claimant within 15 days of notice of claim. The Company had the claimant’s name, address, and phone number. The Department alleges this act is in violation of CCR §2695.5(e)(2) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees with the finding that it had closed the claim without contacting the claimant. The Company conducted training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017.

19. In one instance, the Company failed to conduct and diligently pursue a thorough, fair and objective investigation. The Company failed to contact a claimant/pedestrian who was injured in an automobile accident. The insured vehicle struck the pedestrian outside of a crosswalk and the insured was intoxicated. In addition, the pedestrian appeared to suffer serious injuries to the leg, stomach, and head lacerations. The Company did not contact the claimant either verbally or in

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writing. The Company had the claimant’s name, address, and phone number. The Company indicates this was a “report only” notice however, the Company initiated its investigation with securing its insured statement, statements of the passengers, and the police report. The Department alleges these acts are in violation of CCR §2695.7(d) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees with the finding and counseled the assigned adjuster who should have reasonably contacted the claimant prior to closing the claim.

The Company has conducted training sessions in their Minnesota offices on

February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017.

20. In one instance, the Company failed to provide written notice of any statute of limitation or other time period requirement upon which the insurer may relay to deny a claim. The Company had a copy of a police report and was aware of the injuries sustained by the claimant as a result of its insured’s negligence. The Company closed the file without contacting the unrepresented claimant (pedestrian) who was hit by the insured and suffered bodily injuries. The Company failed to provide written notice of the statute of limitation on this loss. The Department alleges this act is in violation of CCR §2695.7(f) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company states that the claimant’s counsel had already filed a bodily injury lawsuit and the Company reopened the claim. The Company agrees that it closed its claim without providing written notice of the applicable statute of limitations to the claimant who was not legally represented at that time.

The Company has conducted training sessions in their Minnesota offices on

February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. 21. The Companies failed to comply with the Fair Claims Regulations Practices. In a single instance each, (for a total of three instances), the Companies failed to comply with the following Fair Claims Regulation Practices:

21(a) CCR §2695.4(a) for failure to disclose all benefits, coverage, time limits or other provisions of the insurance policy;

21(b) CCR §2695.7(b)(3) for failure 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;

21(c) CCR §2695.8(f)(3) for failure to reasonably adjust any written estimates

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prepared by the repair shop of the claimant’s choice if the claimant contends, based upon a written estimate he or she obtains, that necessary repairs will exceed the written estimate prepared for by the Company.

Summary of the Companies’ Response: The Companies agree with the

findings and addressed these instances with pertinent staff for compliance reinforcement. The Companies conducted training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Companies also provided the Department with a copy of the training agenda incorporating the findings in the examination. COMMERCIAL MULTIPLE – PERIL [Company SIC] 22. In seven instances, the Company failed to conduct its business in its own name. The Company failed to identify Scottsdale Indemnity Company in its claims correspondence. The Department alleges these acts are in violation of CIC §880 and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees with the findings

and addressed these instances with pertinent staff for compliance reinforcement. The Company provided the Department with a copy of the training agenda incorporating the findings in the examination. The Company conducted training sessions at staff meetings in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017.

23. In six instances, the Company failed to provide written notice of the need for additional time or information every 30 calendar days. The Company failed to consistently transmit thirty-day status letters in compliance with regulatory timelines. 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: The Company agrees with the findings and addressed these instances with pertinent staff for compliance reinforcement. The Company conducted training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Company also provided the Department with a copy of the training agenda incorporating the findings in the examination

24. In four instances, the Company failed to respond to communications within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(b) and are unfair practices under CIC §790.03(h)(2).

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Summary of the Company’s Response: The Company agrees with the findings and addressed these instances with pertinent staff for compliance reinforcement. The Company conducted training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Company also provided the Department with a copy of the training agenda incorporating the findings in the examination.

25. In four instances, the Company failed to acknowledge notice of claim within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(e)(1) and are unfair practices under CIC §790.03(h)(2).


and addressed these instances with pertinent staff for compliance reinforcement. The Company conducted training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Company also provided the Department with a copy of the training agenda incorporating the findings in the examination.

26. In three instances, the Company failed to begin investigation of the claim within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(e)(3) and are unfair practices under CIC §790.03(h)(3).


27. In three instances, the Company 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) and are unfair practices under CIC §790.03(h)(4).


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28. 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) and are unfair practices under CIC §790.03(h)(3).


29. In two instances, the Company failed to conduct and diligently pursue a thorough, fair and objective investigation. In the first instance, the Company was aware of the claimant’s injury and subsequent medical care however, it failed to follow up diligently with communications and investigation to settle the claim promptly. In the second instance, the claim was delayed several months due to a lack of a diligent investigation. The Department alleges these acts are in violation of CCR §2695.7(d) and are unfair practices under CIC §790.03(h)(3).


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30. The Company failed to comply with the Fair Claims Regulations Practices. In a single instance each (for a total of four instances), the Company failed to comply with the following Fair Claims Regulation Practices: 30(a) CCR §2695.3(a) for failure to maintain all documents, notes and work papers which reasonably pertain to each claim in such detail that pertinent events and the dates of the events can be reconstructed.

30(b) CCR §2695.4(a) for failure to disclose all benefits, coverage, time limits or other provisions of the insurance policy;

30(c) CCR §2695.5(e)(2) for failure to provide necessary forms, instructions, and reasonable assistance within 15 calendar days; and

30(d) CCR §2695.8(b)(4) for failure 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.


and addressed these instances with pertinent staff for compliance reinforcement. The Company conducted training sessions in their Minnesota offices on February 15, 2017; and in their Arizona offices on February 21, 2017 and July 31, 2017. Training for its Third Party Administrator (TPA) was conducted on March 21, 2017. The Company also provided the Department with a copy of the training agenda incorporating the findings in the examination.

Documents

NATIONAL CASUALTY COMPANY NAIC # 11991 CDI # 0127-1 ... Conduct... · 5/31/2016 · SCOTTSDALE INDEMNITY COMPANY NAIC # 15580 CDI # 3940-4 AS OF MAY 31, 2016 ADOPTED OCTOBER 31,