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Title 10 CCR Chapter 5, Subchapter 7.5, Sections 2695.1 thru 2695.14
California
Regulation provided by StateNet
DOCUMENT NUMBER: SN001CDA
VERSION NUMBER: 1.000
PUBLICATION DATE: 06/29/2006 06:00 AM
TABLE OF CONTENTS
CITATION
Title 10 CCR Chapter 5, Subchapter 7.5, Sections 2695.1 thru 2695.14
STATUS
This regulation was assigned the status of Adopted Rule
on 06/01/2006.
Agency: Department of Insurance
StateNet Processing Date: 06/28/2006
StateNet Regulation ID: 2006 CA 17090
ADOPTED TEXT
CALIFORNIA CODE OF REGULATIONS, TITLE 10. CHAPTER 5
AMEND SUBCHAPTER 7.5 TO READ:
TABLE OF CONTENTS
SUBCHAPTER 7.5 FAIR CLAIMS SETTLEMENT PRACTICES
REGULATIONS
RH05044124/RH05044134
Section 2695.1. Preamble
Section 2695.2. Definitions
Section 2695.3. File and Record Documentation
Section 2695.4. Representation of Policy Provisions and Benefits
Section 2695.5. Duties upon Receipt of Communications
Section 2695.6. Training and Certification
Section 2695.7. Standards for Prompt, Fair and Equitable Settlements
Section 2695.8. Additional Standards Applicable to Automobile Insurance
Section 2695.85. Auto Body Repair Consumer Bill of Rights
Section 2695.9. Additional Standards Applicable to First Party Residential
and Commercial Property Insurance Policies
Section 2695.10. Additional Standards Applicable to Surety Insurance
Section 2695.11. Additional Standards Applicable to Life and Disability
Insurance
Section 2695.12. Penalties
Section 2695.13. Severability
Section 2695.14. Compliance Date
Section 2695.1. Preamble
(a) Section 790.03(h) of the California Insurance Code enumerates sixteen
claims settlement practices that, when either knowingly committed on a single
occasion, or performed with such frequency as to indicate a general business
practice, are considered to be unfair claims settlement practices and are,
thus, prohibited by this section of the California Insurance Code. The
Insurance Commissioner has promulgated these regulations in order to
accomplish the following objectives:
(1) To delineate certain minimum standards for the settlement of claims
which, when violated knowingly on a single occasion or performed with such
frequency as to indicate a general business practice shall constitute an
unfair claims settlement practice within the meaning of Insurance Code Section
790.03(h);
(2) To promote the good faith, prompt, efficient and equitable settlement
of claims on a cost effective basis;
(3) To discourage and monitor the presentation to insurers of false or
fraudulent claims; and,
(4) To encourage the prompt and thorough investigation of suspected
fraudulent claims and ensure the prompt and comprehensive reporting of
suspected fraudulent claims as required by Insurance Code Section 1872.4.
(b) These regulations are not meant to provide the exclusive definition of
all unfair claims settlement practices ; . O o ther
methods, act(s), or practices not specifically delineated in this set of
regulations may also be unfair claims settlement practices and subject to
a violation of California Insurance Code Section 790.03(h)
and/or pursuant to the provisions of California Insurance Code
Section 790.06. These regulations are applicable to the handling or settlement
of all claims subject to Article 6.5 of Division 1, Part 2, Chapter 1 of the
California Insurance Code, commencing with Section 790, except as specifically
provided below:
(1) Workers' compensation insurance;
(2) Liability insurance for the professional malpractice of health care
providers as defined in California Code of Civil Procedure Section 364(f)(1);
(3) Self insured or self funded plans which are bona fide Employee
Retirement Income Security Act ("ERISA") plans which are not also multiple
employer welfare arrangements, to the extent that these ERISA plans are not
covered by insurance;
(4) Any other self funded or self insured plan, to the extent it is not
covered by insurance, which is lawfully conducting business in this state.
(c) These regulations recognize the unique relationship which exists
under a surety bond between the insurer, the obligee or beneficiary, and the
principal. In contrast to other classes of insurance, surety insurance
involves a promise to answer for the debt, default or miscarriage of a
principal who has the primary duty to pay the debt or discharge the obligation
and who is bound to indemnify the insurer. Therefore, only sections 2695.1
through 2695.6, inclusive, section 2695.10, and sections 2695.12, 2695.13 and
2695.14, inclusive, shall apply to the handling or settlement of claims
brought under surety bonds .
(c) In recognition of both the unique relationship which exists under
a surety bond between the surety, the obligee or beneficiary, and the
principal, and the fact that the processing of surety claims is subject to the
Unfair Practices Act, beginning with California Insurance Code Section 790,
only sections 2695.1 through 2695.6, inclusive, section 2695.10, and sections
2695.12, 2695.13 and 2695.14, inclusive, shall apply to the handling or
settlement of claims brought under surety bonds.
(d) These regulations apply to home protection contracts and home
protection companies defined in California Insurance Code Section 12740.
(e) All licensees, as defined in these regulations, shall have thorough
knowledge of the regulations contained in this subchapter.
(f) Policy provisions relating to the investigation, processing and
settlement of claims shall be consistent with or more favorable to the insured
than the provisions of these regulations.
(g) The California Insurance Code provides the commissioner with
access to all records of an insurer and the power to examine the affairs of
every person engaged in the business of insurance to determine if such person
is engaged in any unfair or deceptive act or practice. California Insurance
Code Section 790.03(h) requires all persons engaged in the business of
insurance to effectuate prompt, fair and equitable settlements of claims and
to otherwise process claims in a fair and reasonable manner. The Department
considers the use of reliable information to be an essential element of the
fair and equitable settlement of claims. The fact that information, data or
statistical methods used or relied upon by a licensee to process or establish
the value of insurance claims is obtained through a third party source shall
not absolve the licensee of its legal responsibility to comply with these
regulations or to effectuate prompt, fair and equitable settlements of claims.
Failure of a licensee to provide the commissioner with requested information
sufficient to examine the licensee's claims handling practices may justify a
finding that the licensee was in non-compliance with these regulations or
other applicable insurance code provisions. Any and all information received
pursuant to the Department's request shall be given confidential treatment, as
provided in California Insurance Code section 735.5 and California Government
Code Section 11180 et seq. When processing or establishing the value of a
claim, a licensee shall not be responsible for the accuracy of information
provided by a governmental entity, unless the licensee has discovered or been
notified of the inaccuracy and has continued to use the information.
NOTE: Authority cited: Sections 790.034, 790.10, 1871.1, 12340 -
12417, inclusive, 12921 and 12926 of the California Insurance Code and
Sections 11342.2 and 11152 of the California Government Code. Reference:
Sections 790.03 , 790.04, 735.5 and 12740 of the California Insurance
Code , and Section 11180 of the California Government Code .
Section 2695.2. Definitions
As used in these regulations:
(a) "Beneficiary" means:
(1) for the purpose of life and disability claims, the party or parties
entitled to receive the proceeds or benefits occurring under the policy in
lieu of the insured; or,
(2) for the purpose of surety claims, a person who is within the class of
persons intended to benefit from the bond;
(b) "Calendar days" means each and every day including Saturdays, Sundays,
Federal and California State Holidays, but if the last day for performance of
any act required by these regulations falls on a Saturday, Sunday, Federal or
State Holiday, then the period of time to perform the act is extended to and
including the next calendar day which is not a Saturday, Sunday, or Federal or
State holiday;
(c) "Claimant" means a first or third party claimant as defined in these
regulations, any person who asserts a right of recovery under a surety bond,
an attorney, any person authorized by operation of law to represent the
claimant, or any of the following persons properly designated by the claimant
in the manner specified in subsection 2695.5(c): an insurance adjuster, a
public adjuster, or any member of the claimant's family.
(d) "Claims agent" means any person employed or authorized by an insurer,
to conduct an investigation of a claim on behalf of an insurer or a person who
is licensed by the Commissioner to conduct investigations of claims on behalf
of an insurer. The term "claims agent", however, shall not include the
following:
1) an attorney retained by an insurer to defend a claim brought against an
insured; or,
2) persons hired by an insurer solely to provide valuation as to the
subject matter of a claim.
(e) "Extraordinary circumstances" means circumstances outside of the
control of the licensee which severely and materially affect the licensee's
ability to conduct normal business operations;
(f) "First party claimant" means any person asserting a right under an
insurance policy as a named insured, other insured or beneficiary under the
terms of that insurance policy, and including any person seeking recovery of
uninsured motorist benefits;
(g) "Gross settlement amount" means the amount tendered plus the amount
deducted as provided in the policy in the settlement of an automobile total
loss claim;
(h) "Insurance agent" means:
(1) the term "insurance agent" as used in section 31 of the California
Insurance Code; or,
(2) the term "life agent" as used in section 32 of the California
Insurance Code; or,
(3) any person who has authority or responsibility to notify an insurer of
a claim upon receipt of a notice of claim by a claimant; or,
(4) an underwritten title company.
(i) "Insurer" means a person licensed to issue or that issues an insurance
policy or surety bond in this state, or that otherwise transacts the business
of insurance in the state, including reciprocal and interinsurance exchanges,
fraternal benefit societies, stock and mutual insurance companies, risk
retention groups, California county mutual fire insurance companies, grants
and annuities societies, entities holding certificates of exemption,
non-profit hospital service plans, multiple employer welfare arrangements
holding certificates of compliance pursuant to Article 4.7 of the California
Insurance Code, and motor clubs, to the extent that they transact the business
of insurance in the State. The term "insurer" for purposes of these
regulations includes non-admitted insurers, the California FAIR Plan, the
California Earthquake Authority, those persons licensed to issue or that issue
an insurance policy pursuant to an assignment by the California Automobile
Assigned Risk Plan, home protection companies as defined under California
Insurance Code Section 12740, and any other entity subject to California
Insurance Code Section 790.03(h). The term "insurer" shall not include
insurance agents and brokers, surplus line brokers and special lines surplus
line brokers.
(j) "Insurance policy" or "policy" means the written instrument in which
any certificate of group insurance, contract of insurance, or non-profit
hospital service plan is set forth. For the purposes of these regulations the
terms insurance policy or policy do not include "surety bond" or "bond". For
the purposes of these regulations the term insurance policy or policy includes
a home protection contract or any written instrument in which any certificate
of insurance or contract of insurance is set forth that is issued pursuant to
the California Automobile Assigned Risk Plan, the California Earthquake
Authority, or the California FAIR Plan;
(k) "Investigation" means all activities of an insurer or its claims agent
related to the determination of coverage, liabilities, or nature and extent of
loss or damage for which benefits are afforded by an insurance policy,
obligations or duties under a bond, and other obligations or duties arising
from an insurance policy or bond.
(l) "Knowingly committed" means performed with actual, implied or
constructive knowledge, including, but not limited to, that which is implied
by operation of law.
(m) "Licensee" means any person that holds a license or Certificate of
Authority from the Insurance Commissioner, or any other entity for whom the
Insurance Commissioner's consent is required before transacting business in
the State of California or with California residents. The term "licensee" for
purpose of these regulations does not include an underwritten title company if
the underwriting agreement between the underwritten title company and the
title insurer affirmatively states that the underwritten title company is not
authorized to handle policy claims on behalf of the title insurer.
(n) "Notice of claim" means any written or oral notification to an insurer
or its agent that reasonably apprises the insurer that the claimant wishes to
make a claim against a policy or bond issued by the insurer and that a
condition giving rise to the insurer's obligations under that policy or bond
may have arisen. For purposes of these regulations the term "notice of claim"
shall not include any written or oral communication provided by an insured or
principal solely for informational or incident reporting purposes.
(o) "Notice of legal action" means notice of an action commenced against
the insurer with respect to a claim, or notice of action against the insured
received by the insurer, or notice of action against the principal under a
bond, and includes any arbitration proceeding;
(p) "Obligee" means the person named as obligee in a bond;
(q) "Person" means any individual, association, organization, partnership,
business, trust, corporation or other entity;
(r) "Principal" means the person whose debt or other obligation is secured
or guaranteed by a bond and who has the primary duty to pay the debt or
discharge the obligation;
(s) "Proof of claim" means any evidence or documentation in the
claimant's possession submitted to of the insurer
, whether as a result of its having been submitted by the claimant or obtained
by the insurer in the course of its investigation, which that
provides any evidence of the claim and that reasonably supports
the magnitude or the amount of the claimed loss.
(t) "Remedial measures" means those actions taken by an insurer to correct
or cure any error or omission in the handling of claims on the part of its
insurance agent as defined in subsection 2695.2(h), including, but not limited
to:
(1) written notice to the insurance agent that he/she is in violation of
the regulations contained in this subchapter;
(2) transmission of a copy of the regulations contained in this subchapter
and instructions for their implementation;
(3) reporting the error or omission in the handling of claims by the
insurance agent to the Department of Insurance;
(u) "Replacement crash part" means a replacement for any of the
nonmechanical sheet metal or plastic parts which generally constitute the
exterior of a motor vehicle, including inner and outer panels;
(v) "Single act" for the purpose of determining any penalty pursuant to
California Insurance Code Section 790.035 is any commission or omission which
in and of itself constitutes a violation of California Insurance Code Section
790.03 or this subchapter;
(w) "Surety bond" or "bond" means the written instrument in which a
contract of surety insurance, as defined in California Insurance Code Section
105, is set forth;
(x) "Third party claimant" means any person asserting a claim against any
person or the interests insured under an insurance policy;
(y) "Willful" or "Willfully" when applied to the intent with which an act
is done or omitted means simply a purpose or willingness to commit the act, or
make the omission referred to in the California Insurance Code or this
subchapter. It does not require any intent to violate law, or to injure
another, or to acquire any advantage;
NOTE: Authority cited: Sections 132(d), 790.10, 12340 - 12417, inclusive,
12921 and 12926 of the California Insurance Code, Section 995.130 of the Code
of Civil Procedure and Sections 11342.2 and 11152 of the California Government
Code. Reference: Sections 31, 32, 101, 106, 675.5(b), (c) and (d), 676.6,
790.03(h) and 10082 of the California Insurance Code.
Section 2695.3. File and Record Documentation
(a) Every licensee's claim files shall be subject to examination by the
Commissioner or by his or her duly appointed designees. These files shall
contain all documents, notes and work papers (including copies of all
correspondence) which reasonably pertain to each claim in such detail that
pertinent events and the dates of the events can be reconstructed and the
licensee's actions pertaining to the claim can be determined;
(b) To assist in such examination all insurers shall:
(1) maintain claim data that are accessible, legible and retrievable for
examination so that an insurer shall be able to provide the claim number, line
of coverage, date of loss and date of payment of the claim, date of
acceptance, denial or date closed without payment. This data must be available
for all open and closed files for the current year and the four preceding
years;
(2) record in the file the date the licensee received, date(s) the
licensee processed and date the licensee transmitted or mailed every material
and relevant document in the file; and
(3) maintain hard copy files or maintain claim files that are accessible,
legible and capable of duplication to hard copy; files shall be maintained for
the current year and the preceding four years.
(c) The requirements of this section shall be satisfied where the licensee
provides documentation evidencing inability to obtain data, nonexistence of
data, or difficulty in obtaining clear documentary support for actions due to
catastrophic losses, or other unusual circumstances providing the licensee
establishes to the satisfaction of the Commissioner that the circumstances
alleged by the licensee do exist and have materially affected the licensee's
ability to comply with this regulation. Any licensee that alleges an inability
to comply with this section shall establish and submit to the Commissioner a
plan for file and record documentation to be used by such licensee while the
circumstances alleged to preclude compliance with this subsection continue to
exist.
NOTE: Authority cited: Sections 790.04, 790.10, 12340 - 12417, inclusive,
12921 and 12926 of the California Insurance Code and Sections 11342.2 and
11152 of the California Government Code. Reference: Section 790.03(h) of the
California Insurance Code.
Section 2695.4. Representation of Policy Provisions and Benefits
(a) Every insurer shall disclose to a first party claimant or beneficiary,
all benefits, coverage, time limits or other provisions of any insurance
policy issued by that insurer that may apply to the claim presented by the
claimant. When additional benefits might reasonably be payable under an
insured's policy upon receipt of additional proofs of claim, the insurer shall
immediately communicate this fact to the insured and cooperate with and assist
the insured in determining the extent of the insurer's additional liability.
(b) No insurer shall misrepresent or conceal benefits, coverages
, time limits or other provisions of the bond which may apply to the
claim presented under a surety bond.
(c) No insurer shall deny a claim on the basis of the claimant's failure
to exhibit property, unless there is documentation in the file (1) of
reasonable demand by the insurer, and unfounded refusal by the claimant,
to exhibit property, or (2) of the breach of any policy provision providing
for the exhibition of property.
(d) Except where a time limit is specified in the policy, no insurer shall
require a first party claimant under a policy to give notification of a claim
or proof of claim within a specified time.
(e) No insurer shall:
(1) request that a claimant sign a release that extends beyond the subject
matter which gave rise to the claim payment unless, prior to execution of the
release, the legal effect of the release is disclosed and fully explained by
the insurer to the claimant in writing. For purposes of this subsection, an
insurer shall not be required to provide the above explanation or disclosure
to a claimant who is represented by an attorney at the time the release is
presented for signature;
(2) be precluded from including in any release a provision requiring the
claimant to waive the provisions of California Civil Code Section 1542 ,
provided that, prior to execution of the release, the legal effect of the
release is disclosed and fully explained by the insurer to the claimant in
writing. For purposes of this subsection, an insurer shall not be required to
provide the above explanation or disclosure to a claimant who is represented
by an attorney at the time the release is presented for signature.
(f) No insurer shall issue checks or drafts in partial settlement of a
loss or claim that contain or are accompanied by language releasing the
insurer, the insured, or the principal on a surety bond from total liability
unless the policy or bond limit has been paid, or there has been a compromise
settlement agreed to by the claimant and the insurer as to coverage and amount
payable under the insurance policy or bond.
(g) No insurer shall require a first party claimant or beneficiary to
submit duplicative proofs of claim where coverage may exist under more than
one policy issued by that insurer.
NOTE: Authority cited: Sections 790.10, 12340 - 12417, inclusive, 12921
and 12926 of the California Insurance Code and Sections 11342.2 and 11152 of
the California Government Code. Reference: Section 790.03(h)(1), (3) and (4)
of the California Insurance Code.
Section 2695.5. Duties upon Receipt of Communications
(a) Upon receiving any written or oral inquiry from the Department of
Insurance concerning a claim, every licensee shall immediately, but in no
event more than twenty- one (21) calendar days of receipt of that inquiry,
furnish the Department of Insurance with a complete written response based on
the facts as then known by the licensee. A complete written response addresses
all issues raised by the Department of Insurance in its inquiry and includes
copies of any documentation and claim files requested. This section is not
intended to permit delay in responding to inquiries by Department personnel
conducting a scheduled examination on the insurer's premises.
(b) Upon receiving any communication from a claimant, regarding a claim,
that reasonably suggests that a response is expected, every licensee shall
immediately, but in no event more than fifteen (15) calendar days after
receipt of that communication, furnish the claimant with a complete response
based on the facts as then known by the licensee. This subsection shall not
apply to require communication with a claimant subsequent to receipt by the
licensee of a notice of legal action by that claimant.
(c) The designation specified in subsection 2695.2(c) shall be in writing,
signed and dated by the claimant, and shall indicate that the designated
person is authorized to handle the claim. All designations shall be
transmitted to the insurer and shall be valid from the date of execution until
the claim is settled or the designation is revoked. A designation may be
revoked by a writing transmitted to the insurer, signed and dated by the
claimant, indicating that the designation is to be revoked and the effective
date of the revocation.
(d) Upon receiving notice of claim, every licensee or claims agent shall
immediately transmit notice of claim to the insurer.
(e) Upon receiving notice of claim, every insurer shall immediately, but
in no event more than fifteen (15) calendar days later, do the following
unless the notice of claim received is a notice of legal action:
(1) acknowledge receipt of such notice to the claimant unless payment is
made within that period of time. If the acknowledgment is not in writing, a
notation of acknowledgment shall be made in the insurer's claim file and
dated. Failure of an insurance agent or claims agent to promptly transmit
notice of claim to the insurer shall be imputed to the insurer except where
the subject policy was issued pursuant to the California Automobile Assigned
Risk Program.
(2) provide to the claimant necessary forms, instructions, and reasonable
assistance, including but not limited to, specifying the information the
claimant must provide for proof of claim;
(3) begin any necessary investigation of the claim. #378713v1 8
(f) An insurer may not require that the notice of claim under a policy be
provided in writing unless such requirement is specified in the insurance
policy or an endorsement thereto.
NOTE: Authority cited: Sections 790.04, 790.10, 12340 - 12417, inclusive,
12921, 12926 of the California Insurance Code and Sections 11342.2 and 11152
of the California Government Code. Reference: Sections 790.03(h)(2) and (3) of
the California Insurance Code.
Section 2695.6 Training and Certification
(a) Every insurer shall adopt and communicate to all its claims agents
written standards for the prompt investigation and processing of claims, and
shall do so within ninety (90) days after the effective date of these
regulations or any revisions thereto.
(b) All licensees shall provide thorough and adequate training regarding
these regulations to all their claims agents. Licensees shall certify that
their claims agents have been trained regarding these regulations and any
revisions thereto. However, licensees need not provide such training or
certification to duly licensed attorneys.
A licensee shall demonstrate compliance with this subsection by the
following methods:
(1) where the licensee is an individual, the licensee shall annually
certify in writing under penalty of perjury that he or she has read and
understands these regulations and any and all amendments thereto; (2) where
the licensee is an entity, the annual written certification shall be executed,
under penalty of perjury, by a principal of the entity as follows:
(A) that the licensee's claims adjusting manual contains a copy of these
regulations and all amendments thereto; and,
(B) that clear written instructions regarding the procedures to be
followed to effect proper compliance with this subchapter were provided to all
its claims agents;
(3) where the licensee retains insurance adjusters as defined in
California Insurance Code Section 14021, the licensee must provide training to
the insurance adjusters regarding these regulations and annually certify, in a
declaration executed under penalty of perjury, that such training is provided.
Alternately, the insurance adjuster may annually certify in writing, under
penalty of perjury, that he or she has read and understands these regulations
and all amendments thereto or has successfully completed a training seminar
which explains these regulations;
(4) a copy of the certification required by subsections 2695.6(b) (1), (2)
or (3) shall be maintained at all times at the principal place of business of
the licensee, to be provided to the Commissioner only upon request. (5) the
annual certification required by this subsection shall be completed on or
before September 1 of each calendar year.
NOTE: Authority cited: Sections 790.10, 12340 - 12417, inclusive, 12921
and 12926 of the California Insurance Code and Sections 11342.2 and 11152 of
the California Government Code. Reference: Section 790.03(h)(3) of the
California Insurance Code.
Section 2695.7. Standards for Prompt, Fair and Equitable Settlements
(a) No insurer shall discriminate in its claims settlement practices based
upon the claimant's age, race, gender, income, religion, language, sexual
orientation, ancestry, national origin, or physical disability, or upon the
territory of the property or person insured.
(b) Upon receiving proof of claim, every insurer, except as specified in
subsection 2695.7(b)(4) below, shall immediately, but in no event more than
forty (40) calendar days later, accept or deny the claim, in whole or in part.
The amounts accepted or denied shall be clearly documented in the claim file
unless the claim has been denied in its entirety.
(1) Where an insurer denies or rejects a first party claim, in whole or in
part, it shall do so in writing and shall provide to the claimant a statement
listing all bases for such rejection or denial and the factual and legal bases
for each reason given for such rejection or denial which is then within the
insurer's knowledge. Where an insurer's denial of a first party claim, in
whole or in part, is based on a specific statute, applicable law or
policy provision, condition or exclusion, the written denial shall include
reference thereto and provide an explanation of the application of the
statute, applicable law or provision, condition or exclusion to the claim.
Every insurer that denies or rejects a third party claim, in whole or in part,
or disputes liability or damages shall do so in writing.
(2) Subject to the provisions of subsection 2695.7(k), nothing contained
in subsection 2695.7(b)(1) shall require an insurer to disclose any
information that could reasonably be expected to alert a claimant to the fact
that the subject claim is being investigated as a suspected fraudulent claim.
(3) Written notification pursuant to this subsection shall include a
statement that, if the claimant believes all or part of the claim has been
wrongfully denied or rejected, he or she may have the matter reviewed by the
California Department of Insurance, and shall include the address and
telephone number of the unit of the Department which reviews claims practices.
(4) The time frame in subsection 2695.7(b) shall not apply to claims
arising from policies of disability insurance subject to Section 10123.13 of
the California Insurance Code, disability income insurance subject to Section
10111.2 of the California Insurance Code or mortgage guaranty insurance
subject to Section 12640.09(a) of the California Insurance Code, and shall not
apply to automobile repair bills arising from policies of automobile collision
and comprehensive insurance subject to Section 560 of the California Insurance
Code. All other provisions of subsections 2695.7(b)(1), (2), and (3) are
applicable.
(c)(1) If more time is required than is allotted in subsection 2695.7(b)
to determine whether a claim should be accepted and/or denied in whole or in
part, every insurer shall provide the claimant, within the time frame
specified in subsection 2695.7(b), with written notice of the need for
additional time. This written notice shall specify any additional information
the insurer requires in order to make a determination and state any continuing
reasons for the insurer's inability to make a determination. Thereafter, the
written notice shall be provided every thirty (30) calendar days until a
determination is made or notice of legal action is served. If the
determination cannot be made until some future event occurs, then the insurer
shall comply with this continuing notice requirement by advising the claimant
of the situation and providing an estimate as to when the determination can be
made.
(2) Subject to the provisions of subsection 2695.7(k), nothing contained
in subsection 2695.7(c)(1) shall require an insurer to disclose any
information that could reasonably be expected to alert a claimant to the fact
that the claim is being investigated as a possible suspected fraudulent claim.
(d) Every insurer shall conduct and diligently pursue a thorough, fair and
objective investigation and shall not persist in seeking information not
reasonably required for or material to the resolution of a claim dispute.
(e) No insurer shall delay or deny settlement of a first party claim on
the basis that responsibility for payment should be assumed by others, except
as may otherwise be provided by policy provisions, statutes or regulations,
including those pertaining to coordination of benefits.
(f) Except where a claim has been settled by payment, every insurer shall
provide written notice of any statute of limitation or other time period
requirement upon which the insurer may rely to deny a claim. Such notice shall
be given to the claimant not less than sixty (60) days prior to the expiration
date; except, if notice of claim is first received by the insurer within that
sixty days, then notice of the expiration date must be given to the claimant
immediately. With respect to a first party claimant in a matter involving an
uninsured motorist, this notice shall be given at least thirty (30) days prior
to the expiration date; except, if notice of claim is first received by the
insurer within that thirty days, then notice of the expiration date must be
given to the claimant immediately. This subsection shall not apply to a
claimant represented by counsel on the claim matter.
(g) No insurer shall attempt to settle a claim by making a settlement
offer that is unreasonably low. The Commissioner shall consider any admissible
evidence offered regarding the following factors in determining whether or not
a settlement offer is unreasonably low:
(1) the extent to which the insurer considered evidence submitted by the
claimant to support the value of the claim;
(2) the extent to which the insurer considered legal authority or evidence
made known to it or reasonably available;
(3) the extent to which the insurer considered the advice of its claims
adjuster as to the amount of damages;
(4) the extent to which the insurer considered the advice of its counsel
that there was a substantial likelihood of recovery in excess of policy
limits;
(5) the procedures used by the insurer in determining the dollar amount of
property damage;
(6) the extent to which the insurer considered the probable liability of
the insured and the likely jury verdict or other final determination of the
matter;
(7) any other credible evidence presented to the Commissioner that
demonstrates that (i) any amount offered by the insurer in settlement of a
first-party claim to an insured not represented by counsel, or (ii) the final
amount offered in settlement of a first-party claim to an insured who is
represented by counsel or (iii) the final amount offered in settlement of
the a third party claim by the insurer is below the amount
that a reasonable person with knowledge of the facts and circumstances would
have offered in settlement of the claim.
(h) Upon acceptance of the claim in whole or in part and, when necessary,
upon receipt of a properly executed release, every insurer, except as
specified in subsection 2695.7(h)(1) and (2) below, shall immediately, but in
no event more than thirty (30) calendar days later, tender payment or
otherwise take action to perform its claim obligation. The amount of the claim
to be tendered is the amount that has been accepted by the insurer as
specified in subsection 2695.7(b). In claims where multiple coverage is
involved, and where the payee is known, amounts that have been accepted by the
insurer shall be paid immediately, but in no event more than thirty (30)
calendar days, if payment would terminate the insurer's known liability under
that individual coverage, unless impairment of the insured's interests would
result. The time frames specified in this subsection shall not apply where the
policy provides for a waiting period after acceptance of claim and before
payment of benefits.
(1) The time frame specified in subsection 2695.7(h) shall not apply to
claims arising from policies of disability insurance subject to Section
10123.13 of the California Insurance Code, disability income insurance subject
to Section 10111.2 of the California Insurance Code, or of mortgage guaranty
insurance subject to Section 12640.09(a) of the California Insurance Code, and
shall not apply to automobile repair bills subject to Section 560 of the
California Insurance Code. All other provisions of Section 2695.7(h) are
applicable.
(2) Any insurer issuing a title insurance policy shall either tender
payment pursuant to subsection 2695.7(h) or take action to resolve the problem
which gave rise to the claim immediately upon, but in no event more than
thirty (30) calendar days after, acceptance of the claim.
(i) No insurer shall inform a claimant that his or her rights may be
impaired if a form or release is not completed within a specified time period
unless the information is given for the purpose of notifying the claimant of
any applicable statute of limitations or policy provision or the time
limitation within which claims are required to be brought against state or
local entities.
(j) No insurer shall request or require an insured to submit to a
polygraph examination unless authorized under the applicable insurance
contract and state law.
(k) Subject to the provisions of subsection 2695.7(c), where there is a
reasonable basis, supported by specific information available for review by
the California Department of Insurance, for the belief that the claimant has
submitted or caused to be submitted to an insurer a suspected false or
fraudulent claim as specified in California Penal Code Section 550 or
California Insurance Code Section 1871.4(a), the number of calendar days
specified in subsection 2695.7(b) shall be:
(1) increased to eighty (80) calendar days; or,
(2) suspended until otherwise ordered by the Commissioner, provided the
insurer has complied with California Insurance Code Section 1872.4 and the
insurer can demonstrate to the Commissioner that it has made a diligent
attempt to determine whether the subject claim is false or fraudulent within
the eighty day period specified by subsection 2695.7(k)(1).
(l) No insurer shall deny a claim based upon information obtained in a
telephone conversation or personal interview with any source unless the
telephone conversation or personal interview is documented in the claim file
pursuant to the provisions of Section 2695.3.
(m) No insurer shall make a payment to a provider, pursuant to a policy
provision to pay medical benefits, and thereafter seek recovery or set-off
from the insured on the basis that the amount was excessive and/or the
services were unnecessary, except in the event of a proven false or fraudulent
claim, subject to the provisions of Section 10123.145 of the California
Insurance Code.
(n) Every insurer requesting a medical examination for the purpose of
determining liability under a policy provision shall do so only when the
insurer has a good faith belief that such an examination is reasonably
necessary.
(o) No insurer shall require that a claimant withdraw, rescind or refrain
from submitting any complaint to the California Department of Insurance
regarding the handling of a claim or any other matter complained of as a
condition precedent to the settlement of any claim.
(p) Every insurer shall provide written notification to a first party
claimant as to whether the insurer intends to pursue subrogation of the claim.
Where an insurer elects not to pursue subrogation, or discontinues pursuit of
subrogation, it shall include in its notification a statement that any
recovery to be pursued is the responsibility of the first party claimant.
This subsection does not require notification if the deductible is waived, the
coverage under which the claim is paid requires no deductible to be paid, the
loss sustained does not exceed the applicable deductible, or there is no legal
basis for subrogation.
(q) Every insurer that makes a subrogation demand shall include in every
demand the first party claimant's deductible. Every insurer shall share
subrogation recoveries on a proportionate basis with the first party claimant,
unless the first party claimant has otherwise recovered the whole deductible
amount. No insurer shall deduct legal or other expenses from the recovery of
the deductible unless the insurer has retained an outside attorney or
collection agency to collect that recovery. The deduction may only be for a
pro rata share of the allocated loss adjustment expense. This subsection shall
not apply when multiple policies have been issued to the insured(s) covering
the same loss and the language of these contracts prescribe alternative
subrogation rights. Further, this subsection shall not apply to disability and
health insurance as defined in California Insurance Code Section 106.
(r) Insurers shall take reasonable steps to ensure the fairness,
accuracy, reliability, and reasonableness of computerized data and the
statistical methods used to establish the value of insurance claims, whether
the data or statistical method is developed in - house or through third
parties.
(1) The fact that data is provided to an insurer by a third party
source shall not absolve the insurer from any legal responsibility it may have
to use accurate data, to effectuate fair and equitable settlements of claims,
or its obligation to provide the Department with reasonable assurance that the
data used is fair and accurate. Upon its request, the Department shall have
access to all records, data, computer programs, or any other information used
by the insurer or any other source to establish the value of insurance claims
and all documents that support the reasonable steps taken by the insurer, as
set forth in subsection (2) of this section.
(2) Reasonable steps to be taken by the insurer in ensuring that data
or statistical methods are accurate, fair, reliable and reasonable include,
but are not limited to: reviewing random sample data; performing test runs on
sample data; or securing a certificate of accuracy from a qualified
independent reviewer, with accompanying support documentation, which attests
to the accuracy of the data. If, after these steps are followed, the insurer
has determined that the data or method used is inaccurate, unreliable or
unreasonable, the insurer shall cease to use this data or method immediately,
but in no event more than sixty (60) days after the determination by the
insurer.
(3) If an insurer utilizes data from a third - party vendor for the
purpose of evaluating claims, the Department shall have access to all
records, data, computer programs, or any other information used by the third
party source to establish the value of insurance claims. The Department shall
agree in writing with the thirty party vendor that it will maintain the
confidentiality of the computerized database and support documentation and
will not furnish the computerized database and support documentation to any
third party, except that the Department may use this information as evidence
in an administrative or civil action involving the Department and the insurer
or vendor. This exception shall not prohibit a court from issuing a protective
order prohibiting public disclosure of the evidence.
(4) When establishing the value o f a claim, an insurer shall not be
responsible for the accuracy of data provided by a governmental entity, unless
the insurer has discovered or been notified of the inaccuracy and has
continued to use the data.
NOTE: Authority cited: Sections 553, 554, 790.03(h)(5),
790.03(h)(12), 790.10, 1861.03(a), 10350.10, 10111.2, 11580.2(k), 12340 -
12417, inclusive, 12921 and 12926 of the California Insurance Code and
Sections 11342.2 and 11152 of the California Government Code; Egan v. Mutual
of Omaha Insurance Company (1979) 24 Cal.3d 809 [169 Cal.Rptr. 691]; KPFF,
Inc. v. California Union Insurance Company (1997) 56 Cal.App.4th 963 [66
Cal.Rptr.2d 36] (certified for partial publication); Betts v. Allstate Ins.
Co. (1984) 154 Cal.App.3d 688 [201 Cal.Rptr. 528]. Reference: Section
790.03(h) (2), (3), (4), (5) (13) and (15), and 1872.4 of the California
Insurance Code, Section 6149.5 of the California Business and Professions Code
and California Penal Code Section 550.
Section 2695.8. Additional Standards Applicable to Automobile Insurance
(a) This section enumerates standards which apply to adjustment and
settlement of automobile insurance claims.
(1) the words "automobile" and "vehicle" are used synonymously.
(b) In adjusting and settling first party evaluating
automobile total loss claims the following standards shall apply:
(1) The insurer may elect a cash settlement that shall be based upon the
actual cost of a "comparable automobile" less any deductible provided in the
policy. This cash settlement amount shall include all applicable taxes and
one-time fees incident to transfer of evidence of ownership of a comparable
automobile. This amount shall also include the license fee and other annual
fees to be computed based upon the remaining term of the loss vehicle's
current registration. This procedure shall apply whether or not a replacement
automobile is purchased.
(A) If the insured chooses to retain the loss vehicle or if the third
party claimant retains the loss vehicle, the cash settlement amount shall
include the sales tax associated with the cost of a comparable automobile,
discounted by the amount of sales tax attributed to the salvage value of the
loss vehicle. The cash settlement amount shall also include all fees incident
to transfer of the claimant's vehicle to salvage status. The salvage value may
be deducted from the settlement amount and shall be determined by the amount
for which a salvage pool or a licensed salvage dealer, wholesale motor vehicle
auction or dismantler will purchase the salvage. If requested by the claimant,
the insurer shall provide the name, address and telephone number of the
salvage dealer, salvage pool, motor vehicle auction or dismantler who will
purchase the salvage. The insurer shall 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 disclosure must also inform
the claimant of his or her right to seek a refund of the unused license fees
from the Department of Motor Vehicles.
(2) A "comparable automobile" is one of like kind and quality, made by the
same manufacturer, of the same or newer model year, of the same model type, of
a similar body type, with options and mileage similar to the insured vehicle.
Newer model year automobiles may not be used as comparable automobiles unless
there are not sufficient comparable automobiles of the same model year to make
a determination as set forth in Section 2695.8(b)(3), below. In
determining the cost of a comparable automobile, the insurer may use either
the asking price or actual sale price of that automobile. Any differences
between the comparable automobile and the insured vehicle shall be permitted
only if the insurer fairly adjusts for such differences. Any adjustments from
the cost of a comparable automobile must be discernible, measurable, itemized,
and specified as well as appropriate in dollar amount and so documented in the
claim file. Deductions taken from the cost of a comparable automobile that
cannot be supported shall not be used. The actual cost of a comparable
automobile shall not include any deduction for the condition of a loss vehicle
unless the documented condition of the loss vehicle is below average for that
particular year, make and model of vehicle. This subsection shall not preclude
deduction for prior and/or unrelated damage to the loss vehicle. A comparable
automobile must have been available for retail purchase by the general public
in the local market area within ninety (90) calendar days of the final
settlement offer. The comparable automobiles used to calculate the cost shall
be identified by the vehicle identification number (VIN), the stock or order
number of the vehicle from a licensed dealer, or the license plate number of
that comparable vehicle if this information is available. The identification
shall also include the telephone number (including area code) or street
address of the seller of the comparable automobile.
(3) Not withstanding subsection (2), above, upon approval by the
Department of Insurance, an insurer may use private sales data from the
Department of Motor Vehicles, or other approved sources, which does not
contain the seller's telephone number or street address. Approval by the
Department of Insurance shall be contingent on the Department's determination
that reasonable steps have been taken to limit the use of private sales data
that may be inaccurately reported to the Department of Motor Vehicles.
(4) (3) The insurer shall take reasonable steps to verify
that the determination of the cost of a comparable vehicle is accurate and
representative of the market value of a comparable automobile in the local
market area. Upon its request, the department shall have access to all
records, data, computer programs, or any other information used by the insurer
or any other source to determine market value. The cost of a comparable
automobile shall be determined as follows and, once determined, shall be fully
itemized and explained in writing for the claimant at the time the settlement
offer is made:
(A) when comparable automobiles are available or were available in the
local market area in the last 90 days, the average cost of two or more such
comparable automobiles; or,
(B) when comparable automobiles are not available or were not available in
the local market area in the last 90 days, the average of two or more
quotations from two or more licensed dealers in the local market area; or,
(C) the cost of a comparable automobile as determined by a computerized
automobile valuation service that produces statistically valid fair market
values within the local market area; or
(D) if it is not possible to determine the cost of a comparable automobile
by using one of the methods described in subsections (b)(3)(A), (b)(3)(B) and
(b)(3)(C) of this section, the cost of a comparable automobile shall otherwise
be supported by documentation and fully explained to the claimant. Any
adjustments to the cost of a comparable automobile shall be discernible,
measurable, itemized, and specified as well as be appropriate in
dollar amount and so documented in the claims file. Deductions taken from the
cost of a comparable automobile that cannot be supported shall not be used.
(5) (4) In first party automobile total loss claims, the
insurer may elect to offer a replacement automobile which is a specified
comparable automobile available to the insured with all applicable taxes,
license fees and other fees incident to transfer of evidence of ownership of
the automobile paid by the insurer at no cost other than any deductible
provided in the policy. The offer and any rejection thereof must be documented
in the insurer's claim file. A replacement automobile must be in as good or
better overall condition than the insured vehicle and available for inspection
within a reasonable distance of the insured's residence.
(6) Subsection 2695.8(b) applies to the evaluation of third party
automobile total loss claims, but does not change existing law with respect to
the obligations of an insurer in settling such claims with a third party.
(c) In first party automobile total loss claims, every insurer shall
provide notice to the insured at the time the settlement payment is sent or
final settlement offer is made that if notified by the insured within
thirty-five (35) calendar days after the insured receives the claim payment or
final settlement offer that he or she cannot purchase a comparable automobile
for the gross settlement amount, the insurer will reopen its claim file. If
subsequently notified by the insured the insurer shall reopen its claim file
and utilize the following procedures:
(1) The insurer shall locate a comparable automobile for the gross
settlement amount determined by the company at the time of settlement and
shall provide the insured with the information required in (c)(4), below, or
offer a replacement vehicle in accordance with section 2695.8(b)(4). Any such
vehicle must be available in the local market area; or,
(2) The insurer shall either pay the insured the difference between the
amount of the gross settlement and the cost of the comparable automobile which
the insured has located, or negotiate and purchase this vehicle for the
insured; or,
(3) The insurer shall invoke the appraisal provision of the insurance
policy.
(4) No insurer is required to take action under this subsection if its
documentation to the insured at the time of final settlement offer included
written notification of the identity of a specified comparable automobile
which was available for purchase at the time of final settlement offer for the
gross settlement amount determined by the insurer. The documentation shall
include the telephone number (including area code) or street address of the
seller of the comparable automobile and:
(A) the vehicle identification number (VIN) or,
(B) the stock or order number of the vehicle from a licensed dealer, or
(C) the license plate number of such comparable vehicle.
(d) No insurer shall, where liability and damages are reasonably clear,
recommend that the third party claimant make a claim under his or her own
policy to avoid paying the claim under the policy issued by that insurer.
(e) No insurer shall:
(1) require that an automobile be repaired at a specific repair shop; or,
(2) direct, suggest or recommend that an automobile be repaired at
a specific repair shop, unless all of the requirements set forth in
California Insurance Code Section 758.5 have been met. ,
(A) such referral is expressly requested by the claimant; or,
(B) the claimant has been informed in writing of the right to select
the repair facility; and,
(C) the insurer that elects to repair a vehicle or directs, suggests
or recommends that a specific repair shop be used, shall cause the damaged
vehicle to be restored to its condition prior to the loss at no additional
cost to the claimant other than as stated in the policy or as otherwise
allowed by these regulations.
(3) require a claimant to travel an unreasonable distance either to
inspect a replacement automobile, to conduct an inspection of the vehicle, to
obtain a repair estimate or to have the automobile repaired at a specific
repair shop.
(f) If partial losses are settled on the basis of a written estimate
prepared by or for the insurer, the insurer shall supply the claimant with a
copy of the estimate upon which the settlement is based. The estimate prepared
by or for the insurer shall be of an amount which will allow for repairs to be
made in a workmanlike manner. If the claimant subsequently contends, based
upon a written estimate which he or she obtains, that necessary repairs will
exceed the written estimate prepared by or for the insurer, the insurer shall:
(1) pay the difference between the written estimate and a higher estimate
obtained by the claimant; or,
(2) if requested by the claimant, promptly provide the claimant with the
name of at least one repair shop that will make the repairs for the amount of
the insurer's written estimate. The insurer shall cause the damaged vehicle to
be restored to its condition prior to the loss at no additional cost to the
claimant other than as stated in the policy or as otherwise allowed by law
these regulations . The insurer shall maintain documentation of
all such communications; or,
(3) reasonably adjust any written estimates prepared by the repair shop of
the claimant's choice and provide a copy of the adjusted estimate to the
claimant.
(g) No insurer shall require the use of non-original equipment manufacture
replacement crash parts in the repair of an automobile unless:
(1) the parts are at least equal to the original equipment manufacturer
parts in terms of kind, quality, safety, fit, and performance;
(2) insurers specifying the use of non-original equipment manufacturer
replacement crash parts shall pay the cost of any modifications to the parts
which may become necessary to effect the repair; and,
(3) insurers specifying the use of non-original equipment manufacture
replacement crash parts warrant that such parts are of like kind, quality,
safety, fit, and performance as original equipment manufacturer replacement
crash parts; and,
(4) all original and non-original manufacture replacement crash parts,
manufactured after the effective date of this subchapter, when supplied by
repair shops shall carry sufficient permanent, non-removable identification so
as to identify the manufacturer. Such identification shall be accessible to
the greatest extent possible after installation; and,
(5) the use of non-original equipment manufacturer replacement crash parts
is disclosed in accordance with section 9875 of the California Business and
Professions Code.
(h) No insurer shall require an insured or claimant to supply parts for
replacement.
(i) When the amount claimed is adjusted because of betterment ,
or depreciation, or salvage, all justification shall be
contained in the claim file. Any adjustments shall be discernable, measurable,
itemized, and specified as to dollar amount, and shall accurately reflect the
value of the betterment , or depreciation , or salvage
. This subsection shall not preclude deduction for prior and/or unrelated
damage to the loss vehicle. The basis for any adjustment shall be fully
explained to the claimant in writing and shall:
(1) reflect a measurable difference in market value attributable to the
condition and age of the vehicle, or and
(2) apply only to parts normally subject to repair and replacement during
the useful life of the vehicle such as, but not limited to, tires, batteries,
et cetera.
(j) In a first party partial loss claim, the expense of labor
necessary to repair or replace the damage is not subject to depreciation or
betterment unless the insurance contract contains a clear and unambiguous
provision permitting the depreciation of the expense of labor.
(k) (j ) Every After a covered loss under a policy of
automobile collision coverage or automobile physical damage coverage as
defined in California Insurance Code Section 660, where towing and storage are
reasonably necessary to protect the vehicle from further loss, the insurer
shall pay reasonable towing and storage charges incurred by the claimant.
The insurer shall provide reasonable notice to a the
claimant before terminating payment for storage charges , so that the
claimant has time to remove the vehicle from storage. This subsection
shall also apply to a third party claim filed under automobile liability
coverage as defined in California Insurance Code section 660, however, payment
to a third party claimant may be prorated based upon the comparative fault of
the parties.
(k) Unless the insurer has provided an insured with the name of a
specific towing company prior to the insured's use of another towing company,
the insurer shall pay the reasonable towing charges of the towing company used
by the insured.
NOTE: Authority cited: Sections 790.10, 12921 and 12926 of the California
Insurance Code, Section 3333 of the California Civil Code and Sections 11342.2
and 11152 of the California Government Code. Reference: Sections 758.5,
790.03(c) and 790.03(h)(3) of the California Insurance Code and Section 9875
of the California Business and Professions Code.
Section 2695.85. Auto Body Repair Consumer Bill of Rights
(a) Every insurer that issues automobile liability or collision insurance
policies shall provide the named insured(s) with an Auto Body Repair Consumer
Bill of Rights either at the time of application for an automobile insurance
policy, at the time a policy is issued, or following an accident or loss that
is reported to the insurer. If the insurer provides the insured with an
electronic copy of a policy, the bill of rights may also be transmitted
electronically. If the insurer provides the bill of rights following an
accident or loss, the insurer shall also provide the bill of rights to the
particular insured filing the insurance claim. If the insurer provides the
bill of rights at the time of application or policy issuance, all named
insureds that have not previously received the bill of rights shall be
provided with a copy upon renewal of the policy.
(b) The requirements set forth in subsection 2695.85(a), above, shall
apply to all automobile liability and collision insurance policies issued in
California including commercial automobile, private passenger automobile, and
motorcycle insurance policies.
(c) The Auto Body Repair Consumer Bill of Rights shall be a separate
standardized document and plainly printed in no less than ten-point type. An
insurer may distribute the form using its own letterhead, but the language of
the Auto Body Repair Consumer Bill of Rights shall be developed by the
California Department of Insurance and shall read as follows:
AUTO BODY REPAIR CONSUMER BILL OF RIGHTS
A CONSUMER IS ENTITLED TO:
1. SELECT THE AUTO BODY REPAIR SHOP TO REPAIR AUTO BODY DAMAGE COVERED BY
THE INSURANCE COMPANY. AN INSURANCE COMPANY SHALL NOT REQUIRE THE REPAIRS TO
BE DONE AT A SPECIFIC AUTO BODY REPAIR SHOP.
2. AN ITEMIZED WRITTEN ESTIMATE FOR AUTO BODY REPAIRS AND, UPON COMPLETION
OF REPAIRS, A DETAILED INVOICE. THE ESTIMATE AND THE INVOICE MUST INCLUDE AN
ITEMIZED LIST OF PARTS AND LABOR ALONG WITH THE TOTAL PRICE FOR THE WORK
PERFORMED. THE ESTIMATE AND INVOICE MUST ALSO IDENTIFY ALL PARTS AS NEW, USED,
AFTERMARKET, RECONDITIONED, OR REBUILT.
3. BE INFORMED ABOUT COVERAGE FOR TOWING AND STORAGE SERVICES.
4. BE INFORMED ABOUT THE EXTENT OF COVERAGE, IF ANY, FOR A REPLACEMENT
RENTAL VEHICLE WHILE A DAMAGED VEHICLE IS BEING REPAIRED.
5. BE INFORMED OF WHERE TO REPORT SUSPECTED FRAUD OR OTHER COMPLAINTS AND
CONCERNS ABOUT AUTO BODY REPAIRS.
COMPLAINTS WITHIN THE JURISDICTION OF THE BUREAU OF AUTOMOTIVE REPAIR
Complaints concerning the repair of a vehicle by an auto body repair shop
should be directed to:
Toll Free (800) 952-5210
California Department of Consumer Affairs
Bureau of Automotive Repair
10240 Systems Parkway
Sacramento, CA 95827
The Bureau of Automotive Repair can also accept complaints over its web
site at: www.autorepair.ca.gov
COMPLAINTS WITHIN THE JURISDICTION OF THE CALIFORNIA INSURANCE
COMMISSIONER
Any concerns regarding how an auto insurance claim is being handled should
be submitted to the California Department of Insurance at:
(800) 927-HELP or (213) 897-8921
California Department of Insurance
Consumer Services Division
300 South Spring Street
Los Angeles, CA 90013
The California Department of Insurance can also accept complaints over its
web site at: www.insurance.ca.gov
NOTE: Authority cited: Sections 790.10, 1874.85, 1874.87 of the California
Insurance Code. Reference: Sections 790.03(c), 790.03(h)(3), and 1874.87 of
the California Insurance Code; Sections 9884.8, 9884.9 of the California
Business and Professions Code; and California Code of Regulations, Title 10,
Chapter 5, Subchapter 7.5, Section 2695.8(j).
Section 2695.9. Additional Standards Applicable to First Party Residential
and Commercial Property Insurance Policies
(a) When a residential or commercial property insurance policy provides
for the adjustment and settlement of first party losses based on replacement
cost, the following standards apply:
(1) When a loss requires repair or replacement of an item or part, any
consequential physical damage incurred in making the repair or replacement not
otherwise excluded by the policy shall be included in the loss. The insured
shall not have to pay for depreciation nor any other cost except for the
applicable deductible.
(2) When a loss requires replacement of items and the replaced items do
not match in quality, color or size, the insurer shall replace all items in
the damaged area so as to conform to a reasonably uniform appearance.
(b) No insurer shall require that the insured have the property repaired
by a specific individual or entity.
(c) No insurer shall suggest or recommend that the insured have the
property repaired by a specific individual or entity unless:
(1) the referral is expressly requested by the claimant; or
(2) the claimant has been informed in writing of the right to select a
repair individual or entity and , if the claimant accepts the suggestion
or recommendation, the insurer shall cause the damaged property to be
restored to no less than its condition prior to the loss and repaired in a
manner which meets accepted trade standards for good and workmanlike
construction at no additional cost to the claimant other than as stated in the
policy or as otherwise allowed by these regulations.
(d) If losses are settled on the basis of a written scope and/or estimate
prepared by or for the insurer, the insurer shall supply the claimant with a
copy of each document upon which the settlement is based. The estimate
prepared by or for the insurer shall be in accordance with applicable policy
provisions, of an amount which will restore the damaged property to no less
than its condition prior to the loss and which will allow for repairs to be
made in a manner which meets accepted trade standards for good and workmanlike
construction. The insurer shall take reasonable steps to verify that the
repair or rebuilding costs utilized by the insurer or its claims agents are
accurate and representative of costs in the local market area. If the claimant
subsequently contends, based upon a written estimate which he or she obtains,
that necessary repairs will exceed the written estimate prepared by or for the
insurer, the insurer shall:
(1) pay the difference between its written estimate and a higher estimate
obtained by the claimant; or,
(2) if requested by the claimant, promptly provide the claimant with the
name of at least one repair individual or entity that will make the repairs
for the amount of the written estimate. The insurer shall cause the damaged
property to be restored to no less than its condition prior to the loss and
which will allow for repairs in a manner which meets accepted trade standards
for good and workmanlike construction at no additional cost to the claimant
other than as stated in the policy or as otherwise allowed by these
regulations; or,
(3) reasonably adjust any written estimates prepared by the repair
individual or entity of the insured's choice and provide a copy of the
adjusted estimate to the claimant.
(e) Once the appraisal provision under an insurance policy is invoked, the
appraisal process shall not include any legal proceeding or procedure not
specified under California Insurance Code Section 2071. Nothing herein is
intended to preclude separate legal proceedings on issues unrelated to the
appraisal process.
(f) When the amount claimed is adjusted because of betterment,
depreciation, or salvage, all justification for the adjustment shall be
contained in the claim file. Any adjustments shall be discernable, measurable,
itemized, and specified as to dollar amount, and shall accurately reflect the
value of the betterment, depreciation, or salvage. Any adjustment for
betterment or depreciation shall reflect a measurable difference in market
value attributable to the condition and age of the property and apply only to
property normally subject to repair and replacement during the useful life of
the property. The basis for any adjustment shall be fully explained to the
claimant in writing.
(1) Under a policy, subject to California Insurance Code Section 2071,
where the insurer exercises its option is required to pay the
expense of repairing, rebuilding or replacing the property destroyed or
damaged with other of like kind and quality, the measure of recovery is
determined by the actual cash value of the damaged or destroyed property, as
set forth in California Insurance Code Section 2051. Except for the intrinsic
labor costs that are included in the cost of manufactured materials or goods,
the The expense of labor necessary to repair, rebuild or
replace covered property is not a component of physical depreciation and shall
not be subject to depreciation or betterment.
NOTE: Authority cited: Sections 790.10, 2051, 2051.5, 2071, 12921 and
12926 of the California Insurance Code, Section 7109 of the California
Business and Professions Code and Sections 11342.2 and 11152 of the California
Government Code; Reference: Sections 790.03(h)(3), (5) and (7) of the
California Insurance Code.
Section 2695.10 Additional Standards Applicable to Surety Insurance
(a) No insurer shall base or vary its claims settlement practices, or its
standard of scrutiny and review, upon the claimant's, age, race,
gender, income, religion, language, sexual orientation, ancestry, national
origin, or physical disability, or upon the territory of the property or
person insured.
(b) As soon as possible, but in no event later than forty (40)
Within sixty calendar days after receipt by the insurer of proof of claim,
and provided the claim is not in litigation or arbitration, the insurer shall
accept or deny the claim, in whole or in part, and affirm or deny liability.
Every insurer that denies or rejects a claim in whole or in part, or disputes
liability or damages, shall do so in writing. provide to the
claimant a written statement listing all bases for such rejection or denial,
and the factual and legal bases for each reason given for each rejection or
denial, which are within the insurer's knowledge. If an insurer's denial of a
claim in whole or in part is based on a specific statute or specific bond
provisions, the denial shall include reference thereto and provide an
explanation of the application of the statute or bond provision to the claim.
Written notification pursuant to this subsection shall also include a
notification that the claimant may have the matter reviewed by the California
Department of Insurance and shall provide the address and telephone number of
the unit of the Department which reviews complaints regarding claims
practices.
(1) A principal's absence, non-cooperation, or failure to meet the
bonded obligation shall not excuse unreasonable delay by the insurer in
determining whether a claim should be accepted or denied.
(2) While an insurer may consider all information provided by a
principal, absent reasonable factual and/or legal bases for denying a claim,
no insurer shall deny a claim based solely upon a principal's protest of a
claim or denial of liability for a claim.
(c) In the event an insurer requires more time than is allotted in
subsection 2695.10(b) to determine whether a claim should be accepted and/or
denied, in whole or in part, the insurer shall provide the claimant with
written notice of the need for such additional time within the time specified
in subsection 2695.10(b). Such written notice shall specify the reasons for
the need for such additional time, including specification of any additional
information the insurer requires in order to make such determination. The
insurer shall provide the claimant with written notice as to the continuing
reasons for the insurer's inability to make such a determination. Except in
cases where extraordinary circumstances are present which materially affect
the insurer's ability to comply, such written notice shall be provided within
30 calendar days of the date of the initial notification, and every 30
calendar days thereafter until such determination is made or notice of legal
action is received. If the determination cannot be made until some event,
process, or third party determination is made, then the insurer shall comply
with this requirement by advising the claimant of the situation and provide an
estimate as to when the determination can be made.
(d) No insurer shall fail to pursue diligently an investigation of a
claim, or persist in seeking information not reasonably required for or
material to resolution of a claim dispute.
(e) No insurer shall deny a claim upon information obtained in a telephone
conversation or personal interview with any source unless the telephone
conversation or personal interview is documented in the claim file pursuant to
the provisions of section 2695.3.
(f) Where the claim is to be settled by payment, and where neither the
claim nor the amount is in dispute, such payment shall be tendered (1) within
15 calendar days following affirmation of liability where the insurer does not
require the claimant to execute a release, or (2) within 15 calendar days
following the insurer's receipt of a release properly executed by the
claimant, where such release is required by the insurer. Such release shall be
provided to the claimant within ten (10) calendar days following affirmation
of liability. Where multiple claimants are involved, payment shall be made
pursuant to this subsection, provided such payment shall not increase the
insurer's liability, or impair the rights of other claimants under the bond.
(g) Except where a claim has been settled by payment, every insurer
shall provide written notice of any statute of limitations or other time
period requirement upon which the insurer may rely to deny a claim. Such
notice shall be given to the claimant no less than sixty (60) days prior to
the expiration date. If notice of claim is first received by the insurer
within sixty (60) days of the expiration date and such date is known to the
insurer, then notice of the expiration date must be given to the claimant
immediately. This subsection shall not apply to a claimant represented by
counsel on the claim matter or to a claim already time barred when first
received by the insurer.
(h) No insurer shall attempt to settle a claim by making a settlement
offer that is unreasonably low. The Commissioner shall consider any admissible
evidence offered regarding the following factors in determining whether or not
a settlement offer is unreasonably low:
(1) the extent to which the insurer considered evidence submitted by
the claimant to support the value of the claim;
(2) the extent to which the insurer considered legal authority or
evidence made known to it or reasonably available;
(3) the procedures used by the insurer in determining the dollar
amount of damages;
(4) any other credible evidence presented to the Commissioner that
demonstrates that the final amount offered by the insurer in settlement of a
claim is below the amount that a reasonable person with knowledge of the facts
and circumstances would have offered in settlement of the claim.
NOTE: Authority cited: Sections 790.10, 12921, 12921.1 and 12926 of the
California Insurance Code. Reference: Sections 790.03(h)(3), (4) and (15),
12921.3 of the California Insurance Code, and California Civil Code Section
2807.
Section 2695.11. Additional Standards Applicable to Life and Disability
Insurance Claims
(a) No insurer shall seek reimbursement of an overpayment or withhold any
portion of any benefit payable as a result of a claim on the basis that the
sum withheld or reimbursement sought is an adjustment or correction for an
overpayment made under the same policy unless:
(1) the insurer's files contain clear, documented evidence of an
overpayment and written authorization from the insured or assignee, if
applicable, permitting such the reimbursement or withholding
procedure, or
(2) the insurer's files contain clear, documented evidence pursuant to
section 2695.3 of all of the following:
(A) The overpayment was erroneous under the provisions of the policy.
(B) The error which resulted in the payment is not a mistake of the law.
(C) The insurer notifies the insured within six (6) months of the date of
the error, except that in instances of error prompted by representations or
nondisclosure of claimants or third parties, the insurer notifies the insured
within fifteen (15) calendar days after the date of discovery of such error.
For the purpose of this subsection, the date of the error shall be the day on
which the draft for benefits is issued.
(D) Such notice states clearly the cause of the error and states the
amount of the overpayment.
(E) The procedure set forth above in (a)(2)(A) through (D) above may not
be used if the overpayment is the subject of a reasonable dispute as to facts.
(b) With each claim payment, the insurer shall provide to the claimant and
assignee, if any, an explanation of benefits which shall include, if
applicable, the name of the provider or services covered, dates of service,
and a clear explanation of the computation of benefits.
(c) An insurer may not impose a penalty upon any insured for noncompliance
with insurer requirements for precertification of benefits unless such
penalties are specifically and clearly set forth in writing in the policy or
certificate of insurance.
(d) An insurer that contests a claim under California Insurance Code
Section 10123.13 shall subsequently affirm or deny the claim within thirty
(30) calendar days from the original notification. In the event an insurer
requires additional time to affirm or deny the claim, it shall notify the
claimant and assignee in writing. This written notice shall specify any
additional information the insurer requires in order to make a determination
and shall state any continuing reasons for the insurer's inability to make a
determination. This notice shall be given within thirty (30) calendar days of
the notice (required under Insurance Code Section 10123.13) that the claim is
being contested and every thirty (30) calendar days thereafter until a
determination is made or legal action is served. If the determination cannot
be made until some future event occurs, the insurer shall comply with this
continuing notice requirement by advising the claimant and assignee of the
situation and providing an estimate as to when the determination can be made.
(e) When a policy requires preauthorization of non-emergency medical
services, the preauthorization must be given immediately but in no event more
than five (5) calendar days after the request for preauthorization. The
preauthorization shall be communicated or confirmed in writing to the insured
and the medical service provider, and shall explain the scope of the
preauthorization and whether the preauthorization is or is not a guarantee of
acceptance of the claim. In the event the preauthorization is denied, the
reason(s) for the denial shall be communicated in writing to the insured and
the medical service provider.
(f) No preauthorization shall be required by an insurer for emergency
medical services.
(g) An insurer shall reimburse the insured or medical service provider for
reasonable expenses incurred in copying medical records requested by the
insurer.
NOTE: Authority cited: Sections 790.10, 12921 and 12926 of the California
Insurance Code and Sections 11342.2 and 11152 of the California Government
Code. Reference: Section 790.03(h)(1), (2), (3), (5) and (13) and Section
10123.13 of the California Insurance Code.
Section 2695.12. Penalties
(a) In determining noncompliance with this subchapter and appropriate
whether to assess penalties and if so the appropriate amount
to be assessed , if any, the Commissioner shall consider
admissible evidence on the following:
(1) the existence of extraordinary circumstances;
(2) whether the licensee has a good faith and reasonable basis to believe
that the claim or claims are fraudulent or otherwise in violation of
applicable law and the licensee has complied with the provisions of Section
1872.4 of the California Insurance Code;
(3) the complexity of the claims involved;
(4) gross exaggeration of the value of the property or severity of the
injury, or amount of damages incurred;
(5) substantial mischaracterization of the circumstances surrounding the
loss or the alleged default of the principal;
(6) secreting of property which has been claimed as lost or destroyed.
(7) the relative number of claims where the noncomplying act(s) are found
to exist, as contrasted to the total number of claims handled by the
licensee and the total number of claims reviewed the Department during
the relevant time period;
(8) whether the licensee has taken remedial measures with respect to the
noncomplying act(s);
(9) the existence or nonexistence of previous violations by the licensee;
(10) the degree of harm occasioned by the noncompliance;
(11) whether, under the totality of circumstances, the licensee made a
good faith attempt to comply with the provisions of this subchapter;
(12) the frequency of occurrence and/or severity of the detriment to the
public caused by the violation of a particular subsection of this subchapter;
(13) whether the licensee's management was aware of facts that apprised or
should have apprised the licensee of the act(s) and the licensee failed to
take any remedial measures; and
(14) the licensee's reasonable mistakes or opinions as to valuation of
property, losses or damages.
(b) This section shall not bar, obstruct or restrict any right to
administrative due process an insurer may be afforded under California
Insurance Code Sections 790.05, 790.06, and 790.07.
NOTE: Authority cited: Sections 790.035, 790.07, 790.08, 790.09, 790.10,
1872.4, 12340 - 12417, inclusive, 12921, 1065, 704, 780-784, 1011, 11690,
12926 and 12928.6 of the California Insurance Code and Sections 11342.2 and
11152 of the California Government Code. Reference: Section 790.03(h), 790.035
(a), 790.04, 790.05, 790.06, 790.08, 790.10 of the California Insurance Code.
Section 2695.13. Severability
If any provision or clause of this rule or the application thereof to any
person or situation is held invalid, such invalidity shall not affect any
other provision or application of this rule which can be given effect without
the invalid provision or application, and to this end the provisions of this
rule are declared to be severable.
NOTE: Authority cited: Sections 790.10, 12340 - 12417, inclusive, 12921
and 12926 of the California Insurance Code and Sections 11342.2 and 11152 of
the California Government Code. Reference: Section 790.03(h) of the California
Insurance Code.
2695.14 Compliance Date
(a) Any amendments to these regulations shall be complied with within
ninety (90) calendar days after they are filed with the Secretary of State.
(b) Prior to the compliance date of these regulations, licensees
shall, pursuant to Section 2695.6, adopt and communicate to their claims
agents standards for the prompt investigation and processing of claims, and
provide training and instruction on these regulations.
(c) These regulations shall apply to any claims handling that takes
place on or after the compliance date set forth under subsection 2695.14(a).
NOTE: Authority Cited: Sections 790.10, 12921 and 12926 of the
California Insurance Code and Section 11343.4 of the California Government
Code. Reference: Section 790.03(h) of the California Insurance Code.
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