Transcript Avalos v US Food Services

CALIFORNIA FAIR
CLAIMS
REGULATIONS
SEMINAR FOR
Coronado Claims Services, Inc.
February 15, 2011
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Summary of CA Fair Claims
Practices Regulations
Presented by Partners:
Keith G. Bremer, Esq.
Vik Nagpal, Esq
BREMER WHYTE BROWN & O’MEARA LLP
Los Angeles, Newport Beach, Riverside, San Diego, Berkley, Las
Vegas and Arizona
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Introduction
Unfair Settlement Practices Prohibited by
California Insurance Code

California Insurance Code section 790.03, subdivision
(h) denotes 16 claims settlement practices which are
deemed to be unfair, and thus prohibited, when it
can be demonstrated that an insurer:

"knowingly committed" them on a single occasion

with such a frequency so they can reasonably be
construed to be part of a general business practice.
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Introduction
Unfair Settlement Practices Prohibited by
California Insurance Code

The standards set forth are a minimum, but not
exclusive, standards

The amended regulations apply to all new claims
submitted on or after May 12, 1997, as well as to
acts performed with respect to all preexisting claims
fom that date forward.
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Introduction
Classes of Insurance Affected by Regulations
a.
Admitted Insurers
 unfair claims handling regulations apply generally to
Insurers issuing all classes of insurance.
 including non-admitted insurers and participants in
the California FAIR Plan and the California
Automobile Assigned Risk Plan.
 The regulations apply to claims brought by either
first or third parties to the insurance contract, their
representatives, their attorneys, as well as public
adjusters.
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Introduction
Classes of Insurance Affected by Regulations
b. Non-Admitted Insurers
 Non-Admitted Insurers are within the ambit of the
California Insurance Practices Act.
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Claims Handling Duties
1.
Record-Keeping Requirements
The claims files are subject to examination by the
Insurance Commissioner. The files are required to
be complete as to the individual claim so as to allow
reconstruction of pertinent events and the dates on
which the events occurred.
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Claims Handling Duties
Record-Keeping Requirements
To facilitate examination of claims handling
records, insurers are required to:
a. Maintain retrievable claim data for examination for
the current year as well as the preceding four years
in a form that allows inspection of the following:
i. Claim number;
ii. Type of coverage;
iii. Date of loss;
iv. Date claim paid;
v. Date claim denied or closed without payment.
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Claims Handling Duties
Record-Keeping Requirements
To facilitate examination of claims handling
records, insurers are required to:
b. Chronicle in each file the dates the carrier received,
processed, and transmitted or mailed each key
document in the file.
c. Preserve claims file material for the current year
and the four previous years in hard copy form or in
a form which can be duplicated.
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Policy Provision
Disclosure Requirements
Insurers are required to divulge to policyholders
presenting claims the following information.
a.
Benefits;
b. Coverage ;
c.
Time limits or other applicable policy provisions
which apply to the claim;
d. Any additional benefits which may be
implicated by the claim.
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Prohibited Claims Handling Conduct
a.
Discrimination
Insurers may not discriminate in claims settlement
practices based upon the race, gender, income,
religion, language, sexual orientation, ancestry,
national original or physical disability of the claimant,
nor based upon the area in which the property or
person insured is located.
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Prohibited Claims Handling Conduct
b. Generally Prohibited Acts
The following acts are forbidden:
i.
Concealing benefits or coverages;
ii.
Denying a claim for failure to exhibit property
unless the claim file documents either a demand by
the underwriter and an unfounded refusal by a
policyholder, or a breach of a contract provision
mandating production of the property;
iii. Requiring a first-party claimant to provide
notice or proof of a claim within a specified period
of time unless set forth in the contract;
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Prohibited Claims Handling Conduct
iv. Requesting an unrepresented claimant to sign a
release which is broader in scope that the subject
of the claim for which payment is being made
unless the effect of the release is both disclosed
and fully explained to the claimant in writing.
However, a waiver of the provisions of California
Civil Code Section 1542 (release includes claim not
then known) is permitted if disclosed and
explained.
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Prohibited Claims Handling Conduct
v. Issuing checks in partial payment which are
accompanied by language releasing the insurer,
insured, or principal in full unless the policy limit
has been paid, or a compromise settlement has
been mutually agreed to as to coverage and
amount payable under a policy.
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Prohibited Claims Handling Conduct
vi. Requiring a first party to submit duplicative
proofs of claim where the insurer may provide
coverage under more than one policy.
vii. Requiring the claimant to refrain, withdraw, or
forbear from submitting a complaint to the
Commissioner as a condition precedent to the
settlement of a claim.
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Prohibited Claims Handling Conduct
c.
Threatening Impairment of Rights
A third party claimant may not be informed that his
or her rights will be abridged if a form or release is
not completed within a specified period unless the
purpose of advising the claimant of a time deadline is
to inform of an applicable statute of limitations,
policy provision, or government tort claim statute.
d. Lie Detector Tests
Insurers may not request or require insureds to submit
to polygraph examination unless authorized by the
insurance policy and state law.
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Duties Upon Receipt of
Claims Communications
Upon receipt of notice of a claim, the insurer has
the following duties:
a. Transmit Claims Notification
Agents and licensees handling claims on an
insurer's behalf are required to immediately
transmit notice of claims to the underwriter in
conformity with its written instructions for proper
handling of a notice or claim
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Duties Upon Receipt of
Claims Communications
b. Acknowledge Receipt of Claim
Notices of claims must generally be acknowledged
in writing or the acknowledgment be documented
in the claims file within 15 days of the receipt of a
notice of claim. The only exceptions are where the
underwriter makes payment or receives notice of
legal action. A "notice of claim" does not include
any written or verbal communication provided
solely for informational or incident reporting
purposes.
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Duties Upon Receipt of
Claims Communications
c. Notice of Claim
Notice of a claim is essentially receipt of oral or
written communication by the carrier or its agent
which substantially informs the insurer that the
claimant wishes to make a claim and that a
condition giving rise to the insurer's obligations
may have arisen. Written notice may not be
required unless specified in the insurance contract.
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Duties Upon Receipt of
Claims Communications
d. Respond to Communications Regarding
Claims
i. Provide Forms, Instructions and Assistance
Upon receiving notice of a claim, the underwriter
is required to immediately (but not later than 15
days) provide the necessary claim forms,
instructions and reasonable assistance, including
detailing the information the claimant must
provide for proof of claim.
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Duties Upon Receipt of
Claims Communications
d. Respond to Communications Regarding
Claims
ii. Reply to Claimants' Communications within
15 Days
Unless a legal action has been filed, licensees are
required to respond as soon as practicable, but in
any event no more than 15 days after receipt of
any communication from a claimant which
suggests a reply is expected. The response must
be complete and based upon the facts as then
known.
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Duties Upon Receipt of
Claims Communications

Commence Investigation of the Claim within
15 days
Carriers are required to immediately, but not more
than 15 days after receiving notice, commence any
necessary claims investigation.
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Acceptance or Rejection of Claims
Claims Determination Required Within 40 Days
An insurer must accept or reject, in whole or in
part, both first-and third-party claims immediately,
but no later than 40 days after receiving a "proof of
claim." A "proof of claim" is any documentation in
the claimant's possession provided to the insurer
showing evidence of the claim and supporting the
magnitude or amount of the claimed loss.
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Acceptance or Rejection of Claims
Extensions of the 40 Day Period
Inability to Make Determination as Basis for
Extension

If an insurer requires more than 40 days to make a claims
determination, the insurer must provide the claimant with
written notice of the fact additional time is required to
make a determination within the initial 40-day period. An
insurer's notice that additional time is required must include
a specification of the further information required in order
for the insurer to reach a decision and state the continuing
reasons for the insurer's inability to make a determination.
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Acceptance or Rejection of Claims

If an insurer's inability to make a determination continues,
the continuing reasons for the inability to resolve the claim
must be communicated in writing to the claimant. This
notice must be provided every 30 days thereafter until
either a resolution is accomplished or notice of legal action
is served. In the event a claims determination is contingent
upon the happening of some other event or determination,
the insurer's notice to the claimant of the existence of this
fact as well as an estimate of when the matter will resolve
will constitute compliance. Insurers need not disclose
information which would inform a claimant that his or her
claim was being investigated on the bases of a suspected
fraud.
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Acceptance or Rejection of Claims
Resolution of claims may not be delayed by:
1. An insurer's persistence in seeking information not
reasonably required for the determination of the
claim;
2. In the case of first-party claims, an assertion by the
insurer that others are responsible for payment,
unless the assertion is supported by policy
provisions, statutes, or regulations, including those
concerning coordination of benefits.
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Acceptance or Rejection of Claims
Required Claims File Documentation
A denial, if based on an interview or telephonically
communicated information, must have such
information contained in the claims file
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Acceptance or Rejection of Claims
Contents of Notice of Claims Decisions
a.
First-Party Claims
Communications of claims decisions as to claims brought
by first-party claimants to the contract of insurance, which
are denied or rejected in whole or in party, must be in
writing and must also satisfy the following requirements:
i. They must include a statement of all the grounds for the
determination as well as the factual and legal basis for each
reason for the decision then within the insurer's knowledge.
ii. Where a claims decision is based upon specific policy
language, the communication must include both a reference
to the provision relied upon as well as an explanation of its
application to the facts of the claim.
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Acceptance or Rejection of Claims
Contents of Notice of Claims Decisions
b.
Third-Party Claims
Communications of claims decisions as to claims of
third parties to the policy, which are denied or
rejected in whole or in party, or as to which liability
or damages are disputed, must be in writing.
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Acceptance or Rejection of Claims
Contents of Notice of Claims Decisions
c. Exception to Notice Requirement:
Fraud Investigation
As noted above, an insurer's notice must recite all
facts considered by the insurer in accepting or
denying a claim. However, to discourage
fraudulent claims, an insurer, whether first or thirdparty, who is investigating a potential fraudulent
claim, need not disclose information alerting a
claimant to the fact that an investigation as to fraud
is taking place.
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Acceptance or Rejection of Claims
Contents of Notice of Claims Decisions
Each communication of a claims decision
denying or rejecting a claim (in whole or in
part), must also provide:
a. Notice to the claimant that if he or she believes the
action taken by the insurer is wrongful, the matter
may be reviewed by the Department of Insurance;
and
b. The address and telephone number of the
Department’s claim practice review unit.
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Settlement Offers and
Payment of Accepted Settlements
1. Unreasonably Low Settlement Offers
Prohibited
Insurers may not attempt to make a settlement by
making offers which are unreasonably low, as
measured by the following factors:
a. The extent of the insurer's consideration of the
claimant's evidence in support of the valuation of
the claim;
b. The extent to which the insurer considered
evidence otherwise made known to it and
reasonably available;
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Settlement Offers and
Payment of Accepted Settlements
c. The extent to which the insurer considered the
input of the claim's handler as to the amount of
damages;
d. The extent to which the insurer considered the
advice of counsel that there was a substantial
likelihood of an excess of limits recovery;
e. The procedures employed by the insurer in
determining the dollar value of property damage;
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Settlement Offers and
Payment of Accepted Settlements
f. The extent to which the insurer considered the
liability of the insured and potential verdict;
g. Any other credible evidence presented to the
Commissioner that indicates the last amount
offered in settlement of the claim by the insurer
was less than an informed, reasonable person
would have offered.
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Settlement Offers and
Payment of Accepted Settlements
2. Limitation on Medical Examinations
A carrier may only request a medical examination
for determining its obligation under a policy
provision to make payments for medical benefits
where it has a good faith belief that such an
examination is necessary to enable it to determine
the reasonableness and/or necessity of any medical
treatments.
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Tender of Settlement
Payments within 30 days
a. Payments Required Where Coverage and/or
Liability Admitted
The regulations provide that insurers must tender
immediate payment, but in no more than 30 days,
of claims resolutions where the amount of a claim
has been determined and is not in dispute (and,
where necessary, a fully executed release has been
received.
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Tender of Settlement
Payments within 30 days
b. Payments Required Where Multiple Coverages
Involved
Where multiple coverages are at stake; and:
i. Payment would terminate the insurer's known
liability under a single coverage without impairing
the interests of the insured; and
ii. The amount of payment is not in dispute; and
iii. The recipient's identity is known; then

Payment must be tendered immediately or no later
than 30 days after determination, unless the policy
provides otherwise.
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Subrogation
a) Notice of Subrogation
Insurers are required to provide written notice to a
first-party claimant whether or not the insurer
desires to exercise a right of subrogation. If a
carrier does not elect to subrogate, or determines
to forego further efforts to subrogate once such
efforts have begun, it must notify the insured that
any effort at effecting a recovery is the insured's
responsibility.
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Subrogation
Notice is not required where:
i. The deductible has been waived;
ii. No deductible is required by the claimant
pursuant to the terms of the coverage;
iii. The total loss sustained is within the amount of
the deductible;
iv. There is no legal basis for subrogation.
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Subrogation Demand
Must Include Deductible
Subrogation demands must include the insured's
deductible, and recovery must be shared with the
insured on a proportionate basis unless the insured
has otherwise recovered the full amount of the
deductible. The amount of deductible recovered may
not be reduced for expenses unless the carrier has
actually retained the services of an outside attorney or
collection agency to effect recoupment, in which case
it may be reduced by only a pro rata share of the
allocated expense
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Time Limits/Diarying Requirements
Time Limits Regarding Communications From Claimants
TIME LIMITS
ACTION REQUIRED
CITATION
Within 15 calendar days
after receiving notice of
claim which is not notice
of legal action
Acknowledge receipt of notice of
claim, begin any necessary
investigation of claim, provide
claimant with necessary claim forms,
instructions, and reasonable
assistance.
2695.5(e)(13)
Within 15 calendar days
after receiving any
communication indicating
response is required
Reply to any communication from a
claimant regarding a claim that
reasonably suggests a response is
requested. Not applicable where a
legal action has been initiated.
2695.5(b)
Within 40 calendar days
after receipt of proof of
claim
Accept or reject the claim, in whole or
in part, and affirm or deny liability.
2695.7(b)
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Time Limits/Diarying Requirements
Time Limits Regarding Communications From Claimants
TIME LIMITS
ACTION REQUIRED
CITATION
Every 30 days beginning within initial
40 day period
Notify claimant that insurer's
2695.7(c
inability to make determination )(1)
regarding acceptance or
settlement cannot be made.
For unrepresented parties, at least 60
days before expiration of the statute
of limitations or other time period
limitation requirement applicable to
the claim, or immediately if a claim is
received within 60 days of an expiring
statute or other time limit; or, 30 days
prior to the expiration of a UM claim
statute, or immediately if the claim is
received within 30 days of an expiring
UM statute
An insurer must notify the
2695.7(c
claimant of the expiration of
)(1)
the statute of limitations or
other time limitation in writing.
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Time Limits Regarding
Settlement Payments
TIME LIMITS
ACTION REQUIRED
Immediately or within 30
calendar days after
acceptance of a claim and
receipt of a release when
necessary
Tender payment of undisputed
amount of claim. Exceptions apply
where multiple coverages are
applicable and insured's interests
would be impaired.
CITATION
2695.7(h)
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