790.03 v5 02-16-16 [IN ACCORDANCE WITH CALIFORNIA INSURANCE CODE (CIC) SECTION 12938, THIS REPORT WILL BE MADE PUBLIC AND PUBLISHED ON THE CALIFORNIA DEPARTMENT OF INSURANCE (CDI) WEBSITE] WEBSITE PUBLISHED REPORT OF THE MARKET CONDUCT EXAMINATION OF THE CLAIMS PRACTICES OF OLD REPUBLIC INSURANCE COMPANY NAIC # 24147 CDI # 1489-4 AS OF APRIL 30, 2018 ADOPTED JUNE 26, 2019 STATE OF CALIFORNIA CALIFORNIA DEPARTMENT OF INSURANCE MARKET CONDUCT DIVISION FIELD CLAIMS BUREAU
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OLD REPUBLIC INSURANCE COMPANY NAIC # 24147 CDI # … Conduct Exam Reports/110475 - 110475 - Old...Old Republic Insurance Company NAIC # 24147 Group NAIC # 0150 Hereinafter, the Company
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790.03 v5 02-16-16
[IN ACCORDANCE WITH CALIFORNIA INSURANCE CODE (CIC) SECTION 12938,
THIS REPORT WILL BE MADE PUBLIC AND PUBLISHED ON THE CALIFORNIA DEPARTMENT OF INSURANCE (CDI) WEBSITE]
WEBSITE PUBLISHED REPORT OF THE MARKET CONDUCT EXAMINATION OF THE CLAIMS PRACTICES OF
OLD REPUBLIC INSURANCE COMPANY NAIC # 24147 CDI # 1489-4
AS OF APRIL 30, 2018
ADOPTED JUNE 26, 2019
STATE OF CALIFORNIA
CALIFORNIA DEPARTMENT OF INSURANCE MARKET CONDUCT DIVISION
FIELD CLAIMS BUREAU
790.03 v5 02-16-16
NOTICE
The provisions of Section 735.5(a) (b) and (c) of the California
Insurance Code (CIC) describe the Commissioner’s authority
and exercise of discretion in the use and/or publication of
any final or preliminary examination report or other
associated documents. The following examination report is
a report that is made public pursuant to California Insurance
Code Section 12938(b)(1) which requires the publication of
every adopted report on an examination of unfair or
deceptive practices in the business of insurance as defined
in Section 790.03 that is adopted as filed, or as modified or
corrected, by the Commissioner pursuant to Section 734.1.
The Company failed to ask if a child passenger restraint system was in use by a child during an accident or was in the vehicle at the time of a loss that was covered by the policy.
7
CIC §880 *[CIC §790.03(h)(3)]
The Company failed to conduct its business in its own name.
6
CCR §2695.7(d) *[CIC §790.03(h)(3)]
The Company failed to conduct and diligently pursue a thorough, fair and objective investigation.
5
CCR §2695.8(b)(1) *[CIC §790.03(h)(5)]
The Company failed to include, in the settlement, all applicable taxes; the one-time fees incident to transfer of evidence of ownership of a comparable automobile; the license fee and other annual fees computed based upon the remaining term of the current registration.
5
CCR §2695.5(b) *[CIC §790.03(h)(2)]
The Company failed to respond to communications within 15 calendar days, or the Company failed, in its response, to furnish the claimant with a complete response.
4
CCR §2695.7(b)(3) *[CIC §790.03(h)(3)]
The Company failed to include a statement in its claim denial that, if the claimant believes 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.
2
CCR §2695.7(c)(1) *[CIC §790.03(h)(3)]
The Company failed to provide written notice of the need for additional time or information every 30 calendar days.
2
CCR §2695.5(e)(2) *[CIC §790.03(h)(3)]
The Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days.
1
CCR §2695.5(e)(3) *[CIC §790.03(h)(3)]
The Company failed to begin any necessary investigation of the claim within 15 calendar days.
1
7
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Citation Description of Allegation ORIC Number of
Alleged Violations
CCR §2695.8(b)(4) *[CIC §790.03(h)(3)]
The Company failed to take reasonable steps to verify that the determination of the cost of a comparable vehicle was accurate and representative of the market value in the local market area.
1
CCR §2695.8(b)(4)(a) *[CIC §790.03(h)(5)]
The Company determined the actual cash value (ACV) of the vehicle by utilizing more than one method described by CCR §2695.8(b)(4)(A), (B), or (C).
1
CCR §2695.8(c) *[CIC §790.03(h)(3)]
The Company failed to notify the insured that the file will be reopened if the Company is notified within 35 days that the insured cannot purchase a comparable automobile for the settlement amount offered or paid.
1
CCR §2695.85(a) *[CIC §790.03(h)(3)]
The Company failed to provide the insured with the Auto Body Repair Consumer Bill of Rights either at the time of application for automobile insurance, at the time a policy was issued, or following an accident.
1
CIC §1861.05(a) *[CIC §790.03(h)(5)]
The Company failed to amend the premium charged to the insured to reflect the current exposure following the total loss of the vehicle that previously served as the exposure basis for rating purposes. No rate shall remain in effect which is excessive, inadequate, unfairly discriminatory or otherwise in violation of Chapter 9, Article 10 of the California Insurance Code.
1
CIC §790.03(h)(1) The Company misrepresented to claimants pertinent facts or insurance policy provisions relating to any coverages at issue.
1
Total Number of Alleged Violations 39
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*DESCRIPTIONS OF APPLICABLE UNFAIR CLAIMS SETTLEMENT PRACTICES
CIC §790.03(h)(2) The Company failed to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.
CIC §790.03(h)(3) The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.
CIC §790.03(h)(5) The Company failed to effectuate prompt, fair, and equitable settlements of claims in which liability had become reasonably clear.
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TABLE OF ALLEGED VIOLATIONS BY LINE OF BUSINESS
COMMERCIAL AUTOMOBILE 2017 Written Premium: $8,712,901
AMOUNT OF RECOVERIES $1,667.84
NUMBER OF ALLEGED VIOLATIONS
CIC §11580.011(e) [CIC §790.03(h)(3)] 7
CIC §880 [CIC §790.03(h)(3)] 6
CCR §2695.7(d) [CIC §790.03(h)(3)] 5
CCR §2695.8(b)(1) [CIC §790.03(h)(5)] 5
CCR §2695.5(b) [CIC §790.03(h)(2)] 4
CCR §2695.7(b)(3) [CIC §790.03(h)(3)] 2
CCR §2695.7(c)(1) [CIC §790.03(h)(3)] 2
CCR §2695.5(e)(2) [CIC §790.03(h)(3)] 1
CCR §2695.5(e)(3) [CIC §790.03(h)(3)] 1
CCR §2695.8(b)(4) [CIC §790.03(h)(3)] 1
CCR §2695.8(b)(4)(a) [CIC §790.03(h)(5)] 1
CCR §2695.8(c) [CIC §790.03(h)(3)] 1
CCR §2695.85(a) [CIC §790.03(h)(3)] 1
CIC §1861.05(a) [CIC §790.03(h)(5)] 1
CIC §790.03(h)(1) 1
SUBTOTAL 39
WORKERS’ COMPENSATION
2017 Written Premium: $130,606,737
AMOUNT OF RECOVERIES $0.00
NUMBER OF ALLEGED VIOLATIONS
0
SUBTOTAL 0
TOTAL 39
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SUMMARY OF EXAMINATION RESULTS
The following is a brief summary of the criticisms that were developed during the
course of this examination related to the violations alleged in this report.
In response to each criticism, the Company is required to identify remedial or
corrective action that has been or will be taken to correct the deficiency. The Company
is obligated to ensure that compliance is achieved.
Any noncompliant practices identified in this report may extend to other
jurisdictions. The Company should address corrective action for other jurisdictions
when applicable.
Money recovered within the scope of this report was $1,667.84 as described in
section numbers 4 and 14 below. Pursuant to the findings of the examination as
described in sections 1 and 4 below, the Company is conducting closed claims surveys.
The results of these surveys and additional payments, if any, shall be reported to the
Department by April 2020.
COMMERCIAL AUTOMOBILE
1. In seven instances, the Company failed to ask if a child passenger restraint system was in use by a child during an accident or was in the vehicle at the time of a loss that was covered by the policy. The Department alleges these acts are in violation of CIC §11580.011(e) and are unfair practices under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges that it failed to question whether a child passenger restraint system (CPRS) was in the vehicle at the time of loss. As a remedial measure, the Company addressed this issue with all claims staff as of February 2019. The Company provided claim handling guidelines to staff adjusters to ensure adjusters were reminded to ask if a child restraint system was in the vehicle at the time of loss and to document these findings in the claim notes.
Further, as the Company may have overlooked the payment of the CPRS in prior claims and to address claims not reviewed as part of the sample files examined by the
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CDI, the Company is conducting a three year internal audit for the period of February 2016 through February 2019 related to the requirements specified in CIC Section 11580.011(e). The findings of the internal audit, as well as additional payments, if any, will be provided to the Department by April, 2020. 2. In six instances, the Company failed to conduct its business in its own name. The correspondence sent to claimants identified the name of the Company’s Third Party Administrator (TPA), but did not identify the name of the underwriting insurer. The Department alleges these acts are in violation of CIC §880 and are unfair practices under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges its correspondence did not include the name of ORIC, the underwriting insurer. Effective February 4, 2019, the system has been automated so that the Company’s name is shown on all correspondence sent to claimants. Further, the TPAs involved are all on notice of the requirements in CIC Section 880, and all have confirmed that ORIC’s name as the insurer is included on all insured/claimant correspondence going forward. The Company also conducted refresher training with staff from November 28, 2018 through December 28, 2018. 3. In five instances, the Company failed to conduct and diligently pursue a thorough, fair and objective investigation. Four instances involved delays in following up with the claimant or the claimant’s attorney to resolve Uninsured Motorist Bodily Injury claims. In one instance, the Company failed to follow its own procedures to request a police report for a collision claim. The Department alleges these acts are in violation of CCR §2695.7(d) and are unfair practices under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges these findings. As a remedial measure, the Company communicated these findings with the respective supervisors and operational leads to monitor claims handling activities to ensure regulatory compliance. The Company’s TPAs also conducted refresher training with staff. The training, entitled Auto Liability Claims California State Regulations Training, was given by all California claims adjusters November 28, 2018 through December 28, 2018. 4. In five instances, the Company failed to comply with the requirements of CCR §2695.8(b)(1) as described below:
4(a). In two instances, the Company failed to include, in the settlement, the one-time fees incident to transfer of evidence of ownership of a comparable vehicle.
4(b). In two instances, the Company failed to include, the settlement, the
license fee and other annual fees computed based upon the remaining terms of the current registration.
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4(c). In one instance, the Company failed to include, in the settlement, all applicable taxes. The Department alleges these acts are in violation of CCR §2695.8(b)(1) and are unfair practices under CIC §790.03(h)(5). Summary of the Company’s Response to 4(a), 4(b) and 4(c): The Company acknowledges the findings in all of these identified claims. As a remedial measure, the Company reopened these identified claims and issued additional settlement payments of $386.84. The Company states the branch managers for the TPAs conducted staff training and provided written handouts and directions for handling total loss claim settlements. All instructions and changes were implemented by the Company and its TPAs as of February 2019.
Further, as the Company may have overlooked the payment of the sales taxes and vehicle fees in prior claims and to address claims not reviewed as part of the sample files examined by the CDI, the Company is conducting a three year internal self-audit for the period of February 2016 through February 2019 related to the requirements specified in CCR Section 2695.8(b)(1). In the event it is shown on any file that applicable taxes and fees were unpaid, the Company will issue additional payments. The findings of the internal audit, and additional payments, if any, will be reported to the Department by April 2020.
5. In four instances, the Company failed to respond to communications within 15 calendar days. The four claims involved Uninsured Motorist Bodily Injury coverage. The Company failed to acknowledge the claimants’ representatives’ request for coverage information or respond to payment demand requests. The Department alleges these acts are in violation of CCR §2695.5(b) and are unfair practices under CIC §790.03(h)(2). Summary of the Company’s Response: The Company acknowledges it failed to respond to the claimants’ attorneys for coverage information within 15 days. The Company states its procedure is to discuss and disclose all pertinent coverage information with the claimants’ representatives as applicable and follow-up with written correspondence. To ensure regulatory compliance, the Company conducted refresher training November 28, 2018 through December 28, 2018, to address timely communications in accordance with CCR Section 2695.5(b). 6. In two instances, the Company failed to include a statement in its claim denial 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. The Department alleges these acts are in violation of CCR §2695.7(b)(3) and are unfair practices under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges its denial notices and email communications did not include the relevant CDI language on these identified claims. The Company states these were adjuster errors as the Company’s standard denial notice does include the required CDI language on all denied claims. As a remedial measure, the Company communicated these findings to the appropriate
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supervisors and operational leads to monitor claims handling activities to ensure regulatory compliance. The Company’s TPA also provided individual coaching to the claims adjusters and conducted refresher training with staff on November 9, 2018. 7. In two instances, the Company failed to provide written notice of the need for additional time or information every 30 calendar days. The Department alleges these acts are in violation of CCR §2695.7(c)(1) and are unfair practices under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges these findings. As a remedial measure, the Company communicated these findings to the appropriate supervisors and operational leads to monitor claims handling activities to ensure regulatory compliance. 8. In one instance, the Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. The Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days on a third party liability claim. The Department alleges this act is in violation of CCR §2695.5(e)(2) and is unfair practice under CIC §790.03(h)(3).
Summary of the Company’s Response: The Company acknowledges the claims adjuster did not reach out to the parties involved in the claim. The examiner and team leads involved were notified of this audit finding on August 2018. All parties were re-trained on California-specific requirements by taking the TPA’s self-paced training module entitled Auto Liability Claims California State Regulations Training. 9. In one instance, the Company failed to begin any necessary investigation of the claim within 15 calendar days. The Company failed to begin an investigation under a third party liability claim after receiving additional information including photographs from its own insured confirming the loss. The Department alleges this act is in violation of CCR §2695.5(e)(3) and is an unfair practices under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges this finding, and has reviewed the TPA’s training module for California Auto/General Liability (GL) claims, and is satisfied that such training goes over in detail all of the requisite information necessary to successfully adjudicate a California auto/GL claim. The TPA’s training module is entitled Auto Liability Claims California State Regulations Training, and all individuals handling California claims completed the training between November 28, 2018 and December 28, 2018, to ensure that the TPA’s adjusters will comply with such requirements in the future.
In addition, the TPA re-opened the identified claim in order to comply with regulatory requirements. On February 19, 2019, to account for damage to the claimant’s side mirror the TPA sent a letter to the claimant to initiate contact and notify them of information needed for proof of claim. The new adjuster assigned to the claim will
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continue to monitor the claim in accordance with CCR Section 2695.5(e)(3), and related regulations. The Department will be notified of the results of this investigation, and if applicable, any settlement payments. 10. In one instance, the Company failed to explain in writing the determination of the cost of a comparable vehicle at the time the settlement offer was made. Determination of the actual cash value (ACV) was not explained. The Department alleges this act is in violation of CCR §2695.8(b)(4) and is an unfair practice under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges the ACV valuation report was not sent with the settlement offer. As a result of the audit examination, the Company sent a copy of the valuation report to the claimant’s attorney on October 25, 2018. The Company also conducted training and provided a total loss template letter to claims staff on February 19, 2019.
11. In one instance, the Company determined the actual cash value (ACV) of the vehicle by utilizing more than one method described by CCR §2695.8(b)(4)(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 shall be used. The Company used 16 comparable vehicles of which only the first three listed were in the local market of San Diego. The remaining vehicles were over 100 miles or more away. The Department alleges this act is in violation of CCR §2695.8(b)(4)(A), and is an unfair practice under CIC §790.03(h)(3). Summary of the Company’s Response: The Company states an outside appraiser was used to obtain the valuation report and it was the appraiser that went outside of the local market. The Company states, in this instance, although vehicles were used outside of the local market, the claimant was made whole in the total loss settlement due to the GAP coverage on the policy. The Company believes this to be a one-time occurrence, due to the uniqueness of the vehicle. Going forward, the Company will ensure that any appraiser, either independent or in-house, is aware of the State’s regulations pursuant to CCR §2695.8(b)(4)(A). 12. In one instance, the Company failed to notify the insured that the file will be reopened if the Company is notified within 35 days that the insured cannot purchase a comparable automobile for the settlement amount offered or paid. The Department alleges this act is in violation of CCR §2695.8(c) and is an unfair practice under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges the insured was not notified at the time of settlement that the file would be reopened if the Company is notified within 35 days that the insured cannot purchase a comparable automobile for the settlement amount offered or paid. The Company, through its servicing Third Party Administrator, sent a letter to the insured on January 23, 2019,
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which stated the insured’s rights under CCR Section 2695.8(c). The TPA is monitoring for a response to the same. The Company also sent an email on February 19, 2019, to the claims team discussing the audit results, and notifying the team that it needs to use this notification letter as a template going forward on all future first party total loss settlements when addressing the insured’s rights pursuant to CCR Section 2695.8(c). 13. In one instance, the Company failed to provide the insured with the Auto Body Repair Consumer Bill of Rights either at the time of application for automobile insurance, at the time a policy was issued, or following an accident. The Department alleges this act is in violation of CCR §2695.85(a) and is unfair practice under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges this finding and states this letter is system generated. It is the Company’s practice to send the Auto Body Repair Consumer Bill of Rights notice at the time policies are issued. In this instance, the Company states the letter failed to generate due to invalid data and the adjuster did not regenerate the letter. To correct this error, the Company initiated a system diary trigger that will notify the handling examiner of a letter failure. Further, the Company also communicated this issue to the appropriate supervisors and operational leads to monitor claims handling activities to ensure regulatory compliance. 14. In one instance, the Company failed to amend the premium charged to the insured to reflect the current exposure following the total loss of the vehicle that previously served as the exposure basis for rating purposes. No rate shall remain in effect which is excessive, inadequate, unfairly discriminatory or otherwise in violation of Chapter 9, Article 10 of the California Insurance Code. The Department alleges this act is in violation of CIC §1861.05(a) and is an unfair practice under CIC §790.03(h)(5). Summary of the Company’s Response: The Company states the policy is an auditable policy and it does not add or delete vehicles during the course of the policy period. The Company determines the final number of vehicles at the end of the policy term and used an average of the beginning and ending counts to calculate the final premium. After further review, the Company noted the total loss vehicle was included on the vehicle list that was received from the insured. The Company states this was an inadvertent oversight and has issued the insured an unearned premium refund for $1,281.00 on November 13, 2018.
The Company revised its communications to its premium audit vendors, reinforcing their responsibility to obtain accurate vehicle lists at audit to ensure that the Company can account for the correct number of autos and calculate the appropriate amount of premium. These changes will be fully implemented and will impact the Company’s May 1, 2019 policy expirations.
The Company states although this one instance has been identified in the exam,
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it believes the process is working well overall and this particular instance was an outlier. With respect to the audit, the Company relies on its insureds to provide their vehicle counts and listing of autos. The insured, in this case, provided a listing of the autos at audit and had inadvertently included the totaled auto. The insureds normally are sure to remove any deleted autos from their final audit exposure to ensure they are paying the right premium for their exposure. To reinforce this, the Company enhanced its instructions to the audit vendor (the Company currently uses one audit vendor), to prompt additional focus on added and deleted autos to ensure it is capturing the correct exposure. The Company also enhanced its notice of audit to the insured as a reminder to update any added and deleted autos. The Company provided the Department with a copy of its updated instructions to its policyholders on April 4, 2019. 15. In one instance, the Company misrepresented to claimants pertinent facts or insurance policy provisions relating to any coverages at issue. The Company misrepresented its procedures practices regarding disclosure of policy coverage and benefits pertaining to a liability claim. The Department alleges this act is in violation of CIC §790.03(h)(1). Summary of the Company’s Response: The Company acknowledges the claims handler erred in statements made to the claimant’s authorized representative. The claims handler received individual counseling and coaching to ensure statutory compliance. WORKERS’ COMPENSATION:
There were no alleged violations or criticisms of insurer practices made within the
scope of this report in the Workers’ Compensation category of claims.