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

AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA NAIC # 10111 CDI # 1400-1

AMERICAN BANKERS LIFE ASSURANCE COMPANY OF FLORIDA NAIC # 60275 CDI # 1646-9

AMERICAN RELIABLE INSURANCE COMPANY NAIC # 19615 CDI # 3154-2

AS OF MAY 31, 2016

ADOPTED MAY 17, 2018

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.

790.03 v5 02-16-16

TABLE OF CONTENTS

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

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

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

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

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

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

1

790.03 v5 02-16-16

FOREWORD

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

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

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

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

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

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

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

recovery in this report.

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

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

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

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

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

other jurisdictions does not constitute acceptance of such practices.

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

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

process.

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

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

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

2

790.03 v5 02-16-16

SCOPE OF THE EXAMINATION

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

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

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

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

American Bankers Insurance Company NAIC # 10111

American Bankers Life Assurance Company

NAIC # 60275

American Reliable Insurance Company NAIC # 19615

Group NAIC # 0019

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

ABI, ABL, ARI, or the Company, and collectively as the Companies.

This examination covered the claim handling practices of the aforementioned

Companies on homeowner, inland marine, accidental death & dismemberment, and

credit insurance claims closed during the period from June 1, 2015 through May 31,

2016. The examination was made to discover, in general, if these and other operating

procedures of the Companies conform to the contractual obligations in the policy forms,

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

case law.

To accomplish the foregoing, the examination included:

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

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

Companies in support of positions or interpretations of the California Insurance Code,

3

790.03 v5 02-16-16

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

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

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

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

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

results, and if any, a review of consumer complaints and inquiries about these

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

review of previous CDI market conduct claims examination reports on these

Companies; and a review of prior CDI enforcement actions.

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

the Companies in Miami, Florida.

4

790.03 v5 02-16-16

EXECUTIVE SUMMARY The homeowner, inland marine, accidental death & dismemberment and credit

insurance claims reviewed were closed from June 1, 2015 through May 31, 2016,

referred to as the “review period”. The examiners randomly selected 140 ABI claim

files, 38 ABL claim files and 25 ARI claim files for examination. The examiners cited 54

alleged claims handling violations of the California Insurance Code and the California

Code of Regulations and other specified codes from this sample file review.

Findings of this examination included, for first party property claims, a failure to

document in the claim files that matter of condition was considered in the calculation of

depreciation; and the failure to fully explain the basis for adjustments for depreciation to

claimants in writing, and for inland marine claims, the failure to reference the correct

policy provisions, conditions or exclusions in its written denial.

5

790.03 v5 02-16-16

DETAILS OF THE CURRENT EXAMINATION

Further details with respect to the examination and alleged violations are

provided in the following tables and summaries:

ABI SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Homeowners / First Party Property 2,927 35 27

Homeowner / First Party / Water Damage 696 10 8

Homeowner / First Party / Denied 868 11 -0-

Homeowner / Third Party Liability 789 14 2

Inland Marine / Mobile Device / Paid 187,150 63 3

Inland Marine / Mobile Device / Denied 22,392 7 6

TOTALS 214,822 140 46

6

790.03 v5 02-16-16

ABL SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Credit Insurance / Credit Disability / Paid 289 10 0

Credit Insurance / Credit Disability / Denied 59 5 0

Credit Insurance / Credit Life / Paid 127 10 0

Credit Insurance / Credit Life / Denied 37 5 1

Accidental Death and Dismemberment / Paid 3 3 2

Accidental Death and Dismemberment / Denied

13 5 0

TOTALS 528 38 3

ARI SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Inland Marine / Credit Property / Paid 102 10 5

Inland Marine / Credit Property / Denied 149 10 0

Credit Insurance / Involuntary Unemployment / Paid

11 5 0

TOTALS 262 25 5

7

790.03 v5 02-16-16

TABLE OF TOTAL ALLEGED VIOLATIONS

Citation Description of Allegation

ABI Number of

Alleged Violations

ABL Number

of Alleged Violations

ARI Number of

Alleged Violations

CIC §§2051, 2051.5 CCR §2695.9(f) *[CIC §790.03(h)(3)]

The Company failed to document in the claim file all justification for the adjustment of the amount claimed because of betterment, depreciation, or salvage.

13 0 0

CIC §§2051, 2051.5 CCR §2695.9(f) *[CIC §790.03(h)(3)]

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

12 0 0

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

The Company failed to provide in its written denial a reference to and explanation of the applications of policy provisions, conditions or exclusions.

5 0 0

CIC §1879.2(a) *[CIC §790.03(h)(3)]

The Company failed to include that California fraud warning on insurance forms relating to first-party claimants.

4 0 0

CIC §790.03(h)(5)

The Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear.

3 0 0

CIC §2051(b)(2) *[CIC §790.03(h)(5)]

The Company improperly applied depreciation to overhead and profit. A deduction for physical depreciation shall apply only to components of a structure that are normally subject to repair and replacement during the useful life of that structure.

2 0 0

8

790.03 v5 02-16-16

Citation Description of Allegation

ABI Number of

Alleged Violations

ABL Number

of Alleged Violations

ARI Number of

Alleged Violations

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.

2 0 0

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

The Company failed to specify, in the written notice, any additional information the insurer requires to make a claim determination and to state any continuing reasons for the Company’s inability to make a determination.

0 0 2

CCR §2695.7(p) *[CIC §790.03(h)(3)]

The Company failed to provide written notification to a first party claimant as to whether the insurer intends to pursue subrogation or of its decision to discontinue pursuit of subrogation.

2 0 0

CIC §790.03(h)(1)

The Company misrepresented to claimants pertinent facts or insurance policy provisions relating to any coverages at issue.

1 0 0

CCR §2695.4(a) *[CIC §790.03(h)(1)]

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

0 0 1

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

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

0 0 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.

0 0 1

9

790.03 v5 02-16-16

Citation Description of Allegation

ABI Number of

Alleged Violations

ABL Number

of Alleged Violations

ARI Number of

Alleged Violations

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

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

0 1 0

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

The Company failed to provide in writing the reasons for the denial of the claim in whole or in part including the factual and legal bases for each reason given.

0 1 0

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.

0 1 0

CCR §2695.7(f) *[CIC §790.03(h)(3)]

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

1 0 0

CCR §2695.7(h) *[CIC §790.03(h)(5)]

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

1 0 0

Total Number of Alleged Violations 46 3 5

10

790.03 v5 02-16-16

*DESCRIPTIONS OF APPLICABLE UNFAIR CLAIMS SETTLEMENT PRACTICES

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

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

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

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

CIC §790.03(h)(13)

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

11

790.03 v5 02-16-16

TABLE OF ALLEGED VIOLATIONS BY LINE OF BUSINESS

ABI

HOMEOWNERS 2016 Written Premium: $33,939,145

AMOUNT OF RECOVERIES $609.87

NUMBER OF ALLEGED VIOLATIONS

CIC §2051, 2051.5 CCR §2695.9(f) [CIC §790.03(h)(3)]

13

CIC §2051, 2051.5 CCR §2695.9(f) [CIC §790.03(h)(3)]

12

CIC §790.03(h)(5) 3

CIC §2051(b)(2) [CIC 790.03(h)(5)] 2

CCR §2695.7(p) [CIC §790.03(h)(3)] 2

CIC §790.03(h)(1) 1

CIC §790.03(h)(3) 1

CIC §1879.2(a) 1

CCR §2695.7(f) [CIC §790.03(h)(3)] 1

CCR §2695.7(h) [CIC §790.03(h)(5)] 1

SUBTOTAL 37

ABI

INLAND MARINE 2016 Written Premium: $54,841,715

AMOUNT OF RECOVERIES $0

NUMBER OF ALLEGED VIOLATIONS

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

CIC §1879.2(a) 3

CIC §790.03(h)(3) 1

SUBTOTAL 9

12

790.03 v5 02-16-16

ABL

ACCIDENT AND HEALTH 2016 Written Premium: $1,348,193

AMOUNT OF RECOVERIES $0

NUMBER OF ALLEGED VIOLATIONS

CCR §2695.7(b) [CIC §790.03(h)(3)] 1

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

SUBTOTAL 2

ABL

CREDIT INSURANCE 2016 Written Premium: $1,056,793

AMOUNT OF RECOVERIES $0

NUMBER OF ALLEGED VIOLATIONS

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

SUBTOTAL 1

ARI

CREDIT INSURANCE 2014 Written Premium: $729,433

AMOUNT OF RECOVERIES $0

NUMBER OF ALLEGED VIOLATIONS

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

CCR §2695.4(a) [CIC §790.03(h)(3)] 1

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

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

SUBTOTAL 5

TOTAL 54

13

790.03 v5 02-16-16

SUMMARY OF EXAMINATION RESULTS

The following is a brief summary of the criticisms that were developed during the

course of this examination related to the violations alleged in this report.

In response to each criticism, the Companies are required to identify remedial or

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

Companies are obligated to ensure that compliance is achieved.

Any noncompliant practices identified in this report may extend to other

jurisdictions. The Companies should address corrective action for other jurisdictions

when applicable.

As a result of this examination, money recovered within the scope of this report

was $609.87 as described in section number 3 below.

HOMEOWNERS [ABI] 1. In 13 instances, the Company’s claim files failed to contain all justification for the adjustment of the amounts claimed because of betterment, depreciation or salvage, and the adjustments failed to reflect a measurable difference in market value attributable to the condition, in addition to the age of, the property. Ten instances involved the depreciation of personal property; and three instances for the depreciation of the dwelling structure. In each instance, the factor of condition was not considered in the calculation of depreciation. The Department alleges these acts are in violation of CIC §§2051, 2051.5, CCR §2695.9(f) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company utilizes a vendor, Enservio, that provides a program that is used in the adjustment of property claims. The Company uses the Enservio CE 1.0 depreciation schedule in the calculation of depreciation which takes into account age, normal usage and useful life to determine an appropriate depreciation rate. If the investigation reveals that condition of the item was such that that the item was subjected to greater than average or less than average usage, the deprecation rate is appropriately increased or decreased and discussed with the insured. As a result of the examination, the Company modified its Estimate form on December 2, 2016 to include a column labeled “condition.” On June 23, 2017, the Company modified its template inventory form provided to the insureds for a list of their

14

790.03 v5 02-16-16

damaged items. The insured’s input as to the condition of their property will now be included on this new inventory form. Finally, the Company utilized a new Enservio depreciation schedule on June 1, 2017, to take into account the age, condition, and useful life of the item. The Company has also placed a work order to have the new Enservio depreciation schedule produce estimates that will reflect age, condition, and useful life breakdowns. The revised Homeowners Building Estimate was released into production July 1, 2017. The revised Renters estimate was released into production on September 6, 2017. 2. In 12 instances, the Company failed to fully explain the basis for any adjustment to the claimant in writing. Ten instances pertain to the depreciation of personal property. Two instances pertain to the depreciation of the dwelling. In each of these instances, the Company failed to provide claimants with a written explanation of the basis for depreciation that took condition, age and useful life all into consideration.

The Department alleges these acts are in violation of CCR §2695.9(f) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The loss settlement letter states that depreciation was “determined by taking into consideration the condition and age of the materials evaluated by the adjuster.” The letter combined with the detailed estimate paints a clear picture in compliance with CCR 2695.9(f). While it believes its process and letters are compliant with applicable law, nonetheless the Company modified the outgoing estimate form on December 2, 2016 to include a column labeled “condition.” Moreover, the inventory sheet provided to the insured to allow them to list their damaged items was modified on June 23, 2017 to obtain their input on the condition of the property being claimed. Finally, the Company has also placed a work order to have that new Enservio depreciation schedule produce estimates that show age, condition, and useful life breakdowns. The revised Homeowners Building Estimate was released into production on July 1, 2017. The revised Renters estimate was released into production September 6, 2017. 3. In three instances, the Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In these instances, all three instances involved how depreciation was calculated for the actual cash value settlement of personal property claims. In two instances, the file handler did not factor in the matter of age when calculating depreciation. In the last instance, the file handler did not factor in the matter of condition when determining the amount of depreciation. The Department alleges these acts are in violation of CIC §790.03(h)(5).

Summary of the Company’s Response: The Company acknowledges these findings. In each of these instances, the adjusters inadvertently failed to input the age and/or condition into the estimating system. The adjusters have been counseled to evaluate all information before finalizing to ensure that all available information has

15

790.03 v5 02-16-16

been included. As a result of the exam, ABIC issued additional loss payments totaling $609.87 to the three identified insureds.

4. In two instances, the Company improperly applied depreciation to overhead and profit. A deduction for physical depreciation shall apply only to components of a structure that are normally subject to repair and replacement during the useful life of that structure. The Department alleges these acts are in violation of CIC §2051(b)(2) and are unfair practices under CIC §790.03(h)(5).

Summary of the Company’s Response: When the initial settlement payment was issued, the insured was paid the actual cash value (ACV) plus overhead & profit (OH&P) and sales tax less deductible, in accordance with policy provisions. The definition of ACV in the policy states: ‘Actual cash value’ means the amount it would cost you to repair or replace damaged property with material of like kind and quality, less deduction for physical deterioration and depreciation, including obsolescence.”

Depreciation was applied only to components of the structure that are subject to

repair and replacement during the useful life of the property. Taxes and OH&P were added to the ACV to complete the initial payment. Recoverable depreciation is paid upon completion of repairs.

As a result of the examination, effective July 1, 2017, the adjusters have been

advised to calculate overhead and profit (OH&P) on the Replacement Cost Value (RCV) figure in the estimate. Thus, the Company no longer depreciates OH&P.

5. In two instances, the Company failed to provide written notification to a first party claimant as to whether the insurer intends to pursue subrogation or failed to provide written notification of a first party claimant of its decision to discontinue pursuit of subrogation. The Department alleges these acts are in violation of CCR §2695.7(p) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees with the findings. This is an unintentional oversight. The subrogation representative is no longer with the Company; however, the Subrogation Unit has been counseled. On December 6, 2016, the Company provided its Subrogation Unit with letter templates to notify the insured that the Company intends to pursue subrogation or to advise that pursuit of subrogation has been closed. 6. In one instance, the Company misrepresented to claimants pertinent facts or insurance policy provisions relating to any coverages at issue. The Company advised the insured that the claim remained open pending the insured’s provision of the Adjuster’s report. This is inaccurate as the report actually comes from the Company’s field investigator and not from the insured. The Department alleges this act is in violation of CIC §790.03(h)(1).

16

790.03 v5 02-16-16

Summary of the Company’s Response: The Company agrees with the finding. While the intent was to convey that the Company needed a report and photos of the damage from the field adjuster, it was not made clear in the status letter. The adjuster has been coached to ensure that all status letters clearly state the status of any outstanding item and parties responsible for its submission. 7. In one instance, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies. The Company did not send the notice regarding the recovery of depreciation holdback to the insured’s tenant who presented the claim. The Department alleges this act is in violation of CIC §790.03(h)(3).

Summary of the Company’s Response: The notice mailed on August 11, 2016 was sent only to the policyholder of record, a property management company. There was no reminder sent the claimant/tenant on instructions for recoverable depreciation and the timelines. The last supplemental payment was issued on December 2, 2016. As a result of the examination, the Company extended and provided an additional 12 months for the claimant to make a claim for recoverable depreciation. There are procedures in place to ensure the claimant receives the proper notices. The adjuster involved was counseled to ensure these procedures are followed for future compliance. 8. In one instance the Company failed to provide written notice of any statute of limitations or other time period requirement upon which the insurer may rely to deny a claim. The Department alleges this act is in violation of CCR §2695.7(f) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company indicates that the claimant had been unresponsive and had not provided the documentation necessary to fully evaluate his claim of bodily injury. The claimant was notified that his claim was being placed on inactive status. The Company agrees that the statute of limitations for bodily injury is two years in California and has coached its adjusters to ensure that the proper time limit is disclosed in their correspondence. The Company revised its letter templates and implemented it use on August 4, 2017. 9. In one instance, the Company failed, upon acceptance of the claim, to tender payment within 30 calendar days. A loss settlement check was returned and received in the accounting department. The Company failed to transmit payment promptly to the claimant. The Department alleges this act is in violation of CCR §2695.7(h) and is an unfair practice under CIC §790.03(h)(5).

Summary of the Company’s Response: The Company acknowledges the finding and indicates that its standard procedures require its Accounting department to contact the payment issuer within five business days to request instructions to re-mail to

17

790.03 v5 02-16-16

a different address and/or to void the check for reissue. This delay is an isolated incident and the Company has addressed it with pertinent staff.

10. In one instance, the Company failed to include the California fraud warning on insurance forms relating to first-party claimants. The Department alleges this act is in violation of CIC §1879.2(a) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The insured misplaced and requested a replacement Burglary-Robbery-Theft inventory form. The adjuster sent an incorrect version of the claim form which contained the New York fraud language. The adjuster has been counseled to use only the Company-authorized letter writing system for all correspondence to comply with the state-specific statutes. INLAND MARINE

MOBILE DEVICE [ABI]

11. In five instances, the Company failed to provide in its written denial a reference to and explanation of the application of specific statutes, applicable laws, and policy provisions, conditions or exclusions. The denial of coverage letters referenced the Exclusions section of the policy as the basis for the denial when the correct basis for denial was found in the Conditions section of the policy. The Department alleges these acts are in violation of CCR §2695.7(b)(1) and are unfair practices under CIC §790.03(h)(13).

Summary of the Company’s Response: The Company acknowledges that the denial letters did not reference the appropriate policy provision to support the denial. The Company is in the process of updating its system to ensure that the letters contain the specific language and policy provision as reflected in the policy. The Company provided the Department with a copy of its revised template denial which was implemented for use in March 2018.

12. In three instances, the Company failed to include the California fraud warning on insurance forms related to first-party claimants. The Department alleges these acts are in violation of CIC §1879.2(a) and are unfair practices under CIC §790.03(h)(3).

Summary of the Companies’ Response: The Company agrees that the fraud language found on the Sworn Proof of Loss form (WP00919C-0314) is not identical to the language found in CIC §1879.2(a). The Sworn Proof of Loss Form was revised and implemented in March 2018. The Company provided the Department with a copy of its revised template form on December 11, 2017.

13. In one instance, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under

18

790.03 v5 02-16-16

insurance policies. The Department alleges this act is in violation of CIC §790.03(h)(3) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees that a closure letter should have been sent to the insured advising the reason was due to the insured’s lack of activity. This is an oversight by the adjuster. The adjuster has been counseled to comply with Company procedures on closure letters. INLAND MARINE

CREDIT PROPERTY [ARI]

17. In two instances, the Company failed to specify, in the written notice, any additional information the insurer requires to make a claim determination and to state any continuing reasons for the Company’s inability to make a determination. In these two instances, the Company made a written request to the insured to provide the sales receipt for the merchandise being claimed when copies of the sales receipt were attached with the completed claim form. Specifically, the Company did not explain in its request that the submitted sales receipts were not legible. 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 request for additional information should have indicated that the receipts received with the claim were illegible. On April 28, 2017, the Company held a refresher Training for claims staff that also included the topic on the importance of providing a clear explanation for the Company’s request for additional information on the claims.

18. In one instance, the Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. The Company sent a Credit Property Replacement letter to an insured reflecting an approved amount which was different from the actual settlement. The Department alleges this act is in violation of CCR §2695.4(a) and is unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Credit Property Replacement letter should have indicated $216.48 instead of $96.63. On November 29, 2017, the Company addressed this issue with associates handling California claims as a part of a formal refresher training session. 19. In one instance, the Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(e)(2) and is an unfair practice under CIC §790.03(h)(3).

19

790.03 v5 02-16-16

Summary of the Company’s Response: The Company agrees that instructions were not given to the insured within the 15-day requirement. The Automated Daily Aging Report captures all claims on suspense, and claims pending review at 10 days to ensure action is taken before the deadline. On November 29, 2017, refresher training was conducted for all associates that included a compliance review on timely forms, instructions and assistance. 20. In one instance the Company failed to begin any necessary investigation of the claim within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(e)(3) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees that the investigation did not begin within the 15-day requirement. The Company’s Automated Daily Aging Report captures all claims on suspense, and claims pending review at 10 days to ensure action is taken before the deadline. On April 28, 2017, the Company conducted refresher training for all associates which emphasized the importance of initiating timely investigations. ACCIDENTAL DEATH AND DISMEMBERMENT [ABL] 14. In one instance, the Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Department alleges this act is in violation of CCR §2695.7(b) and is an unfair practice under CIC §790.03(h)(4).

Summary of the Company’s Response: The Company acknowledges this finding. It is the Company’s standard practice to accept or deny a claim within 40 days of receiving proof of claim. On April 28, 2017, the Company conducted refresher training for all associates which included compliance with timelines for accepting and denying claims.

15. In one instance, the Company failed to provide written notice of the need for additional time or information every 30 calendar days. The Department alleges this act is in violation of CCR §2695.7(c)(1) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company acknowledges this finding. It is the Company’s standard practice to provide written notice of the need for additional time every 30 days. On April 28, 2017, the Company conducted refresher training for all associates which included requests for additional information in the course of a claim investigation.

20

790.03 v5 02-16-16

CREDIT INSURANCE

CREDIT LIFE [ABL]

16. In one instance, the Company failed to provide in writing the reasons for the denial of the claim in whole or in part including the factual and legal bases for each reason. The Department alleges this act is in violation of CCR §2695.7(b)(1) and is an unfair practice under CIC §790.03(h)(13).

Summary of the Company’s Response: Coverage was cancelled on June 2,

2012 when the insured attained age 65, the maximum age for eligibility. The denial letter of June 9, 2016 did not convey the correct basis for the denial. The Company indicates this was a result of an associate error. On November 29, 2017, the Company conducted refresher training for all associates which included a review of utilizing the appropriate template claim letters.

CREDIT INVOLUNTARY UNEMPLOYMENT [ARI] There were no violations alleged or criticisms of insurer practices noted in this category within the scope of this report. There were no recoveries discovered within the scope of this report.

CREDIT DISABILITY [ABL] There were no citations alleged or criticisms of insurer practices noted in this line of business within the scope of this report. There were no recoveries discovered within the scope of this report.