Thursday, September 27, 2007

California Regulations and 'Unfair Claims Settlement Practices'

The California Fair Claims Settlement Practices Regulations state the following when it comes to their purpose:

Section 2695.1. Preamble

(a) (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);

I have underlined "knowingly on a single occasion" because this shows that, while any insurance company licensed to handle claim in the State of California who violates these "minimum standards" of the California Regulations may be guilty of "an unfair claims settlement practice within the meaning of Insurance Code Section 790.03(h)," it only takes "a single" violation of the Regulatons committed "knowingly" for there to be a determination by the Insurance Commissioner that the insurance company has performed an "unfair claims settlement practice." How, though, can such violations be committed "knowingly"?

These same Regulations require California insurers licensed to handle claims to do the following when it comes to their claims agents (which includes their claims adjusters):

Section 2695.6 Training and Certification

(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:


(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;);


The underlined sections from the above quoted California Regulatons show that there must be annual certification or training with respect to these Regulations, such that the adjuster or claims agent "understands these regulations and all amendments thereto or has successfully completed a training seminar which explains these regulations." Therefore, there should be no excuse for any California insurer's claims agents or adjusters when it comes to whether or not they 'know' the regulations. The California insurer is required by the State to make sure that their claims agents and their adjusters know them.

But having worked for several of the nation's largest property insurers I can tell you that while there is some emphasis on select Regulations, and while some companies do provide a rather brief annual discussion of the Regulations, there is rarely an ongoing implementation of all of the Regulations that may be applicable to property insurance claims in California. I can also attest to this from my having been a licensed California public insurance adjuster for over three years. So what can be done about this lack of ongoing training and/or implementation of all applicable Regulations?

Consumers can become better educated about the California Regulations when they have a property insurance claim. One way to do this is by reviewing the Regulations themselves, a link to which has been provided at the beginning of this post. Another way is by reading publications such as my Property Claims Adjusting: A Complete Guidebook for the Consumer
, California Homeowners Edition (Murrieta, CA: Premier Claim Consultants, 2007), or reviewing the Blog articles and other materials on my web site.

But it would sure be nice if more California insurers dedicated themselves to making sure that they not only provided annual training concerning the Regulations, but in fact made the ongoing understanding and implementation of the Regulations the focus of the claims settlement practices. By proactively looking out for the rights of California consumers and not trying to put in the place of the Regulations company standards and procedures that do not meet the "minimum standards" of what is required of California insurers, there would be less instances of 'knowingly violating them 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),' and thus fewer claims of bad faith on the part of consumers against insurance companies.