Fair Claims Settlement Practices Regulations:
Definitions:
Claimant: 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: an insurance adjuster, a public adjuster, or any member of the claimant’s family. (Title 10, CCR 2695.2(c)
Notice of Legal Action: 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. (Title 10, CCR 2695.2(o)
Proof of Claim: Any documentation in the claimant’s possession submitted to the insurer that provides any evidence of the claim and that supports the magnitude or the amount of the claimed loss. (Title 10, CCR 2695.2(s)
Standards for Prompt, Fair and Equitable Settlements: (Title 10, CCR 2695.7)
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. (Title 10, CCR 2695.7(a) Upon receiving proof of claim every insurer shall immediately, but in no event more than 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. This time frame does not apply to disability insurance, disability income insurance, mortgage guaranty insurance, or automobile repair bills arising from collision and comprehensive claims. (Title 10, CCR 2695.7(b)
When an insurer denies or rejects an insured’s claim, in whole or in part, it must do so in writing and contain the basis for such rejection or denial. If a claimant believes that a claim has been wrongfully denied or rejected, he/she may have the matter reviewed by the California Department of Insurance and the insurer must inform the claimant of this fact as well as providing address and telephone of the unit of the Department that reviews claim practices.
If more time is required than the allotted 40 days to determine whether a claim should be accepted or denied, every insurer shall provide the claimant 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 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. An insurer does have 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. (Title 10, CCR 2695.7(c)
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 the final amount offered is below the amount that a reasonable person with knowledge of the facts and circumstances would have offered in settlement of the claim. (Title 10, CCR 2695.7(g)
Upon acceptance of the claim in whole or in part and, when necessary, upon receipt of a properly executed release, every insurer shall immediately, but in no event more than 30 calendar days later, tender payment or otherwise take action to perform its claim obligation. 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 the 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. These time frames do not apply to disability insurance, disability income insurance, mortgage guaranty insurance, automobile repair bills arising from collision and comprehensive insurance, and title insurance. (Title 10, CCR 2695.7(h) No insurer shall inform a claimant that his/her right may be lost if a form or release is not completed within a specified time period unless the information is given to advise 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.
No insurer shall require that a claimant withdraw, rescind or refrain from submitting any complaint to the Department of Insurance regarding the handling of a claim as a condition to the settlement of any claim.