When a claim comes in, the insurer holds most of the cards: the money, the policy wording and the investigation. Section 790.03(h) and the Fair Claims Settlement Practices Regulations (10 CCR §2695 and following) set the rules of fair play.
Section 790.03(h) lists sixteen unfair claims settlement practices. They are prohibited when knowingly committed or performed often enough to indicate a general business practice. Examples:
- Directly advising a claimant not to hire an attorney.
- Misleading a claimant about the applicable statute of limitations.
- Requiring a preliminary claim report and then a formal proof of loss containing the same information.
A denial is not unfair in itself. Promptly explaining the policy basis for a denial is exactly what the law expects. The regulations carry out §790.03.
Definitions in 10 CCR §2695.2:
Claimant (c): a first or third party claimant, an attorney, or a properly designated adjuster, public adjuster or family member acting for the claimant. The insurer's own adjuster is not a claimant.
Notice of legal action (o): notice of an action, including arbitration, that has actually been started.
Proof of claim (s): any evidence or documentation in the insurer's possession, whether submitted by the claimant or obtained in the insurer's own investigation, that provides evidence of the claim and reasonably supports its amount.
File and record documentation (10 CCR §2695.3): claim files are open to the Commissioner's examination and must be kept for the current year and the preceding four years. The rule covers open and closed files. Files must contain all documents, notes and work papers in enough detail that pertinent events and dates can be reconstructed.