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[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

HILLSTAR INSURANCE COMPANY NAIC # 10068 CDI # 4475-0

AS OF AUGUST 31, 2010

ADOPTED JANUARY 11, 2012

STATE OF CALIFORNIA

CALIFORNIA DEPARTMENT OF INSURANCE

MARKET CONDUCT DIVISION

FIELD CLAIMS BUREAU

790.03 V3 05-10-11

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 V3 05-10-11

TABLE OF CONTENTS

SALUTATION ................................................................................................................. 1

FOREWORD ................................................................................................................... 2

SCOPE OF THE EXAMINATION.................................................................................... 3

EXECUTIVE SUMMARY OF CLAIMS SAMPLE REVIEWED ........................................ 4

RESULTS OF REVIEWS OF MARKET ANALYSIS, CONSUMER COMPLAINTS AND

INQUIRIES, AND PREVIOUS EXAMINATIONS, AND PRIOR ENFORCEMENT

ACTIONS ........................................................................................................................ 5

DETAILS OF THE CURRENT EXAMINATION .............................................................. 6

TABLE OF TOTAL CITATIONS ..................................................................................... 7

TABLE OF CITATIONS BY LINE OF BUSINESS ........................................................ 10

SUMMARY OF EXAMINATION RESULTS .................................................................. 11

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STATE OF CALIFORNIA

Dave Jones,

Insurance Commissioner

DEPARTMENT OF INSURANCE

Consumer Services and Market Conduct Branch Field Claims Bureau, 11th Floor 300 South Spring Street Los Angeles, CA 90013

SALUTATION January 11, 2012 The Honorable Dave Jones Insurance Commissioner State of California 300 Capitol Mall Sacramento, California 95814 Honorable Commissioner:

Pursuant to instructions, and under the authority granted under Part 2, Chapter 1,

Article 4, Sections 730, 733, 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 claims handling

practices and procedures in California of:

Hillstar Insurance Company

NAIC # 10068

Group NAIC # 3495

Hereinafter, the Company listed above also will be referred to as HIC or the

Company.

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).

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FOREWORD

The examination covered the claims handling practices of the aforementioned

Company on Private Passenger Automobile claims closed during the period from

September 1, 2009 through August 31, 2010. The examination was made to discover,

in general, if these and other operating procedures of the Company conform to the

contractual obligations in the policy forms, the California Insurance Code (CIC), the

California Code of Regulations (CCR) and case law. This report contains all alleged

violations of laws that were identified during the course of the examination.

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

present a comprehensive overview of the subject insurer’s 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. 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

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

process.

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SCOPE OF THE EXAMINATION

To accomplish the foregoing, the examination included:

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

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

Company in support of positions or interpretations of the California Insurance Code, 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 claims files and related records.

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

results; a review of consumer complaints and inquiries about the Company closed by

the CDI during the period September 1, 2009 through August 31, 2010; and a review of

previous CDI market conduct claim examination reports on the Company; and a review

of prior CDI enforcement actions.

The review of the sample of individual claims files was conducted at the claims office of

the Company in Cerritos, California.

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EXECUTIVE SUMMARY OF CLAIMS SAMPLE REVIEWED

The Private Passenger Automobile claims reviewed were closed from September

1, 2009 through August 31, 2010, referred to as the “review period”. The examiners

randomly selected 245 HIC claims files for examination. The examiners cited 93

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

Practices Settlement Regulations from this sample file review.

Findings of this examination included failure to send the actual cash value

settlement breakdown letter and to include in the settlement all applicable taxes, fees

and other annual fees computed based upon the remaining term of the current

registration on total losses.

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RESULTS OF REVIEWS OF MARKET ANALYSIS, CONSUMER COMPLAINTS AND

INQUIRIES, AND PREVIOUS EXAMINATIONS AND PRIOR ENFORCEMENT ACTIONS

Except as noted below, market analysis did not identify any specific issues of

concern. There was no specific area of concern identified in the complaint review.

The previous claims examination reviewed a period from August 1, 2004, through

July 31, 2005. The most significant noncompliance issues identified in the previous

examination report were the Company’s (as formerly named Infinity National Insurance

Company) failure to effectuate prompt, fair and equitable settlements of claims in which

liability has become reasonably clear (specifically with regard to paint materials

caps/thresholds). This issue was not identified as problematic in the current

examination.

HIC (as part of the Infinity Property & Casualty Insurance Group) was the subject

of a CDI enforcement action on August 14, 2007 which resulted in a penalty of

$750,000. Significant noncompliance issues identified in the enforcement action

included using paint materials caps/thresholds. This issue was not identified as

problematic in the current examination.

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DETAILS OF THE CURRENT EXAMINATION

Further details with respect to the examination and alleged violations are

provided in the following tables and summaries:

HIC SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY

CLAIMS IN

REVIEW

PERIOD

SAMPLE

FILES

REVIEWED

NUMBER OF

ALLEGED

CITATIONS

Personal Auto / Comprehensive 285 11 4

Personal Auto / Collision 1475 59 40

Personal Auto / Bodily Injury 292 14 3

Personal Auto / Property Damage 1138 56 16

Personal Auto / Uninsured Motorist Bodily Injury

52 36 5

Personal Auto / Uninsured Motorist Property Damage

50 34 9

Personal Auto / Medical Payments 183 25 15

Personal Auto / Towing 13 10 1

TOTALS 3488 245 93

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TABLE OF TOTAL CITATIONS

Citation Description of Allegation

HIC

Number of Alleged Citations

CCR §2695.8(b)(4) *[CIC §790.03(h)(3)]

The Company failed to fully itemize and explain in writing the determination of the cost of a comparable vehicle at the time the settlement offer was made.

15

CCR §2695.8(b)(1) *[CIC §790.03(h)(5)]

The Company failed to include in the settlement all applicable taxes, fees and other annual fees computed based upon the remaining term of the current registration.

14

CCR §2695.7(d) *[CIC §790.03(h)(3)]

The Company failed to conduct and diligently pursue a thorough, fair and objective investigation of a claim and persisted in seeking information not reasonably required for or material to the resolution of a claims dispute.

10

CCR §2695.8(b)(1)(A) *[CIC §790.03(h)(5)]

The Company failed to provide, upon a request from the claimant, the name, address and telephone number of the salvage dealer, salvage pool, motor vehicle auction or dismantler who will purchase the salvage or failed to include, in the settlement, sales tax and/or fees incident to the transfer of the vehicle to salvage status.

9

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

7

CCR §2695.3(a) *[CIC §790.03(h)(3)]

The Company failed to maintain all documents, notes and work papers which reasonably pertain to each claim in such detail that pertinent events and the dates of the events can be reconstructed.

6

CCR §2695.7(b) *[CIC §790.03(h)(4)]

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

5

CCR §2695.7(h) *[CIC §790.03(h)(5)]

The Company failed, upon acceptance of the claim, to tender payment within 30 calendar days. 4

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.

4

CIC §790.03(h)(5)

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

4

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Citation Description of Allegation

HIC

Number of Alleged Citations

CCR §2632.13(e)(2) *[CIC §790.03(h)(3)]

The Company failed to properly advise the insured that the driver of the insured vehicle was principally at fault for an accident. The determination of fault letter was not sent.

3

CIC §790.03(h)(15)

The Company misled a claimant as to the applicable statute of limitations.

3

CIC §880 *[CIC §790.03(h)(3)]

The Company failed to conduct its business in its own name.

2

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.

1

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

The Company failed to reference the California Department of Insurance in its claims denial.

1

CCR §2695.7(g) *[CIC §790.03(h)(5)]

The Company attempted to settle a claim by making a settlement offer that was unreasonably low.

1

CCR §2695.7(q) *[CIC §790.03(h)(3)]

The Company failed to include the insured’s deductible in the subrogation demand.

1

CCR §2695.8(b)(1)(A) *[CIC §790.03(h)(3)]

The Company failed to disclose in writing to the claimant that notice of the salvage retention must be provided to the Department of Motor Vehicles, that this notice may affect the loss vehicle’s future resale and/or insured value and that the claimant has a right to seek a refund of the unused license fees from the Department of Motor Vehicles.

1

CCR §2695.8(g)(3) *[CIC §790.03(h)(5)]

The Company required the use of non-original equipment manufacturer replacement crash parts without warranting that such parts are of like kind, quality, safety, fitness and performance as original manufacturer replacement crash parts.

1

CIC §11580.011(e) *[CIC §790.03(h)(5)]

The Company failed to reimburse the claimant for the cost of purchasing a new child passenger restraint system that was in use by a child during the accident.

1

Total Number of Citations 93

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*DESCRIPTONS 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.

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TABLE OF CITATIONS BY LINE OF BUSINESS

PERSONAL AUTOMOBILE

2010 Written Premium: $23,919,835 AMOUNT OF RECOVERIES $168,129.95

NUMBER OF CITATIONS

CCR §2695.8(b)(4) [CIC §790.03(h)(3)]

15

CCR §2695.8(b)(1) [CIC §790.03(h)(5)] 14

CCR §2695.7(d) [CIC §790.03(h)(3)] 10

CCR §2695.8(b)(1)(A) [CIC §790.03(h)(5)] 9

CIC §790.03(h)(1) 7

CCR §2695.3(a) [CIC §790.03(h)(3)] 6

CCR §2695.7(b) [CIC §790.03(h)(4)] 5

CCR §2695.7(h) [CIC §790.03(h)(5)] 4

CIC §790.03(h)(3) 4

CIC §790.03(h)(5) 4

CCR §2632.13(e)(2) [CIC §790.03(h)(3)] 3

CIC §790.03(h)(15) 3

CIC §880 [CIC §790.03(h)(3)] 2

CCR §2695.4(a) [CIC §790.03(h)(1)] 1

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

CCR §2695.7(g) [CIC §790.03(h)(5)] 1

CCR §2695.7(q) [CIC §790.03(h)(3)] 1

CCR §2695.8(b)(1)(A) [CIC §790.03(h)(3)] 1

CCR §2695.8(g)(3) [CIC §790.03(h)(5)] 1

CIC §11580.011(e) [CIC §790.03(h)(5)] 1

SUBTOTAL 93

TOTAL 93

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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 was asked if it intends to take appropriate corrective action

in all jurisdictions where applicable. The Company intends to implement corrective

actions in all jurisdictions.

Money recovered within the scope of this report was $21,271.17 as described in

sections number 2, 4, 9, 10, 14 and 16 below. Following the findings of the

examination, a closed claims survey as described in section 2, 4, 5 and 10 below was

conducted by the Company resulting in additional payments of $146,858.78. As a result

of the examination, the total amount of money returned to claimants within the scope of

this report was $168,129.95.

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PERSONAL AUTOMOBILE 1. In 15 instances, the Company failed to explain in writing the determination of the cost of a comparable vehicle. In each instance, the actual cash value settlement breakdown letter was not sent. The Department alleges these acts are in violation of CCR §2695.8(b)(4) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: It is the Company’s policy and procedure to send the total loss settlement letter to the insured or claimant. These instances were a result of adjuster oversight. Training was conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing that a total loss breakdown letter must be provided in writing. Also, training included a review of the Total Loss Settlement Quick Checklist used to ensure compliance with company procedure, the California Fair Claims Settlement Regulations and the California Insurance Code.

2. In 14 instances, the Company failed to include in the settlement all applicable taxes, fees and other annual fees computed based upon the remaining term of the registration. In each case, the taxes, unused vehicle license fee or one-time fees were not paid. 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: It is the Company’s standard practice to include the taxes, unused license fee and other one-time fees due on a total loss claim. The instances sited were a result of adjuster error and in each case; payments were made during the examination totaling $2,318.28. Following the examination, training was conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing the proper method of requesting the information from the DMV and paying all applicable taxes and one-time fees in settlement of a total loss claim. Training included a review of the Total Loss Settlement Quick Checklist used to ensure compliance with company procedure, the California Fair Claims Settlement Regulations and the California Insurance Code.

In addition, to compensate claimants for unpaid taxes, registration, and one-time

fees, the Company conducted a self-survey from June 30, 2008, the inception of the Company, to January 12, 2011. The Company reviewed 833 claims in which 179 had errors. The Company issued supplemental payments to claimants totaling $15,998.68. The Company provided the Department with evidence of the completed survey including supporting data and proof of payments. 3. In 10 instances, the Company failed to conduct and pursue a thorough, fair and objective investigation of a claim or persisted in seeking information not reasonably required for or material to the resolution of a claims dispute. In four instances, the Company failed to request the current registration fees owed on an owner retained total loss. In two instances, payments were issued in error. In two instances, letters were incorrectly sent to attorney represented claimants. In one instance, the Company failed to secure a recorded statement. In another instance, the

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Company incorrectly required that an insured sign an Affidavit of No Insurance. 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: It is the Company’s standard practice to conduct a thorough, fair and objective investigation and not persist in seeking information not reasonably required to resolve a claim. The instances sited were a result of adjuster error and in each case, the adjuster has been counseled. In addition, Training was conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing compliance with company procedure, the California Fair Claims Settlement Regulations and the California Insurance Code. 4. In nine instances, the Company failed to provide, upon a request from the claimant, the name, address and telephone number of the salvage dealer, salvage pool, motor vehicle auction or dismantler who will purchase the salvage or the Company failed to include, in the settlement, sales tax and/or fees incident to the transfer of the vehicle to salvage status. In five instances, the Company failed to include in the total loss settlement, the tax and/or fees incident to the transfer of the vehicle to salvage status. In four instances, the Company failed to obtain a purchase offer from a salvage dealer, salvage pool, motor vehicle auction or dismantler. Instead, the Company obtained an average sales price quote. The Department alleges these acts are in violation of CCR §2695.8(b)(1)(A) and are unfair practices under CIC §790.03(h)(5).

Summary of the Company’s Response: The Company agrees that it failed to include the appropriate salvage value or fee on the settlement of owner retain total loss claims. During the course of the examination, the Company paid a total of $1371.70 to claimants. Further, as a result of the findings, the Company changed its practices to only use guaranteed bids from its vendor, Insurance Auto Auctions (IAA) when calculating salvage values. This corrected practice has been in effect since November 1, 2010. Training was also conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing properly documenting the salvage value in the claim file.

In addition, the Company conducted a self-review of first and third party owner retained total loss claims from June 30, 2008, the date of inception of the Company, to January 12, 2011. The survey purpose was to compensate salvage fees and amounts underpaid from deducting the average sales amount rather than a guaranteed salvage bid. The Company reviewed 95 claims in which 15 had errors. The Company issued supplemental payments to claimants totaling $16,265.00. The Company provided the Department with evidence of the completed survey including supporting data and proof of payments. 5. In seven instances, the Company misrepresented to claimants pertinent facts or insurance policy provisions relating to coverages at issue. In six instances, the Company misrepresented policy information to the insured by incorrectly stating that the Med Pay coverage is excess over any other medical insurance. In one

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instance, the Company incorrectly stated that the Uninsured Motorist coverage is excess over Med Pay. The Department alleges these acts are in violation of CIC §790.03(h)(1).

Summary of the Company’s Response: The Company states that it is not its policy to misrepresent the policy relating to the coverages at issue. The instances sited were a result of adjuster error and were not in accordance with the Company’s policy and procedures. The Company instructed its staff as to the appropriate handling of Med Pay and Uninsured Motorist claims as well as the appropriate description of the policy provisions as applicable.

In addition following the examination, the Company conducted a self-survey of claims involving Med Pay coverage from June 30, 2008, the date of inception of the Company, to January 12, 2011. The Company sent letters to each insured advising that the coverage is not excess and to contact the Company if they wish to pursue a claim. As a result of the findings of the survey, the Company paid a total of $112,755.10 to claimants in instances where the Med Pay claim was closed without payment or closed prior to full benefits paid due to the misinformation provided. The Company reviewed 249 claims in which 43 had errors. The Company provided the Department with evidence of the completed survey including supporting data and proof of payments. 6. In six instances, the Company failed to maintain all documents, notes and work papers which reasonably pertain to each claim in such detail that pertinent events and the dates of the events can be reconstructed. The Department alleges these acts are in violation of CCR §2695.3(a) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: It is the Company’s standard practice to maintain all documents, notes and work papers which reasonably pertain to the claim in the claim file. These instances sited were a result of documentation error and the adjusters involved have been counseled. In addition, training was conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing compliance with company procedure, the California Fair Claims Settlement Regulations and the California Insurance Code.

7. In five instances, the Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Department alleges these acts are in violation of CCR §2695.7(b) and are unfair practices under CIC §790.03(h)(4).

Summary of the Company’s Response: It is the Company’s standard practice to accept or deny the claim within 40 calendar days of receiving proof. Four instances involved a delay in response to receipt of medical bills. One instance involved a delay in the collision settlement without providing the insured in writing with the reason for the delay. Training was conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing compliance with company procedure, the California Fair Claims Settlement Regulations and the California Insurance Code.

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8. In four instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies. In one instance a miscalculation of the repair cost was made. In another instance, the claim was closed prematurely without following Company guidelines. In one instance, the insured’s vehicle repair estimate was confused with a subsidiary company’s repair program. In another instance, a tow claim was not setup timely in accordance with Company guidelines. The Department alleges these acts are in violation of CIC §790.03(h)(3).

Summary of the Company’s Response: The Company states that the instances sited were a result of adjuster error and in each case the adjuster has been counseled. Training was conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing compliance with company procedure, the California Fair Claims Settlement Regulations and the California Insurance Code. 9. In four instances, the Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In two instances, the Company failed to pay the collision damage waiver once it was determined that the responsible party was uninsured. In one instance, the Company settled and paid the repair amount to the insured. However, since the insured in turn did not pay the body shop, the Company incorrectly issued a duplicate payment to the shop and pursued collection from the insured. In another instance, the Company delayed settlement of a collision claim pending authorization from the insured to deduct a premium from the settlement in order to afford coverage for an unlisted driver. The Department alleges these acts are in violation of CIC §790.03(h)(5).

Summary of the Company’s Response: The Company agrees that it failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear in these instances. As a result of the examination, the insured was compensated by the Company for the collision damage waiver in two instances totaling $1,250.00. In one instance, the Company sent a letter to the body shop in dispute with the insured advising them that any collection efforts for unpaid repairs and/or deductible amounts are the responsibility of the shop prior to releasing the vehicle. As such, all collection efforts against the insured were ceased. In another instance, as a result of the examination, the Company has discontinued the practice of deducting premium from the claim settlement to afford coverage on permissive users.

10. In four instances, the Company failed, upon acceptance of the claim, to tender payment within 30 calendar days. In each instance, medical bills provided by insureds were unpaid. The Department alleges these acts are in violation of CCR §2695.7(h) and are unfair practices under CIC §790.03(h)(5).

Summary of the Company’s Response: The Company agrees that it failed to

tender payment within 30 calendar days in these instances. As a result of the examination, the Company issued payments for unpaid claims totaling $15,150.00 and states these instances were a result of adjuster error. Further, the Company’s

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management team has been instructed to monitor claims in which there is both Med Pay and UMBI features to ensure there are no improper delays due to pending settlements of either coverage.

In addition, the Company conducted a self-survey of Med Pay claims from June 30,

2008, the date of inception of the Company, to January 12, 2011. The Company reviewed 48 claims in which one had an error. The Company paid $1840.00 to a single claimant as a result of the survey.

The Company also conducted training as part of the 2011 Department of Insurance

Regulation Training and Certification specifically emphasizing compliance with the California Fair Claims Settlement Regulations and the California Insurance Code.

11. In three instances, the Company failed to properly advise the insured that the driver of the insured vehicle was principally at-fault for an accident. These instances involved the failure to send the determination of fault notice. The Department alleges these acts are in violation of CCR §2632.13(e)(2) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees that it failed to

send the principally at-fault letter to the insured in these instances. These instances were a result of adjuster error. As a result of the examination, the Company sent an at-fault letter to each insured.

12. In three instances, the Company misled a claimant as to the applicable statute of limitations. The Department alleges these acts are in violation of CIC §790.03(h)(15).

Summary of the Company’s Response: The Company agrees that it incorrectly

sent the liability statute letter to the insured in these instances. These instances were the result of adjuster error and not representative of Company policy. Training was conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing compliance with the California Fair Claims Settlement Regulations and the California Insurance Code.

13. In two instances, the Company failed to conduct its business in its own name. 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 agrees that the vehicle

repair estimates in each case did not display the correct company name. These instances were a result of adjuster error. The Company states that a separate ID had not yet been set up in CCC for HIC at the time the estimates were written, and were printed with the Infinity name. If an estimate is written for an HIC customer and the estimate printed has Infinity Insurance Company listed, the appraiser is supposed to manually correct the company name on the estimate. The Company has provided further remediation, stating

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that, “In October with the advent of an update to the CCC system, the new company ID was added and all estimates for Hillstar customers and claimants should be processed initially with the correct company name”.

14. In one instance, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. The minor claimant’s parents submitted an ambulance bill totaling $1,106.19 to the Company. The Company in turn paid a settlement of $500.00, and offered an additional $1,100.00 for ambulance services and $5,000.00 for emergency room services rendered in exchange for a signed release. The Department alleges this act is in violation of CCR §2695.7(g) and is an unfair practice under CIC §790.03(h)(5).

Summary of the Company’s Response: The Company agrees that it made an

offer less than the amount of the ambulance bill. The Company further states that this was an isolated incident of adjuster error and not representative of Company policy. As a result of the examination, The Company issued the amount of $1,106.19 to compensate the insured the amount of the unpaid ambulance bill. In addition, training was conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing compliance with the California Fair Claims Settlement Regulations and the California Insurance Code.

15. In one instance, the Company required the use of non-original equipment manufacturer replacement crash parts without warranting that such parts are of like kind, quality, safety, fitness and performance as original manufacturer replacement crash parts. The Department alleges this act is in violation of CCR §2695.8(g)(3) and is an unfair practice under CIC §790.03(h)(5).

Summary of the Company’s Response: The Company agrees that it does not

have guidelines, manuals, directives or instructions for its claims staff to support its warranty position. It states that the Company uses after market parts that are approved by the Certified Automotive Parts Association (CAPA) or parts from suppliers with their own stringent certification programs such as Keystone and Diamond. As a result of the examination, the Company agreed to include written warranties on its repair estimates as well as to include the practice in its Best Practices Guidelines. This task was completed on March 15, 2011.

16. In one instance, the Company failed to replace the child passenger restraint system that was in use by a child during the accident or if it sustained a covered loss while in the vehicle. The Department alleges this act is in violation of CIC §11580.011(e) and is an unfair practice under CIC §790.03(h)(5).

Summary of the Company’s Response: The Company agrees that it did not

reimburse the claimant for the cost of purchasing a new child passenger restraint system that was in use in the accident. This instance was a result of adjuster error and not representative of Company policy. As a result of the examination, a total of $75.00 was paid to the claimant. In addition, training was conducted as part of the 2011 Department of

18 790.03 V3 05-10-11

Insurance Regulation Training and Certification specifically emphasizing compliance with the California Fair Claims Settlement Regulations and the California Insurance Code.

17. The Company failed to comply with the Fair Claims Settlement Practices Regulations and the California Insurance Code. In one instance each, the Department alleges that the Company failed to comply with the following Fair Claims Practices Regulations or California Insurance Codes: CCR §2695.4(a)[CIC §790.03(h)(1)], CCR §2695.7(b)(3)[CIC §790.03(h)(3)], CCR § 2695.7(q)[CIC §790.03(h)(1)], CCR §2695.8(b)(1)(A) [CIC §790.03(h)(3)].

Summary of the Company’s Response: It is the Company’s policy and

procedure to comply with the Fair Claims Settlement Practices Regulations and the California Insurance Code. These instances involved inadvertent oversights on the part of the claims staff. Training was conducted as part of the 2011 Department of Insurance Regulation Training and Certification specifically emphasizing compliance with the California Fair Claims Settlement Regulations and the California Insurance Code.