The Napa and Sonoma fires have destroyed thousands of properties. This post addresses the obligations of insurers under California’s Fair Claims Settlement Practices regulations (the “Regulations”).
The Regulations prohibit an insurer from doing a number of things, including: (i) discriminating on the basis of sex, race, religion, property location and additional factors, (ii) failing to notify a claimant of the benefits under a policy, the coverage under a policy and applicable time limits for acting, (iii) requiring the claimant to submit a notice of claim or proof of loss within a specific time (unless the policy itself contains such a time limit), (iv) making a partial payment accompanied by language releasing the insurer unless the policy limits have been paid or the parties have entered into a mutual settlement of the claim, and (v) requiring the claimant to submit to a lie detector test. The Regulations also provide specific notice requirements and time periods for acting. For example: · The insurer must acknowledge receipt of a notice of claim within 15 days of receipt; · The insurer must respond to any correspondence from the claimant within 15 days (if the correspondence seeks a response); · The insurer must commence investigation of the claim within 15 days after receiving the notice of claim; · The insurer must accept or reject a claim no later than 40 days after the claimant submits a proof of loss (although the insurer may extend this time period by giving written notice every 30 days in the event the insured has not submitted sufficient information); · The insurer must tender payment of the undisputed portion of a settlement payment within 30 days. The Regulations impose additional substantive requirements on insurers. An insurer is prohibited from making an “unreasonably low” settlement offer. The insurer is prohibited from requiring the claimant to use a particular person or entity to perform the repairs (although they may make recommendations). If the insured submits a higher repair estimate than the estimate prepared by the insurer, the insurer must either: (i) pay the higher amount, (ii) provide the claimant with the name of a person or entity who agrees to perform such repairs at the insurer’s cost estimate, or (iii) make written adjustments to the claimant’s estimates and provide a copy of such adjustments to the claimant. The insurer is also required to notify the claimant of the benefits under the policy, the coverage under the policy and any applicable time limits for action. The failure to do so is a prohibited act under the Regulations. With respect to actual cash value policies (as opposed to replacement cost policies), the carrier has the burden of justifying any depreciation in an itemized and explicit manner. This must be explained to the claimant. The cost of labor is not included in any depreciation deduction. If a claim is denied or rejected, either in full or in part, the insurer is required to, amongst other things, provide a factual and legal basis for the denial, including citations to applicable statutes and/or the policy language itself.
3 Comments
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blogHi. I'm Stephen Flynn. Attorney and founder of the Law Offices of Stephen M. Flynn. This is my blog. Enjoy! Archives
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