Tuesday, 31 January 2006 17:00

Farmers fined $1 million for claim handling violations

California Insurance Commissioner John Garamendi announced a $1 million fine against Farmers Insurance Group on January 23 following settlement negotiations over how the company handled consumer claims. According to a spokesman for Garamendi, the claims involved both homeowners and automobile policies. 

Farmers, consisting of Farmers Insurance Exchange, Fire Insurance Exchange, Mid-Century Insurance Company, and Truck Insurance Exchange, agreed to the settlement to resolve a Department enforcement action. The action covered approximately 1,000 violations of the California Insurance Code and Fair Claims Regulations covering the period from January 2, 2002 through August 8, 2004. An investigation by the Claims Services Bureau of the California Department of Insurance found violations arising from some 350 claims handling complaints filed by consumers from 2001 to 2004.

"During my first term in office I issued strong regulations to protect consumers against these kinds of unfair practices by insurers," said Commissioner Garamendi. "This fine should send a message to all companies that this Department will not tolerate mistreatment of policyholders."

The majority of the complaints and violations cited in the December settlement involve claims handling delays; failure to commence investigation of a claim within 15 days, failure to properly notify policyholders of the need for additional investigation time, failure to pay a claim within 30 days after liability was accepted, and failure to respond to the Department within 21 days of receipt of communication from the Department.

The settlement includes an additional $125,000 to be paid if Farmers does not adhere to terms of the agreement and improve its claims handling practices.

 

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