California-Based CSE Insurance Co. to Pay $505,000
for Insurance Code Violations, Including Steering
September 29, 2010
California insurance commissioner Steve Poizner announced this
week that a settlement has been reached in an enforcement action
against CSE Insurance, which includes both Civil Service Employees
Insurance Co. and CSE Safeguard Insurance Co. (CSE), for a variety
of violations of the state's insurance code, including claims related
to steering. The company will pay a total of $505,000 as a result
of the settlement, which arose as a result of a market
conduct examination for the period of May 1, 2005, through April
The insurance department reviewed a total of 596 randomly selected
claim files and found 661 claim-handling violations.
Among the charges are allegations that, in five instances, CSE
representatives "directed, suggested or recommended that at
automobile be repaired at a specific repair shop without such referral
expressly requested by the claimant."
In the details of the report, the insurance commissioner's office
explains that, "specifically, the insured accepted the company's
oral recommendation of an automotive repair dealer and the company
failed to send the written notice required by [California Insurance
Code] §758.5 within five days of the recommendation."
CSE advised state officials that this error was against company
procedures and provided documentation to the insurance commissioner
that it has since incorporated internal auditing procedures to prevent
this from occurring.
Among other charges detailed are some related to the requirement
of the use of aftermarket parts.
"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," writes the state insurance
commissioner's office in its report.
In response, CSE advised the state department that it has modified
its claim acknowledgement letter to now include the following language:
"Civil Service Employees Insurance Company [or CSE Safeguard
Insurance Company] has the right to inspect and reasonably adjust
any written estimate, require non-original equipment manufacturer
replacement crash parts and make adjustments for betterment, depreciation
or salvage. The company warrants that any nonoriginal part used
on your vehicle will be of like, kind, quality, safety, fit and
performance as original equipment manufacturer replacement crash
Poizner called the settlement a "victory for policyholders
in California, as well as a notice to all insurers that deficient
and illegal business practices will not be tolerated."
"The laundry list of violations perpetrated by each of these
companies is unacceptable," says Poizner. "I am pleased
with the work of my department in holding them accountable for their
According to information from the insurance commissioner's office,
this is not the first time that these companies were charged with
violations of the California insurance code. A prior examination,
for the period May 2000 through April 2001, uncovered violations
similar to the ones identified in the 2005 - 2006 examination. The
companies paid $155,000 to settle those charges.
The final order, signed September 20, 2010, requires the two companies
to cease and desist from the acts in which violations were found
and pay a $505,000 monetary penalty.
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