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 30, 2006.

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 parts."

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 irresponsible actions."

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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