California State Insurance Commissioner Steve Poizner announced today that the Department of Insurance has reached a $600,000 settlement agreement with Life Insurance Company of North America (“LINA”) to resolve allegations of disability insurance claims handling violations from February 2005 through June 20, 2006.
In addition to the fine, LINA agreed to make changes in its claims handling policies and procedures, and to review previously closed claims to determine if additional benefits are due.
The handling violations were found when the Department performed an onsite examination of LINA’s claims handling practices. During this examination, the Department found instances where LINA had made claims determinations prior to requesting medical records and examples of LINA adjusters ignoring substantial new information after a claim had initially been denied. As part of the settlement, LINA has agreed to make significant improvements to its claims handling practices in order to avoid future violations.
Based on the results of the examination, CDI filed an Order to Show Cause/Statement of Charges/Accusation and Notice of Monetary Penalty alleging that LINA’s claims handling practices were in violation of state law.
In addition to the penalty, the settlement calls for LINA to cease and desist from engaging in any acts or practices in violation of California law. LINA’s revised claims handling practices are designed to avoid the type of violations alleged and the Department will provide oversight to assure that this goal is being met. LINA will review all California resident closed denied claims for the period January 2005 through December 2007 using the agreed upon quality standards outlined in the settlement.
“Individuals purchase long term disability insurance to protect themselves and their families in the event they become disabled and are unable to work,” said Commissioner Poizner. “When insurance companies fail to follow the law in fairly and expeditiously adjusting these claims, it has a devastating impact on policyholders and their families. I am pleased that LINA has taken responsibility for its actions and has implemented changes in its policies, procedures and practices. The Department will continue to monitor the actions of all insurers selling and marketing disability insurance in the state of California.”
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