California Department of Insurance Takes Action Against Insurer for Unfair Claims Handling Practices
News: 2011 Press Release
The California Department of Insurance today announced the filing of an administrative enforcement action against RiverSource Life Insurance Company for unfair claims handling practices affecting claims under long term care, disability income and life insurance policies.
The enforcement action focuses primarily on long term care policies and alleges that RiverSource mishandled numerous long term care claims and failed to adopt practices to assure that long term care and other policy benefits were paid. The action also alleges that RiverSource adopted business practices that were specifically designed to deny long term care benefits. The long term care claims typically involved persons in their 70's, 80's and 90's, including persons suffering from Alzheimer's disease and other impairments.
In addition to numerous examples of deficient claims handling, the enforcement action alleges that RiverSource systematically delayed investigating claims and intentionally created impediments to receiving policy benefits. Among other practices, RiverSource would not reasonably assist long term care policyholders in locating care facilities, requiring them to guess which facilities RiverSource might pay for, and putting them at risk of either receiving no benefits or moving multiple times until they found a facility that RiverSource would approve.
The enforcement action also alleges that RiverSource systematically denied coverage in facilities by requiring strict compliance with antiquated policy language drafted decades ago that no longer reasonably applies to the long term care industry.
The action is based on a Department of Insurance market conduct examination of RiverSource's own claims handling files. The action seeks penalties based on the violations found in the examination, plus penalties based on a proportional extrapolation of the violations found in the examination to all California claims handled by RiverSource.
The Insurance Code provides for penalties of up to $10,000 for each willful claims handling violation, $10,000 for each willful violation of long term care laws in particular, and $500,000 for each long term care general business practice in violation of long term care statutes.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $259 billion in premiums annually in California. In 2014 the California Department of Insurance received more than 175,000 calls from consumers and helped recover over $54 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.