-STATE OF CALIFORNIA
DEPARTMENT OF INSURANCE
45 FREMONT STREET, 21ST
FLOOR
SAN FRANCISCO, CALIFORNIA 94105
RH-XXX
CALIFORNIA CODE OF REGULATIONS, TITLE 10.
CHAPTER 5, SUBCHAPTER X
ADOPT ARTICLE X.X TO READ:
TABLE OF
CONTENTS
ARTICLE X.X ADJUSTER TRAINING FOR EVALUATING
EARTHQUAKE
DAMAGE
Section X Authority and Purpose
Section XX Definitions
Section XXX Training
Standards
Section XXXX Accreditation
Section XXXX.X Maintenance
of Records
Section XXXX.XX Reporting
Requirements for Untrained Adjusters
Section XXXXX.XXX Forms
Section X Authority
and Purpose
These regulations are promulgated pursuant to the authority granted to
the Insurance Commissioner under the provisions of Insurance Code Section
10089.3 added under SEC. 1 of Senate Bill 708,
Chapter 727, Statutes of 2001. The purpose of these regulations is to set forth
standards governing the training of insurance adjusters in evaluating damage
caused by earthquakes.
Note: Authority cited: Sec. 1
of Assembly Bill 708, Chapter 727,
Statutes of 2001. Reference
Section 10089.3 of the California Insurance Code.
Section XX Definitions
As used in these regulations and in Chapter 8.5(commencing
with Section 10089.3) of the insurance code.
(a)
“Training” or
“train” means to provide a course of instruction that meets the standards
prescribed in this regulation for those adjusters who evaluate earthquake
damage.
(b)
“Accreditation ”
means certification that a person has received training that meets the
standards set forth in this article.
(c)
“Insurance
adjuster” is any person included in California
Insurance Code section 10089.3(b).
(d)
“Insurer” means
an “admitted” or “nonadmitted” insurer, as defined in California Insurance Code
sections 23,24,and 25, that issues or delivers a policy of insurance in this
state covering the peril of earthquake.
Note: Authority cited:
Insurance Code Section 10089.3
Reference Sections 23,24,25 and 10089.3 of the California Insurance
Code.
Section XXX Training
Standards
The content of the training required by Insurance Code
section 10089.3 shall include, but is not limited to, the following elements:
(a)
The California Fair Claims
Settlement Practices Regulations, Section 2695.1
et.seq.
(b)
Evaluating scope of loss:
adjusters must be trained on how to conduct a thorough examination of the home
to find all new covered earthquake damage, including when to engage an engineer
or contractor to help determine a complete scope of covered damage, and
inspection of the attic and crawl space. The training must inform the adjuster
that the scope can change if additional hidden earthquake damage is found after
the repairs start.
(c)
Loss estimating: after the
scope of loss is complete and agreed to with the insured, the adjuster will
generate an estimate. This may be from
an automated estimating system or from a contractor. Lump sum estimates are not acceptable except for those items
clearly above the limit of the contents coverage. The insured is entitled to also get an estimate based upon the
agreed scope. If the insured gets his
or her own estimate, the estimates should be compared and the adjuster and the
insured need to come to an agreement on an estimate of the total loss. The measurement of areas, room sizes, and
other dimensions on which quantities of material and labor are based must be
shown in the estimate. A diagram should
be prepared and attached to the estimate.
Adjusters should document the damages with photographs when
appropriate. The insured is entitled to
receive, and must be given, a copy of the scope and estimate, except in cases
where litigation is pending.
(d)
Determining when an
engineer/expert is necessary: adjusters must be provided with training on how
to look at visible damage and determine if the damage is structural or non-structural. An adjuster can assess the damage where the
causation is obvious and damage is cosmetic only (non-structural). Where the
damage is structural, the adjuster is expected to enlist the services of an engineer
or other appropriate expert who will be used to determine the cause of loss,
the extent of damage and the appropriate repair.
(e)
California Department of
Insurance Earthquake Mediation program: adjusters should be able to
differentiate disputes that they should attempt to resolve, from those that
should be referred to the CDI’s Earthquake Mediation Program.
Adjusters should be encouraged to attempt to resolve and settle
disputes that generally involve questions concerning scope of damage, the
proper repair method, and the actual cost of the repairs. In cases where an
agreement cannot be reached, adjusters should use the CDI mediation program
instead of invoking the appraisal provision of the policy. The CDI mediation program aids in resolving
issues of scope of loss, mandated building upgrades, pre-existing damage,
additional living expense, asbestos abatement, earthquake vs. aftershocks,
hidden damages, and personal property valuation issues. (CDI form 526, EQMED
12/99)
(f)
Assessing damage to concrete
surfaces and foundations: adjusters should be trained to determine the
difference between small cracks which exist in the concrete of most house and
garage slabs versus new cracks caused by the earthquake. Existing cracks that have developed over
time, are considered normal, and generally do not impair the structural
function of the concrete. The cost to repair old cracks that were in the
concrete prior to the earthquake is not covered; however, new damage due to the
earthquake, which may include expansions of old cracks, may be covered. The adjuster,
after receiving the advice of an appropriate expert, will need to determine
whether concrete needs to be replaced or whether it can be repaired with
injected epoxy or other methods. In
cases where the cracks do not cause structural impairment, strong consideration
should be given to a repair with properly injected epoxy, since epoxy is
stronger than the original concrete.
This will be decided on a case-by-case basis and the adjuster should
allow for repair or replacement, whichever is most appropriate.
(g)
Price adjusting: if after
the repair work starts, the insured finds that prices are higher than
estimated, the adjuster should verify that reasonable local costs are being
used and if so, allow for additional payments based on the cost to have the agreed
upon work completed.
(h)
Claims procedures for hidden
damage discovered at a later date, and new claims received 1 year or later
after original loss: the adjuster must be advised that in the event that the
insured discovers hidden damage at a later date, the insurance company is
required to fully investigate the damages before it invokes any policy
provisions.
(i)
Timely adjusting:
policyholders may not receive payment for the total amount of the damage
because of earthquake policy deductible.
As a result, they may look to the Small Business Administration (SBA)
for low interest loans or to the Federal Emergency Management Agency (FEMA)for
grants. The adjuster should be informed
of the rules and regulations of both SBA and FEMA. In order to receive assistance,
the insured will need documentation from the adjuster. Usually these agencies
require a statement of loss or a denial letter. The SBA and FEMA have submission deadlines, so the adjuster will
need to provide the insureds with this documentation as quickly as possible.
Adjusters must be trained on the timeline issues associated with these agencies
so they will be sensitive to handling the underlying earthquake insurance claim
and final paperwork on a timely basis.
Note: Authority cited:
Insurance Code Section 10089.3 The California Fair Claims Settlement Practices
Regulations, Section 2695.1 et.seq
Section XXXX – Accreditation
Certificates shall be provided by the trainer to any
student successfully completing the adjuster training, and shall contain the
following information:
1) full name of adjuster, and license number if applicable
2) a statement certifying that the adjuster completed training that meets
the standards set forth in these regulations
3) signatures of both adjuster and trainer
4) completion date of training.
Section XXXX.-X Maintenance of
Records
(a) Insurer’s offering adjuster training must
maintain records of all adjusters completing the program, for a period
of___years. This list must contain the
following information:
1) name of adjuster and license number if applicable
2) date training completed.
Note: Authority cited: Insurance Code
Section 10089.3
Section XXXX.XX – Reporting Requirements for Untrained Adjusters
a) An insurer using one or more adjusters who are not trained and
accredited in accordance with the standards set forth in this section shall
comply with the following requirements:
(1)
annually submit a list of
those adjusters who have not completed the training, including the name,
license number, and claim number of the claim adjusted by that adjuster
(2)
each submission must be
submitted to the department within 30 calendar days from the end of the
reporting period and shall cover the preceding twelve-month period. The initial
reporting period begins January 1, 2026 and ends December 31, 2005.
Note: Authority cited: Insurance Code Section 10089.3