Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) This section enumerates standards which apply
to adjustment and settlement of automobile insurance claims.
(1) the words "automobile" and "vehicle" are used
synonymously.
(b) In
evaluating automobile total loss claims the following standards shall apply:
(1) The insurer may elect a cash settlement that
shall be based upon the actual cost of a "comparable automobile" less any deductible
provided in the policy. This cash settlement amount shall include all applicable
taxes and one-time fees incident to transfer of evidence of ownership of a
comparable automobile. This amount shall also include the license fee and other
annual fees to be computed based upon the remaining term of the loss vehicle's
current registration. This procedure shall apply whether or not a replacement
automobile is purchased.
(A) If the insured
chooses to retain the loss vehicle or if the third party claimant retains the loss
vehicle, the cash settlement amount shall include the sales tax associated with the
cost of a comparable automobile, discounted by the amount of sales tax attributed to
the salvage value of the loss vehicle. The cash settlement amount shall also include
all fees incident to transfer of the claimant's vehicle to salvage status. The
salvage value may be deducted from the settlement amount and shall be determined by
the amount for which a salvage pool or a licensed salvage dealer, wholesale motor
vehicle auction or dismantler will purchase the salvage. If requested by the
claimant, the insurer shall provide the name, address and telephone number of the
salvage dealer, salvage pool, motor vehicle auction or dismantler who will purchase
the salvage. The insurer shall disclose in writing to the claimant that notice of
the salvage retention by the claimant must be provided to the Department of Motor
Vehicles and that this notice may affect the loss vehicle's future resale and/or
insured value. The disclosure must also inform the claimant of said claimant's right
to seek a refund of the unused license fees from the Department of Motor
Vehicles.
(2) A "comparable
automobile" is one of like kind and quality, made by the same manufacturer, of the
same or newer model year, of the same model type, of a similar body type, with
options and mileage similar to the insured vehicle. Newer model year automobiles may
not be used as comparable automobiles unless there are not sufficient comparable
automobiles of the same model year to make a determination as set forth in Section
2695.8(b)(4), below.
In determining the cost of a comparable automobile, the insurer may use either the
asking price or actual sale price of that automobile. Any differences between the
comparable automobile and the insured vehicle shall be permitted only if the insurer
fairly adjusts for such differences. Any adjustments from the cost of a comparable
automobile must be discernible, measurable, itemized, and specified as well as
appropriate in dollar amount and so documented in the claim file. Deductions taken
from the cost of a comparable automobile that cannot be supported shall not be used.
The actual cost of a comparable automobile shall not include any deduction for the
condition of a loss vehicle unless the documented condition of the loss vehicle is
below average for that particular year, make and model of vehicle. This subsection
shall not preclude deduction for prior and/or unrelated damage to the loss vehicle.
A comparable automobile must have been available for retail purchase by the general
public in the local market area within ninety (90) calendar days of the final
settlement offer. The comparable automobiles used to calculate the cost shall be
identified by the vehicle identification number (VIN), the stock or order number of
the vehicle from a licensed dealer, or the license plate number of that comparable
vehicle if this information is available. The identification shall also include the
telephone number (including area code) or street address of the seller of the
comparable automobile.
(3)
Notwithstanding subsection (2), above, upon approval by the Department of Insurance,
an insurer may use private sales data from the Department of Motor Vehicles, or
other approved sources, which does not contain the seller's telephone number or
street address. Approval by the Department of Insurance shall be contingent on the
Department's determination that reasonable steps have been taken to limit the use of
private sales data that may be inaccurately reported to the Department of Motor
Vehicles, or other approved sources.
(4)
The insurer shall take reasonable steps to verify that the determination of the cost
of a comparable vehicle is accurate and representative of the market value of a
comparable automobile in the local market area. Upon its request, the department
shall have access to all records, data, computer programs, or any other information
used by the insurer or any other source to determine market value. The cost of a
comparable automobile shall be determined as follows and, once determined, shall be
fully itemized and explained in writing for the claimant at the time the settlement
offer is made:
(A) when comparable automobiles are
available or were available in the local market area in the last 90 days, the
average cost of two or more such comparable automobiles; or,
(B) when comparable automobiles are not available
or were not available in the local market area in the last 90 days, the average of
two or more quotations from two or more licensed dealers in the local market area;
or,
(C) the cost of a comparable
automobile as determined by a computerized automobile valuation service that
produces statistically valid fair market values within the local market area;
or
(D) if it is not possible to
determine the cost of a comparable automobile by using one of the methods described
in subsections (b)(3)(A), (b)(3)(B) and (b)(3)(C) of this section, the cost of a
comparable automobile shall otherwise be supported by documentation and fully
explained to the claimant. Any adjustments to the cost of a comparable automobile
shall be discernible, measurable, itemized, and specified as well as appropriate in
dollar amount and so documented in the claims file. Deductions taken from the cost
of a comparable automobile that cannot be supported shall not be
used
(5) In first party
automobile total loss claims, the insurer may elect to offer a replacement
automobile which is a specified comparable automobile available to the insured with
all applicable taxes, license fees and other fees incident to transfer of evidence
of ownership of the automobile paid by the insurer at no cost other than any
deductible provided in the policy. The offer and any rejection thereof must be
documented in the insurer's claim file. A replacement automobile must be in as good
or better overall condition than the insured vehicle and available for inspection
within a reasonable distance of the insured's residence.
(6) Subsection
2695.8(b) applies to
the evaluation of third-party automobile total loss claims, but does not change
existing law with respect to the obligations of an insurer in settling such claims
with a third party.
(c) In
first party automobile total loss claims, every insurer shall provide notice to the
insured at the time the settlement payment is sent or final settlement offer is made
that if notified by the insured within thirty-five (35) calendar days after the
insured receives the claim payment or final settlement offer that said insured
cannot purchase a comparable automobile for the gross settlement amount, the insurer
will reopen its claim file. If subsequently notified by the insured the insurer
shall reopen its claim file and utilize the following procedures:
(1) The insurer shall locate a comparable
automobile for the gross settlement amount determined by the company at the time of
settlement and shall provide the insured with the information required in (c)(4),
below, or offer a replacement vehicle in accordance with section
2695.8(b)(4). Any such
vehicle must be available in the local market area; or,
(2) The insurer shall either pay the insured the
difference between the amount of the gross settlement and the cost of the comparable
automobile which the insured has located, or negotiate and purchase this vehicle for
the insured; or,
(3) The insurer shall
invoke the appraisal provision of the insurance policy.
(4) No insurer is required to take action under
this subsection if its documentation to the insured at the time of final settlement
offer included written notification of the identity of a specified comparable
automobile which was available for purchase at the time of final settlement offer
for the gross settlement amount determined by the insurer. The documentation shall
include the telephone number (including area code) or street address of the seller
of the comparable automobile and:
(A) the vehicle
identification number (VIN) or,
(B) the
stock or order number of the vehicle from a licensed dealer, or
(C) the license plate number of such comparable
vehicle.
(d) No
insurer shall, where liability and damages are reasonably clear, recommend that the
third party claimant make a claim under the claimant's own policy to avoid paying
the claim under the policy issued by that insurer.
(e) No insurer shall:
(1) require that an automobile be repaired at a
specific repair shop; or,
(2) after a
claimant has chosen an automotive repair shop, suggest or recommend that the
claimant select a different repair shop, except as permitted by California Insurance
Code section
758.5. For
purposes of California Insurance Code section
758.5 and this
section, a claimant has chosen an automotive repair shop when the claimant has
specified to the insurer a specific automotive repair shop where the claimant wishes
to repair the vehicle. For purposes of this section, "automotive repair shop" or
"repair shop" means an automotive repair dealer, as defined in Section
9880.1
of the Business and Professions Code, registered with, or licensed by, the Bureau of
Automotive Repair as an auto body and/or paint shop.
(3) communicate false, deceptive, or misleading
information to the claimant, including, but not limited to:
(A) Advising the claimant that an inspection of
the vehicle will occur at a date that is later than required by subdivision (e)(4)
of this Section
2695.8.
(B) Making a statement to the claimant to the
effect that the automotive repair shop chosen by the claimant has a record of poor
service or poor repair quality, or making any other statement to the claimant with
respect to the chosen repair shop, if the statement is known to be, or should by the
exercise of reasonable care be known to be, untrue, deceptive or
misleading.
(C) Advising the claimant
that the automotive repair shop chosen by the claimant has a record of poor service
or poor repair quality, or of other similar allegations against the repair shop,
solely on the basis of the shop's participation or nonparticipation in a labor rate
survey.
(4) require a claimant
to travel an unreasonable distance or wait an unreasonable period of time either to
inspect a replacement automobile, to conduct an inspection of the claimant's
vehicle, to obtain a repair estimate, or to have the automobile repaired at a
specific repair shop.
(A) In the case of both
first-party and third-party claims: For purposes of this section, an unreasonable
distance shall be, for cities or urban areas with a population of 100,000 or higher,
more than fifteen (15) miles, and for all other areas of the state, more than
twenty-five (25) miles, from the location where the vehicle is located and made
available for inspection by the claimant.
(B) In the case of first-party claims only:
1. Initial inspection. Except as provided in
Subdivision (e)(4)(B)2. or (e)(4)(B)3. of this section, if an insurer chooses to
exercise its right to inspect the damaged vehicle, the insurer shall within six (6)
business days after receiving the notice of claim:
a. request of the claimant that the claimant make
the vehicle available for inspection by the insurer, and
b. provided the claimant makes the vehicle
reasonably available for inspection, inspect the damaged
vehicle.
2. Inspections and
re-inspections in response to requests for supplemental estimates. Subdivision
(e)(4)(B)1. of this section notwithstanding, and except as provided in Subdivision
(e)(4)(B)3. of this section, if in response to a request for a supplemental estimate
an insurer chooses to exercise its right to inspect or re-inspect the damaged
vehicle, the insurer shall within six (6) business days after receiving the request
for a supplemental estimate:
a. request of the
claimant that the claimant make the vehicle available for inspection or
re-inspection by the insurer, and
b.
provided the claimant makes the vehicle reasonably available for inspection or
re-inspection, inspect or re-inspect the damaged vehicle.
3. Photographs or estimates in lieu of inspection
or re-inspection; inspections and re-inspections upon receipt of photographs or
estimates. If the insurer requests from the claimant photographs of the damaged
vehicle, or an estimate of repairs, in lieu of a physical inspection, such a request
must be made within three (3) business days after the insurer's receipt of the
notice of claim or request for a supplemental estimate and shall include
notification to the claimant that, upon receipt of the photographs or estimate, the
insurer may elect to inspect or re-inspect the vehicle. Subdivisions (e)(4)(B)1. and
(e)(4)(B)2. of this section notwithstanding, if, after receiving the photographs or
estimate of repairs from the claimant in response to a request pursuant to the
immediately preceding sentence, the insurer subsequently elects to inspect or
re-inspect the vehicle, the insurer shall within six (6) business days following its
receipt of the photographs or estimate:
a. request
of the claimant that the claimant make the vehicle available for inspection or
re-inspection by the insurer, and
b.
provided the claimant makes the vehicle reasonably available for inspection or
re-inspection, inspect or re-inspect the damaged
vehicle.
(C) In the
case of third-party claims only: The provisions of Subdivision (e)(4)(B) above
notwithstanding, should an insurer exercise its right to inspect or re-inspect the
damaged vehicle, the insurer shall within six (6) business days from the time the
insurer decides to inspect or re-inspect the third-party claimant's vehicle:
1. request of the third-party claimant that the
third-party claimant make the vehicle available for inspection or re-inspection by
the insurer, and
2. provided the
third-party claimant makes the vehicle reasonably available for inspection or
re-inspection by the insurer, inspect or re-inspect the damaged
vehicle.
(D) In the event that
the first-party claimant or third-party claimant fails to make the damaged vehicle
reasonably available for inspection or re-inspection during the six-day period
specified in Subdivision (e)(4)(B)1., (e)(4)(B)2., (e)(4)(B)3. or (e)(4)(C) of this
section, the insurer shall in each case inspect or re-inspect the damaged vehicle as
soon after the end of that six-day period as is reasonable.
(E) For purposes of this Subdivision (e)(4):
1. Requests made of a claimant may be directed to
the claimant or, where the claimant has chosen an automotive repair shop, to the
automotive repair shop chosen by such claimant.
2. A claimant makes the damaged vehicle reasonably
available for inspection or re-inspection by the insurer when either the claimant or
the automotive repair shop chosen by the claimant makes the vehicle reasonably
available for inspection or re-inspection by the insurer.
3. A claimant fails to make the vehicle reasonably
available for inspection or re-inspection by the insurer when neither the claimant
nor the automotive repair shop chosen by the claimant makes the vehicle reasonably
available for inspection or re-inspection by the
insurer.
(5) after
the claimant has chosen an automotive repair shop, require that the claimant have
the vehicle inspected at or by an automotive repair shop where the insurer has a
Direct Repair Program, or at or by any other automotive repair shop identified by
the insurer.
(f) If a partial
loss is settled on the basis of a written estimate prepared by or for the insurer,
the insurer shall supply the claimant with a copy of the estimate upon which the
settlement is based. The estimate prepared by or for the insurer shall be of an
amount that will allow for repairs to be made in accordance with accepted trade
standards for good and workmanlike automotive repairs by an "auto body repair shop"
as defined in section
9889.51
of the Business and Professions Code, and in accordance with the standards of
automotive repair required of auto body repair shops as described in the Business
and Professions Code and associated regulations, including, but not limited to,
Section of
Title 163365 of Title 16 of the California Code of
Regulations. An insurer shall not prepare an estimate that deviates from the
standards, costs, and/or guidelines provided by the third-party automobile collision
repair estimating software used by the insurer to prepare the estimate, if such
deviation would result in an estimate that would not allow for repairs to be made in
accordance with accepted trade standards for good and workmanlike automotive repairs
by an auto body repair shop, as described in this subdivision. If the claimant
subsequently contends, based upon a written estimate that the claimant obtains, that
necessary repairs will exceed the written estimate prepared by or for the insurer,
the insurer shall:
(1) pay the difference between
the written estimate and a higher estimate obtained by the claimant; or,
(2) if requested by the claimant, promptly provide
the claimant with the name of at least one repair shop that will make the repairs
for the amount of the insurer's written estimate. The insurer shall cause the
damaged vehicle to be restored to its condition prior to the loss at no additional
cost to the claimant other than as stated in the policy or as otherwise allowed by
law. The insurer shall maintain documentation of all such communications;
or,
(3) reasonably adjust any written
estimates prepared by the repair shop of the claimant's choice and provide a copy of
the adjusted estimate to the claimant and the claimant's repair shop. The adjusted
estimate provided to the claimant and repair shop shall be either an edited copy of
the claimant's repair shop estimate or a supplemental estimate based on the itemized
copy of the claimant's repair shop estimate. The adjusted estimate shall identify
the specific adjustment made to each item and the cost associated with each
adjustment made to the claimant's shop's estimate.
(g) No insurer shall require the use of
non-original equipment manufacturer replacement crash parts in the repair of an
automobile unless all of the following conditions are met:
(1) the parts are at least equal to the original
equipment manufacturer parts in terms of kind, quality, safety, fit, and
performance;
(2) the insurer specifying
the use of non-original equipment manufacturer replacement crash parts shall pay the
cost of any modifications to the parts that may become necessary to effect the
repair;
(3) the insurer specifying the
use of non-original equipment manufacturer replacement crash parts warrants that
such parts are at least equal to the original equipment manufacturer parts in terms
of kind, quality, safety, fit, and performance. The insurer must disclose in
writing, in any estimate prepared by or for the insurer, the fact that it warrants
that such parts are at least equal to the original equipment manufacturer parts in
terms of kind, quality, safety, fit, and performance;
(4) all original and non-original manufacturer
replacement crash parts, manufactured after the effective date of this subdivision,
when supplied by repair shops shall carry sufficient permanent, non-removable
identification so as to identify the manufacturer. Such identification shall be
accessible to the greatest extent possible after installation; and,
(5) the use of non-original equipment manufacturer
replacement crash parts is disclosed in accordance with section
9875.1
of the California Business and Professions Code.
(6) If an insurer specifying the use of
non-original equipment manufacturer replacement crash parts has knowledge that a
part is not equal to the original equipment manufacturer part in terms of kind,
quality, safety, fit, and performance, or does not otherwise comply with this
section, it shall immediately cease requiring the use of the part and shall, within
thirty (30) calendar days, notify the distributor of the non-compliant aspect of the
part.
(7) In the repair of a particular
vehicle, an insurer specifying the use of a non-original equipment manufacturer
replacement crash part that is not equal to the original equipment manufacturer part
in terms of kind, quality, safety, fit, and performance, or does not otherwise
comply with this section, shall pay for the costs associated with returning the part
and the cost to remove and replace the non-original equipment manufacturer part with
a compliant non-original equipment manufacturer part or an original equipment
manufacturer part.
(8) Nothing in this
subdivision prohibits an insurer from seeking reimbursement or indemnification from
a third party for the costs associated with the insurer's compliance with this
subdivision, including, but not limited to, costs associated with the insurer's
obligation to warrant the part, modifications to the part, or returning, removing or
replacing a non-compliant, non-original equipment manufacturer part. However,
seeking reimbursement or indemnification from a third party shall not in any way
modify the insurer's obligation to comply with this subdivision. An insurer shall
retain primary responsibility to comply with this subdivision and shall not refuse
or delay compliance with this subdivision on the basis that responsibility for
payment or compliance should be assumed by a third party.
(h) No insurer shall require an insured or
claimant to supply parts for replacement.
(i) When the amount claimed is adjusted because of
betterment or depreciation, all justification shall be contained in the claim file.
Any adjustments shall be discernable, measurable, itemized, and specified as to
dollar amount, and shall accurately reflect the value of the betterment or
depreciation. This subsection shall not preclude deduction for prior and/or
unrelated damage to the loss vehicle. The basis for any adjustment shall be fully
explained to the claimant in writing and shall:
(1) reflect a measurable difference in market
value attributable to the condition and age of the vehicle, and
(2) apply only to parts normally subject to repair
and replacement during the useful life of the vehicle such as, but not limited to,
tires, batteries, et cetera.
(j) In a first party partial loss claim, the
expense of labor necessary to repair or replace the damage is not subject to
depreciation or betterment unless the insurance contract contains a clear and
unambiguous provision permitting the depreciation of the expense of labor.
(k) After a covered loss under a policy of
automobile collision coverage or automobile physical damage coverage as defined in
California Insurance Code Section
660, where
towing and storage are reasonably necessary to protect the vehicle from further
loss, the insurer shall pay reasonable towing and storage charges incurred by the
claimant. The insurer shall provide reasonable notice to the claimant before
terminating payment for storage charges, so that the claimant has time to remove the
vehicle from storage. This subsection shall also apply to a third-party claim filed
under automobile liability coverage as defined in California Insurance Code section
660, however,
payment to a third party claimant may be prorated based upon the comparative fault
of the parties.
1. New section
filed 12-15-92; operative 1-14-93 (Register 92, No. 52).
2. Editorial
correction of subsection (i) (Register 95, No. 42).
3. Amendment of
section heading and section filed 1-10-97; operative 5-10-97 (Register 97, No.
2).
4. Amendment of section and NOTE filed 4-24-2003; operative 7-23-2003
(Register 2003, No. 17).
5. Change without regulatory effect filed
8-4-2004 depublishing the amendments to the insurance claims handling practices
regulations that were approved by OAL 4-24-2003, but were enjoined in Personal
Insurance Federation and The Surety Association of America v. John Garamendi, and
reinstating replacement regulations that were either (1) in effect prior to OAL's
4-24-2003 approval of the amendments to the regulations or (2) were found by the
court to be valid, as amended, all pursuant to a court-approved settlement agreement
dated 6-7-2004 (Register 2004, No. 32).
6. Change without regulatory
effect amending subsection (b) filed 9-15-2004 pursuant to section
100, title 1, California Code of
Regulations (Register 2004, No. 38).
7. Amendment of section and NOTE
filed 6-1-2006; operative 8-30-2006 (Register 2006, No. 22).
8. Change
without regulatory effect amending subsection (b)(2) filed 3-23-2007 pursuant to
section 100, title 1, California Code of
Regulations (Register 2007, No. 12).
9. Amendment of subsections (f),
(f)(3)-(g) and (g)(2)-(5), new subsections (g)(6)-(8) and amendment of NOTE, filed
12-31-2012; operative 1-30-2013 (Register 2013, No. 1).
10. Editorial
correction of NOTE (Register 2015, No. 21).
11. Amendment of subsection
(e)(2), new subsections (e)(3)-(e)(3)(C), subsection renumbering, amendment of newly
designated subsection (e)(4), new subsection (e)(4)(A)-(e)(5) and amendment of NOTE
filed 12-12-2016; operative 1-1-2017 pursuant to Government Code section
11343.4(b)(3)
(Register 2016, No. 51).
12. Change without regulatory effect amending
subsections (b)(1)(A), (b)(6), (c), (d), (e)(2), (e)(4)(B)1.a., (e)(4)(B)2.a,
(e)(4)(B)3.a., (e)(4)(C)1. and (f) filed 7-14-2021 pursuant to section
100, title 1, California Code of
Regulations (Register 2021, No. 29). Filing deadline specified in Government Code
section
11349.3(a)
extended 60 calendar days pursuant to Executive Order
N-40-20.
Note: Authority cited: Sections
790.10,
12921 and
12926, Insurance
Code; and Section
3333, Civil Code.
Reference: Sections
758.5 and
790.03,
Insurance Code; and Section
9875.1,
Business and Professions Code.
