Proposal Limits Time Insurers Have on Claims : Regulation: The plan by state Insurance Commissioner John Garamendi requires firms to pay out within 10 weeks or face a fine.

State Insurance Commissioner John Garamendi on Monday proposed California’s first regulations to require insurance companies to handle claims in a timely manner. The companies would face fines unless they delivered payment in full to claimants within 10 weeks of receiving proper documentation.

Acting to implement a 16-year-old state Unfair Claims Practices Act that was never fleshed out with specific regulations or enforced, Garamendi said the current industrywide average for handling claims is about six months.

Under Garamendi’s plan, any inquiry to an insurance company regarding a potential property-casualty claim would have to be answered within 15 days. Upon submission of the claim, the insurer would be required to initiate an immediate investigation. Once claim documentation had been provided, it would have 40 days to affirm or deny the claim, and once a claim was affirmed, it would have to be paid within 30 days.

Garamendi called a public hearing to be held in Long Beach on Dec. 19 to hear testimony on the proposals. When the proposals are finally promulgated, insurers would be allowed a 60-day training period for employees before the rules take effect.

The commissioner, who had made a speedup of claims payments part of his campaign pledges when he ran for the insurance post last year, declared that the industry now “handles policyholder claims according to its own stopwatch.”

“Today, I’m telling the industry, and anyone else that processes policyholder claims, that the clock is ticking and I hold the timer,” he said. “No longer will a person whose house has burned down or who was severely injured in an auto crash need to worry whether their legitimate claim will be paid on time and in full.”

Robert Gore, a spokesman for the Assn. of California Insurance Companies, said much of the industry’s position on the regulations will depend on the specifics.

“We feel that the reporting requirements are too extensive,” Gore said. “They ought to be simplified. A great deal is going to have to be more specifically defined. A lot depends exactly on what documentation of claims means.”

But Gore also noted that his trade association had been represented on a Garamendi task force that drafted the proposed regulations. “We will continue to work with the commissioner through the hearing process,” Gore said.

Other parts of Garamendi’s proposed regulations include:

* Requiring insurers to make reports to the Insurance Department on complaints they receive, which will then be made public.

* Banning any variance in the handling of claims based on such criteria as the claimant’s race, sex, national origin or religion.

* Giving the commissioner discretion to impose heavier fines and penalties--above the $5,000 per violation and $10,000 per willful violation now permitted under the law--for repeated or egregious violations.

In the past, Garamendi has altered some proposed regulations based on insurer or consumer comments made during the hearing process.