Fireman's Fund Insurance Co. and a number of subsidiaries have agreed to pay a fine of $50,000 for various alleged violations discovered during an examination of the company's operations by the Maryland Insurance Division.
The Novato, Calif.-based company also confirmed yesterday that it has paid $110,982 to nearly 3,000 current and past customers for discounts they should have received for having passive restraints, such as air bags and automatic seat belts, in their vehicles.
The state's 47-page report cited a variety of violations, ranging from some agents' not being properly licensed to improper record-keeping.
The company had about 13,500 automobile insurance policies in Maryland at the time of the examination, from Nov. 1, 1989, to Oct. 31, 1990. Fireman's also had about 20,000 homeowner policies in the state at that time.
The $50,000 fine is one of the largest assessed against an insurance company in Maryland as the result of a market conduct examination, which is a comprehensive review of a company's underwriting and claims procedures. Regulators have conducted such reviews since 1982.
Fines were lower in the past because the program was relatively new and insurance companies were not accustomed to them, said J. Frank Nayden, associate insurance commissioner for the property and casualty section. But that has changed in recent examinations. "They should be fully aware they are going to be examined," Mr. Nayden said.
Fireman's felt the fine was excessive. "We feel it was unfortunate that the department wanted to impose a fine on what were technicalities," said John M. Kozero, a spokesman for Fireman's. "There was no clear violation of law."
As an example, he said, the Insurance Division cited the company for not charging for temporary insurance policies to cover people while they awaited permanent policies.
Mr. Kozero said the cost associated with charging for these short-term policies would be higher than the premium the company would collect.
Mr. Kozero also said the licensing problems stemmed from a small number of Fireman's agents who failed to renew their licenses. However, the company accepted the examination's findings and decided not to protest the fine.
"We will not spend our policyholders' money on litigation," he said.
The consent agreement with Fireman's was signed yesterday by John A. Donaho, the Maryland insurance commissioner.
In a random sampling of new policies, the state's examination found that a large percentage were not receiving discounts that the company offered for passive-restraint devices. In a further examination of its records, the insurance company found that 2,980 policyholders had not received the credits and took steps to refund the money, Mr. Kozero said.
The refunds are part of a two-year effort by the division that has resulted in nearly $5 million in refunds to Maryland customers from eight insurance companies, said Dudley B. Ewen, supervisor of property and casualty market conduct examinations at the Insurance Division. The average refund has been about $10 per car, he said.
Even though insurance companies have had discounts on safety devices and anti-theft devices since the mid-1980s, many of them depended on the agent selling the policy to inform the company that the policyholder's car had the equipment.
In the process, thousands of customers have slipped through the cracks.
Information about passive restraints is encoded in the vehicle identification number that is assigned to each automobile. However, the computer software needed for companies to decode that information was not available until 1991, Mr. Kozero says.