|Tuesday, November 16, 1993
Orange County Edition
O.C. Case Spurs Examiners to Probe Farmers;
Regulators: Insurance officials will look through unit's
files seeking to determine if it is illegally denying
By: THOMAS S. MULLIGAN and DEBORA VRANA
TIMES STAFF WRITERS
Citing an Orange County case that resulted in a
bad-faith judgment against a Farmers Insurance Group
Commissioner John Garamendi on Monday announced a special
examination of Farmers.
In the "market-conduct examination," insurance
examiners will visit
Farmers offices and look through files to determine how
certain types of
claims are handled.
A spokesman for the state Department of Insurance said
will be limited to cases where Farmers denied customers'
claims--cases similar to that involving Surgin Surgical
Inc. of Tustin, which an Orange County Superior Court
judge last month
awarded damages of $58 million.
The department is trying to determine whether there is a
Farmers illegally denying liability claims.
"If this abuse is widespread . . . we may have the
authority to revoke
their license," Garamendi said Monday.
Judge C. Robert Jameson cited Truck Insurance Exchange, a
subsidiary, for failing to provide Surgin with a legal
defense in a
patent fraud case.
Attorney Daniel J. Callahan of the law firm Callahan
which represented Surgin Surgical in its case, said
Monday came in response to an Oct. 21 letter that Jameson
ordered him to
send to the insurance commissioner.
"This is a message to the insurance industry to stop
economic interests before those of the insured,"
Callahan said. "The
state of California is taking a stand that this practice
will not be
allowed here even if it's the biggest insurer in
Callahan said the case is the largest won by his Irvine
firm and the
largest punitive damage award against an insurance
company in Orange
Farmers, which says it will appeal the judgment as soon
issues his order, contends that it had no duty to protect
patent infringement is not covered by the commercial
policy that Truck sold to Surgin.
Farmers said in a statement that, "out of respect
for due process and
for the constitutional separation of powers," the
examination should be
put off until the appeal is decided.
Formed in 1981, Surgin Surgical is a privately held
company that makes
medical devices. The company now has about 40 employees
in Tustin, where
it recently moved from Placentia.
Descriptors: CALIFORNIA STATE INSURANCE COMMISSIONER;
SURGIN SURGICAL INSTRUMENTATION INC; FARMERS INSURANCE
GROUP; INSURANCE CLAIMS; LIABILITY; INSURANCE INDUSTRY --
Copyright (c) 1993 Times Mirror Company