Tuesday, November 16, 1993
Home Edition
Section: Business
Page: D-2
Regulators to Scrutinize Claims Process at Farmers
By: THOMAS S. MULLIGAN
TIMES STAFF WRITER
Citing a legal case that resulted in a $58-million
bad-faith
judgment against a Farmers Insurance Group unit, state
Insurance
Commissioner John Garamendi on Monday announced a special
regulatory
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 department spokesman said the examination will be
limited to cases
where Farmers denied customers' large liability
claims--cases similar to
that involving Surgin Surgical Instrumentation Inc. of
Placentia, which
an Orange County Superior Court judge last month awarded
damages of $58
million.
The department is trying to determine whether a pattern
exists of
Farmers illegally denying liability claims.
"If this abuse is widespread . . . we may have the
authority to revoke
their license," Garamendi said.
Judge C. Robert Jameson cited Truck Insurance Exchange, a
Farmers
subsidiary, for failing to provide Surgin with a legal
defense in a
patent fraud case.
Farmers, which says it will appeal the judgment as soon
as Jameson
issues his order, contends it had no duty to protect
Surgin because
patent infringement is not covered by the commercial
general liability
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.
Descriptors: CALIFORNIA STATE INSURANCE COMMISSIONER;
SURGIN SURGICAL INSTRUMENTATION INC; FARMERS INSURANCE
GROUP; INSURANCE CLAIMS; LIABILITY; INSURANCE INDUSTRY --
SUITS
Copyright (c) 1993 Times Mirror Company
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