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