By: THOMAS S. MULLIGAN
TIMES STAFF WRITER


Sterling Casualty Insurance Co. ranked worst among auto insurers and Farmer's Insurance Exchange ranked last among homeowners insurers in the Insurance Department's annual consumer complaint survey released Thursday.

For the second straight year, United Services Auto Assn. of San Antonio, Tex., rated tops in both categories.

Also for the second straight year, some insurers took issue with the survey's methodology and its usefulness as a guide for consumers.

The survey ranked carriers by the number of justified consumer complaints lodged against them in 1992 per 100,000 policies issued. The Insurance Department investigates complaints and determines whether they
are justified.

The total number of justified complaints against auto insurers dropped to 2,801 last year from 3,214 in 1991. On the homeowners side, complaints rose to 794 from 569 in 1991. Insurance Commissioner John Garamendi, at a Thursday news conference, said the rise in homeowner complaints stemmed largely from the aftermath of the disastrous Oakland fire of October, 1991, which led to 388 justified complaints in 1992. He had no explanation for the drop in justified auto insurance complaints.

Some companies questioned the survey's fairness. James F. Chapel Jr., president of Western United Insurance Co. of Newport Beach, noted that most of the lower-rated auto insurers--Western United ranked second-worst--write a large volume of "non-standard" business for drivers with poor records who cannot qualify for "premium" policies.

Chapel noted that his customers also tend to have low incomes, with more than 50% paying premiums monthly instead of twice a year. When customers fail to pay, their policies are canceled, which often generates complaints, Chapel said.

The Insurance Department said Western United had 83 justified complaints against it, but Chapel said the company's records indicate there were only seven. A spokeswoman said the Insurance Department stands
by its figures. David Smith, senior vice president of Sterling Casualty, a small, non-standard carrier based in Van Nuys, said many of his customers borrow from finance companies to pay their premiums. Disputes with finance companies can result in complaints being filed, he said. Farmer's Insurance Group is parent of both Farmer's Insurance Exchange, which ranked worst on the homeowners list, and Fire Insurance
Exchange, a much larger unit that ranked 11th-best.

Spokesman John Millen was at a loss to explain the difference. He said the same employees handle complaints from all Farmer's companies and that there is no difference in the way they treat people.
California Insurance Complaints In this annual Insurance Department survey of auto and homeowners
insurers doing business in California, the "best" and "worst" charts rank firms by their "complaint ratio"--the number of justified complaints per 100,000 policies written.

The "largest" charts rank insurers based on premium volume. The full survey is available free of charge through the Insurance Department's toll-free consumer hot line at (800) 927-HELP.