O.C. Insurer Taking Heat Over Unpaid Riot Claims : Investigation: Regulators expand probe of Western International’s finances after numerous complaints.

A small Huntington Beach insurance company is emerging as a problem child of the L.A. riots.

Numerous small-business owners insured by Western International Insurance Co. have accused the firm of dragging its feet in paying riot-related claims. The result has been severe personal hardship for some of the entrepreneurs and disruption of their efforts to rebuild.

Of 42 riot-related complaints filed with the Department of Insurance as of this week, 16 have been lodged against privately owned Western, a department spokeswoman said. No other company has more than three complaints.

Western President Alfred Hui issued a brief statement through a Fullerton public-relations agency Wednesday, saying the company has received only a “modest” number of complaints and “is committed to honor and pay all legitimate claims.” Hui declined to respond to specific questions.

Western has been under serious financial pressure for several months. The riots came at a time when the company was especially vulnerable--four weeks after it had paid a former Western executive $2.35 million to settle charges of fraud and slander.

Since April, state insurance examiners have been delving through Western’s books to gauge its financial stability. Ramon Calderon, chief examiner, said the legal settlement was one of the initial concerns, but since the riots, the scope of the audit has been expanded to include an assessment of how the firm is coping with its $14.5 million in riot-related claims. The answers may not be known until the audit is completed a month or more from now, Calderon said.

Meanwhile, some of Western’s clients say they are suffering.

Jose Camarena and his brother own a small chain of dry-cleaning stores in Los Angeles. The largest--at 6th Street and Union Avenue--burned to the ground April 29. Camarena said he got the runaround from Western employees for more than two months as he tried to collect on his claim.

“It’s like the bills come in and they don’t wait,” he said.

While Western gave him a stream of excuses and referred him to people who never returned his calls, Camarena was forced to borrow money from acquaintances to keep from falling behind on rent payments and other expenses.

Last week, Camarena finally got a check for $40,000. “We already owe more than that,” he said.

The owner of another small business also got a check from Western recently. He was unhappy with the amount--a fraction of his claim--but was afraid to be named in a newspaper article.

“If they see that,” he said, “I think they’ll just play games with me again. They have all the power.”

The man said his landlord wants a commitment from him on whether he will move back into his old location when the burned-out shopping center is rebuilt. But he can’t give an answer until he knows when his claim will be paid.

“If I lose that location, I lose my customer base,” he said.

Other policyholders have similar stories.

A single agency, Henderson Insurance of Huntington Beach, has 19 customers whose riot-damaged dry-cleaning stores were insured by Western, said agency owner Byron Henderson. Eight of them suffered total losses, he said, and of those, not one has yet received a satisfactory claim settlement.

“They’ve been playing what I guess you’d call hardball,” he said of Western.

The Henderson agency is one of Western’s biggest producers, with more than 1,000 commercial policies written over the last six years. Last Friday, Henderson visited Western to complain about the delays and push for partial payments for his hardest-hit clients.

Claims manager Rhonda Ijams, a company vice president, threw Henderson out, threatening to call the police unless he left.

“I said, ‘You’re killing me!’ ” Henderson said. “She went into her office and started dialing the phone, so I left.”

On Tuesday, Henderson got a letter from Western notifying him that his six-year relationship with the company was terminated.

Even before the riots, it had been a bad year for Western. In April, the firm was forced to pay $2.35 million to settle a bitter dispute with Lin Wu Lan, a former company officer and one of the seven Chinese-Americans who founded Western in 1982.

The battle began in 1987, when Western forced Lan out of the company and sued her for $10 million. The company accused Lan of using her position with Western to enrich herself by throwing business to an underwriting firm and insurance agency that she owned.

Lan countersued for fraud, slander, breach of contract and other charges. She complained, among other things, that Western tried to ruin her by placing libelous advertisements in Chinese-language newspapers, said her attorney, Daniel J. Callahan, of Irvine.

Because Western is a licensed California insurance company, any claims it was unable to pay would ultimately be covered by the state’s insurance guarantee fund. On Dec. 31, the company’s surplus--its cushion against losses--stood at $5.2 million, Calderon said.