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Irvine Insurance Firm to Pay State Fine of $1 Million

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TIMES STAFF WRITER

An Orange County company that sells surety bonds to cover incomplete or shoddy work by contractors agreed Tuesday to pay a $1-million fine to settle state charges that it routinely delayed and withheld payments on claims from consumers.

The fine, to be paid over four years by Indemnity Co. of California, is the third largest ever assessed against an insurance company by the state Department of Insurance. Indemnity didn’t admit liability in settling the charges.

The action comes after an intensive two-year investigation into numerous complaints from consumers to whom Indemnity delayed and denied payments unjustifiably, according to the state agency.

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Insurance examiners also contended that the company resisted an audit by withholding files, removing documents from other files and refusing or delaying answers to agency questions. The company didn’t have written procedures on investigating and processing claims, the state charged.

“What really caught our attention was that over a period of five years, the number of complaints doubled every year,” said Cindy Ossias, a senior staff lawyer with the state. “Just in the last two years, since we started our investigation, there have been 144 complaints against the company.”

Executives at the company, started in 1968 by Harry Crowell, its chairman, would not discuss the charges or any specific case. Crowell himself would not comment.

“We’re just glad the matter is settled and that we can go forward from here,” said Craig Curtner, the company’s marketing director.

Indemnity and a sister company, Developers Insurance Co., operate under the umbrella name of INSCO/DICO Group and are owned by Surety Holdings Ltd., all based in Irvine.

The companies sell only surety bonds, mainly to contractors and developers. A surety company guarantees that it will pay for work not done or done poorly by contractors it insures.

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Indemnity will not have to pay any restitution, said Richard Wiebe, an Insurance Department spokesman, because most of the incidents have been resolved.

Three years ago, Indemnity paid a $150,000 fine for filing financial documents late with the insurance department. But Wiebe said that routine matter was “nowhere near as serious” as the current case.

The state agency said that complaints included a case in which an elderly woman spent 18 months trying to get Indemnity to pay for repairs to her roof, which leaked because of shoddy workmanship by a roofer.

In another case, San Bernardino County pursued Indemnity for four years to cover a contractor’s failures before suing the surety firm in 1993. The case then went to arbitration, which the county won. But Indemnity still didn’t pay the award for four more months, the state said.

The Insurance Department wouldn’t provide further details about either case.

Earlier this year, the state agency fined Allianz Life Insurance Co. $1 million for deceptive sales and marketing practices and required it to pay an additional $2.3 million in restitution and to invest $1.75 million more in underserved areas.

Three years ago, the agency fined Metropolitan Life Insurance Co. $1.1 million over its sales and marketing practices.

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