$2,000,000
Awarded

Insurance company sued for bad faith handling of fire loss claim

INSURANCE
Bad Faith & Coverage/Commercial Policy/Fire

SOUTHERN DISTRICT FEDERAL COURT
Whispering Winds Catholic Conference Center Inc. v. Markel Insurance Company, Docket number: 05CV01911, San Diego. Judge: Irma E. Gonzalez. Trial Type: Bench. Verdict/Judgement date: 7/24/2007.

DECISION: $2,000,000

COUNSEL
Plaintiff: Charles S. LiMandri, Law Offices of Charles S. LiMandri, Rancho Santa Fe.
Defendant: David L. Jones, Gordon & Rees, San Diego. Matthew Elstein, Gordon & Rees, San Diego.

FACTS/CONTENTIONS
According to plaintiff: Defendant Markel Insurance Company insured plaintiff Whispering Winds Catholic Conference Center against property damage and business interruption losses. In October 2003, the “Cedar Fire” destroyed much of the camp. It was closed for almost a year. Plaintiff tendered the claim to defendant, which paid $641,000 for building losses, $167,000 for contents, and $50,000 for lost income. Although its own files showed that the business interruption policy limits were $150,000, defendant represented to plaintiff that the limits were only $50,000.

Plaintiff sought to recover additional benefits (policy limits) for its property damage. Defendant refused to investigate or adjust that part of plaintiff’s claim, and plaintiff filed suit for breach of contract and bad faith. During discovery, plaintiff discovered that the actual policy benefits for business interruption were $150,000. The district court granted plaintiff’s motion for partial summary judgment on defendant’s bad faith handling of the lost business income portion of plaintiff’s claim.

Notwithstanding defendant’s failure to fulfill its statutory duty to investigate, the district court granted partial summary judgment on the building portion of plaintiff’s bad faith claim, based on its findings of a “genuine” dispute between the parties regarding the amount of property damage.

Plaintiff informed defendant that it planned to appeal that ruling after trial of the breach of contract claim. On the eve of trial, defendant paid the balance of its policy limits to plaintiff. Upon being informed of this payment, the district court vacated its summary judgment order in favor of defendant on the issue of bad faith. On the morning the trial was scheduled to begin, defendant accepted plaintiff’s statutory offer to compromise.

CLAIMED INJURIES
NA

CLAIMED DAMAGES
According to plaintiff: Breach of contract damages – property damage and business interruption benefits at policy limits of approximately $1,450,000, plus pre-judgment interest; bad faith damages – attorney fees and costs for recovery of policy benefits.

SETTLEMENT DISCUSSIONS
According to plaintiff: Defendant declined to make any settlement offer at private mediation or at the Mandatory Settlement Conference.

EXPERTS
Plaintiff: Ted Bumgardner, cost estimator, Gafcon Inc., San Diego (619)231-6100. Everette Lee Herndon Jr., insurance/bad faith consultant, Rancho Murieta (916)354-8521. Christopher Glenister, business interruption, The Greenspan Co./Adjusters International, South San Francisco (800)248-3888.

Defendant: Edward J. McKinnon, insurance claims adjuster, Claims Resource Management Inc., Acton (661)269-1124. Peter D. Fowler, cost estimator, Peter Fowler Construction Services Inc., San Clemente. Gary Johnson, business interruption, Morgan Johnson Carpenter & Company, Charlotte, NC.

COMMENTS
According to plaintiff: Defendant paid the policy benefits in an effort to cut off plaintiff’s ability to recover attorney fees and costs after a likely successful appeal to the district court’s summary judgment order regarding defendant’s bad faith as to the property damage claim. Since defendant had consistently denied that it owed any more policy benefits to plaintiff, the district court apparently saw this tactic as evidence that defendant had been acting in bad faith all along and vacated its order sua sponte.