$7.7 Million Verdict Jolts Quake-Damage Insurer
October 3, 1997
Los Angeles Daily Journal, Verdicts & Settlements
Case in Focus
Type: Insurance law, bad faith, denial of claim
Verdict: $7,746,000.
Case/Number: Leon and Mittie Robbins v. Farmers Home Group / BC151210.
Court/date: L.A. Superior Central / July 30.
Judge: Richard C. Hubbell, Dept. 322.
Contributions: $46,000 (economic damages); $100,000 (emotional distress); $7.6 million (punitive damages).
Attorneys: Plaintiffs -- John N. Quisenberry, Brian S. Kabateck (Quisenberry & Barbanel, Century City). Defendant -- Kenneth N. Greenfield, Robert T. Johnson, Kelly L. Bull (Law Offices of Kenneth N. Greenfield, San Diego).
Facts: Immediately after the 1994 Northridge earthquake, plaintiffs Leon Robbins, 1 76-year old retiree, and his wife, Mattie Robbins, contacted their insurance company, Western Home Insurance Co., a wholly-owned subsidiary of defendant Farmers Home Group of Minnesota, to report extensive damage to their property. At the time of the earthquake, the plaintiffs had been living in their South Central Los Angeles home for 30 years. Robbins claimed he was told by a Farmers Home Group representative that he did not have earthquake coverage, although he was sure that there was a mistake as he had paid an additional premium for earthquake coverage. He found his insurance policy and verified that he had earthquake coverage. Approximately 10 months later, following a second telephone call from Robbins, defendant sent a claims adjuster to inspect the property. The adjuster estimated the damage to be $7,168, below the $7,600 deductible, and the claim was denied. Robbins then hired his own contractor to estimate the damage. The plaintiffs' contractor estimated the cost of necessary repairs to be $22,300, not including roof repairs and other work. After receiving the estimate, defendant allegedly denied the plaintiffs' claim again without any reinspection of the property. The plaintiffs claimed that the insurer's letter stated that no consideration could be given to the plaintiffs' estimate, and even if it was considered, damages would not have exceeded the $7,600 deductible. The plaintiffs claimed they were forced to make some repairs at their own expense, including constructing a new roof and performing emergency plumbing work at a cost of over $6,000. However, much of the quake damage remained unrepaired. The plaintiffs filed an action for breach of contract, insurance bad faith and unfair business practices against the defendant. The plaintiffs' attorney hired a contractor, Jan Brussel, to inspect the property of 14 other homeowners insured by Farmers Home Group. The plaintiffs maintained the contractor found the homes to be substantially damaged by the earthquake with collapsed or unstable chimneys, cracked foundations and porches separating from the main structure. The plaintiffs further claimed that of the 14 homes inspected, defendant had denied the claims of 13 property owners because their damages were less than the deductible. One homeowner was allegedly paid substantially less than the amount of the earthquake damages and another claiming nearly $60,000 in damages, received a check for only $194. The plaintiffs brought this action against the defendant based on insurance bad faith and emotional distress theories of recovery.
Contentions: The plaintiffs contended that there was a persistent pattern of "lawballing" estimated losses so that the estimated losses were significantly lower than the losses claimed by the property owners, thereby driving the claim below the deductible to avoid payment, an illegal practice in the insurance industry. The plaintiffs maintained that according to one Farmers Home Group claims adjuster, 80 percent of the claims made by homeowners in South Central Los Angeles were denied because the damages failed to meet their deductible. The defendant contended that it acted reasonably in its review of the plaintiffs' insurance claim. The defendants further contended that the estimates provided by the insurer supported its finding that the damage was less than the deductible and that the property had pre-existing damage. The defendant also maintained that the action was barred by the one-year suit limitation provision in the policy.
Jury trial: Length 11 days; Pol 12-0; Deliberation 3 ½ hours.
Settlement discussions: The plaintiffs made no settlement demand. Per the plaintiff, the defendant made an offer of compromise for $16,000. Per the defendant, the defendant made an offer of compromise for $19,501.
Post-trial motions: Defendant has filed a motion for judgment notwithstanding the verdict and a motion for new trial which will be heard in October.
Other information: The verdict was reached approximately one year and two months after the case was filed. Per plaintiffs' counsel, Judge Richard C. Hubbell was "very fair and even-handed."
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