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CONFIDENTIAL

Nov. 22, 2001

Corporations
Class Action
Unfair Business Practices

Confidential

Settlement –  $5,800,000

Judge

Richard C. Hubbell

Court

L.A. Superior Central


Attorneys

Plaintiff

Richard A. Huver
(Judicate West)

Theodore J. Pintar
(Robbins, Geller, Rudman & Dowd LLP)


Defendant

Bruce W. Boetter

Edward M. Rosenfeld

Helmut F. Furth

William I. Chertok


Facts

The class action challenged defendantÆs alleged improper and inflated calculation of the estimated replacement
cost (ERC) to class members homes, which inflated the class membersÆ homeowners insurance premiums. The
defendant issued homeowners insurance policies to protect homeowners against losses due to certain perils.
The insurance policies were issued at a dollar amount typically in a range of between 80 and 100 percent of the
ERC.
Since 1995, the defendant in many instances used a third-party computer program to calculate the ERC of
certain policyholderÆs homes which was done by using a number of variables such as the style of house, the
type of construction, square footage, etc. The computer program generated two reports. One report identified
and described the characteristics used to generate the ERC and the second report provided a specific dollar
value for each of the characteristics that made up the total replacement cost (TRC) and separate dollar amount
representing the 100-percent insurable replacement cost (IRC). The IRC was calculated by deducting certain
exclusions from the TRC amount. The defendant offered policyholders the opportunity to purchase additional
25-percent coverage beyond the face amount of the policy. This was known as the enhanced dwelling limits
(EDL) endorsement, which required the policyholder to carry a certain amount of insurance on their home as
determined by defendant.
In determining the necessary amount of insurance, the endorsement provided that
certain costs need not be included in the replacement cost calculation.

Settlement Discussions

$5.8 million settlement fund. All policyholders who did not opt out from the settlement received a percentage of the premiums they paid during the relevant class period, depending on the amount of insurance carried on their property. AttorneysÆ fees and costs were paid separately by defendant above and beyond the settlement fund.

Damages

Higher and unnecessary amounts of dwelling insurance coverage resulting in higher premiums.

Result

Class certified for settlement purposes only. $5.8 million settlement fund. All policyholders who did not opt out from the settlement received a percentage of the premiums they paid during the relevant class period, depending on the dwelling limits and time period of policies. Attorney fees were paid separately by defendant above and beyond the settlement fund.


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