Confidential
Settlement – $1,200,000Judge
Attorneys
Plaintiff
Andrew J. Liska
(Pyle, Sims, Duncan & Stevenson)
Defendant
Ralph S. LaMontagne Jr.
(LaMontagne & Amador LLP)
Facts
The plaintiff in this case was a commercial airline that had operated charter flights out of Palomar Airport in Carlsbad since 1980 for customers that included the U.S. Navy. The plaintiff was required to maintain aviation insurance. In May 1994, the plaintiff filed a Chapter 11 bankruptcy and operated as a debtor-in-possession. In September, the plaintiff hired defendant aviation insurance broker to locate coverage for Debtor for the upcoming policy year. He soon told the plaintiff that he had obtained a one-year insurance policy for the plaintiff from the defendant insurer and defendant broker who was acting on behalf of certain defendant underwriters. Between October 1994 and March 1995, the plaintiff paid $151,500 in insurance premiums to defendant for this insurance. Unbeknowst to the plaintiff, his broker had only obtained a 15-day binder. The binder, which required full payment of the annual premium for extension expired on Nov. 4, 1994. The plaintiff claimed that defendant hid this from the plaintiff because he had allegedly been embezzling the insurance premium monies the plaintiff had paid him. On March 31, 1995, the defendant's scheme was discovered and he reportedly admitted embezzling the premiums. The insurers then claimed that the coverage had lapsed. As a result, the plaintiff had to ground its planes, and it lost at least $7 million (gross) of charter contracts with the U.S. Navy. Now unable to reorganize, the plaintiff's case was converted to a Chapter 7 and the business was liquidated. The plaintiff brought this action against the defendants based on breach of insurance contract and negligence theories of recovery.
Settlement Discussions
The plaintiff made a settlement demand for $1.5 million. The defendants made an offer of $151,000.
Damages
The plaintiff claimed $2.5 million - $4 million in damages.
Other Information
The settlement was reached approximately three years and two months after the case was filed. The case was bifurcated for discovery and trial on the issues of liability and damages. Settlement occured at the conclusion of discovery in the liability phase of the case. Discovery of the damages phase of the case had not yet begun, and no experts had been disclosed. Per plaintiff, the broker later pled guilty to embezzlement of funds from a bankruptcy estate and was incarcerated. The plaintiff obtained summary judgment against defendant broker on the issues of his liability to the estate for fraud, deceit and negligence.
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