Facts

Late in the evening on May 15, 2002, or in the early morning hours of May 16, 2002, Darshan Sidhu's 1999 Dodge pickup truck was stolen from his Fresno home's driveway. He submitted a claim for comprehensive benefits to his long time insurer, Farmers Insurance Exchange. After obtaining information about the loss, Farmers commenced a Special Investigation Unit (SIU) investigation, which included the retention of an outside attorney (Robert Howk) to take the Examinations Under Oath of Mr. Sidhu and his son. The Examinations Under Oath was taken on May 1, 2003. During the examinations, Mr. Howk advised Mr. Sidhu and his attorney, Paul Franco, that Farmers would have the vehicle ignition inspected by a forensic locksmith. Per defense counsel, Mr. Franco contended Howk said Farmers would probably deny the claim; Howk denied saying this. Thereafter, neither Farmers, nor Mr. Howk, followed up with Mr. Sidhu or his attorney.

Per defense counsel, Franco contended he made phone calls and sent letters to Mr. Howk, seeking status updates and a formal coverage decision but Mr. Howk failed to respond. Per the plaintiff, Mr. Franco advised Mr. Sidhu that he had no choice but to proceed with the filing of a lawsuit. Per defense counsel, Howk said he received no phone calls, and one letter from Mr. Franco was misfiled; Howk contended he had surgery during that time, then went on vacation, and believed Sidhu did not intend to pursue the claim.

On Oct. 1, 2003, Mr. Sidhu, as the sole registered owner of the vehicle and one of the named insureds under the policy, filed a complaint alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and intentional infliction of emotional distress. The complaint alleged that the suit had been filed because Farmers had improperly and unreasonably delayed the handling and adjustment of Mr. Sidhu's claim which resulted in a constructive and wrongful denial of his claim. Per defense counsel, Mrs. Sidhu had a community property interest in the vehicle and was a named insured; she signed an Authorization form as part of the claim, but was not a plaintiff in the lawsuit.

Per plaintiff, approximately 1.5 months later, Mr. Howk advised that Farmers, for the first time, was seeking to take the Examination Under Oath of Mr. Sidhu's wife. Per defense counsel, Mr. Howk said he was confused as to Mrs. Sidhu's first name, and thought he had arranged for Mrs. Sidhu's claim when the took the Examination Under Oath of Mr. Sidhu.

Thereafter, Mr. Sidhu's counsel wrote several letters to Mr. Howk requesting that he advise whether Farmers was taking the position that Mrs. Sidhu's Examination Under Oath was a condition precedent to Mr. Sidhu obtaining benefits for his claim. Counsel made specific reference to the applicable Farmers policy language which limited Farmers' right to take the Examination Under Oath to only the person claiming coverage for the loss. Per plaintiff, Mr. Howk never answered the specific and repeated question. Per defense counsel, Mr. Howk claimed his letters did respond.

Per plaintiff, the first time Farmers provided a specific response to the outstanding inquiry regarding whether it was a condition precedent, was when Farmers sent a formal denial letter to Mr. Sidhu. In the June 16, 2004 denial letter, Farmers advised that the claim was being denied because of the lack of cooperation resulting from Mrs. Sidhu's alleged refusal to submit herself to an Examination Under Oath.

PLAINTIFF'S CONTENTIONS:
The plaintiff contended that because Farmers had failed to keep Mr. Sidhu apprised as to the status of the claim, failed to timely investigate the claim, repeatedly failed to respond to his inquiries, which included a 4 month period during which he received no response or communication from Farmers or its representative in any respect, that it was reasonable for Mr. Sidhu to conclude that Farmers had denied the claim. Consequently, plaintiff contended that as of October 1, 2003, Farmers had breached the contract and wrongfully deprived Mr. Sidhu of the benefits to which he was entitled. Plaintiff also contended that Farmers' post-litigation efforts to obtain Mrs. Sidhu's Examination Under Oath was not undertaken in good faith but instead was done in furtherance of its efforts to avoid responsibility for the claim and its prior wrongful actions. The plaintiff contended that under the terms of the policy, Farmers was not entitled to demand an Examination Under Oath from Mrs. Sidhu and further, that as a result of the breach of contract that had occurred by October 1, 2003, Mr. Sidhu was relieved of any further obligation to cooperate.

DEFENDANT'S CONTENTIONS:
The defendant contended that it did not provide any status update to Mr. Sidhu after the May 1, 2003 Examination Under Oath because it believed Mr. Sidhu had dropped his claim. Once it learned that Mr. Sidhu was pursuing his claim, it "re-opened" its investigation and sought the Examination Under Oath of Mrs. Sidhu, who Farmers contended was a critical witness because she was home on the night the vehicle was stolen, as Mr. Sidhu was not. The defendant contended that it, at all times, acted reasonably and in compliance with the applicable industry standards because of the heightened investigative responsibilities it imposed upon Farmers in connection with the handling of an SIU claim. The defendant also contended that its actions were reasonable because it sought and obtained the advice of outside counsel.

Settlement Discussions

The plaintiff served a C.C.P. Section 998 demand of $70,000. The defendant served a C.C.P. Section 998 settlement offer of $6,500.

Result

The jury found that Farmers' conduct violated the implied covenant of good faith and fair dealing and constituted an intentional infliction of emotional distress. Although the jury found that agents and employees of Farmers acted with malice, oppression and fraud, no punitive damages were considered because the jury did not find that such conduct was ratified by a managing agent.

Other Information

During the bifurcated portion of the trial, the trial judge determined, contrary to the contention made during the litigation and in the subsequently issued denial letter, that under the applicable terms of the Farmers policy, it was not a condition precedent to Mr. Sidhu's claim for benefits that Mrs. Sidhu cooperate or submit to an Examination Under Oath.

Deliberation

eight hours

Length

4.5 weeks