Facts

On April 1, 2005, the plaintiffs purchased a written Architects and Engineers Professional Liability policy of insurance. On Dec. 20, 2005, Summit Consulting & Architecture was named as a defendant in an action entitled Rogers v. Watermark Owners Association. After being served with the summons and complaint in the Rogers action, the plaintiffs tendered the defense of the action to defendants.

The defendants acknowledged the receipt of the tender of the defense, but denied coverage for the Rogers action. The denial was based primarily on an alleged mold-exclusion in the policy. Based on the denial of the coverage, the plaintiffs subsequently retained defense counsel, at their own expense in order to defend themselves in the ongoing Rogers action.

Throughout 2006, the plaintiffs participated in and engaged in significant discovery and law and motion matters in preparation for the trial in the Rogers action. All litigation was at plaintiffs' own expense based on the denial of coverage by defendants.

On Nov. 6, 2006, the plaintiffs re-tendered their defense, outlining the current case posture of the Rogers action; outlining alleged non-mold related activities performed by plaintiffs; and again requesting reimbursement for defense costs and a request for defendants to pay an indemnity settlement. The defendants also denied the re-tender after plaintiffs had entered into a stipulated judgment.

The plaintiffs sued the defendants alleging that they breached the contract with the insured and breached the covenant of good faith and fair dealing by engaging in bad faith claims handling.

PLAINTIFFS' CONTENTIONS:
The plaintiffs contended that the defendants did no meaningful investigation of the claim and failed to consider other potentially covered claims, relying solely on a mold exclusion. The plaintiffs also contended that the defendants failed to consider in their scope of review available litigation materials from the Rogers action, even after the plaintiffs re-tendered and put defendants on notice of potentially covered claims.

DEFENDANTS' CONTENTIONS:
The defendants contended that the mold exclusion in the policy barred coverage for all claims and, thus, there was no coverage. They also contended that the parent company and claims representative were not proper parties to the action.

The defendants disputed the plaintiffs' valuation of the stipulated judgment.

Settlement Discussions

Prior to mediation, the plaintiffs demanded $17 million. The defendants made a C.C.P. Section 998 of $730,001.

Damages

The plaintiffs sought attorney fees and litigation costs in the Rogers matter of $155,000; lost business revenue of $250,000; and stipulated judgment of $730,000 in the Rogers matter. The plaintiffs also claimed emotional distress damages and punitive damages.

Result

The case settled for $1,850,000.

Other Information

The defendants filed a motion for summary judgment on the coverage issues. The plaintiffs and defendants met with Robert Kaplan, Esq. of Judicate West who assisted them in resolving the litigation. FILING DATE: April 13, 2007.