Facts

Trilogy Plumbing, Inc., a local Orange County plumbing subcontractor and longstanding local employer, brought an action against its insurer, Defendant Navigators Specialty Insurance Company, alleging improper claims handling of dozens of underlying construction defect lawsuits and engaging in such bad acts as:

Misrepresenting and lying about coverage exclusions as a means to wrongfully withdraw defense funding in cases that were covered by the insurance policies;

Failing to pay for independent and/or Cumis counsel as required by Civil Code section 2860 and case law where there were obvious conflicts for Navigators retained defense counsel -- even when counsel admitted such conflicts;

Threatening to have Trilogy's contractors' license revoked (which would have put Trilogy out of business) unless Trilogy paid excessive and inappropriate deductibles;

Creating conflicts and tension amongst the lawyers at Trilogy's independent defense firm to encourage that firm to abandon Trilogy as a client;

Misleading Trilogy regarding obligations under the policies and demanding Trilogy enter into a "Claims Handling Agreement" and then making demands of Trilogy's counsel in hopes of creating conflicts; and,

Withdrawing coverage to force Trilogy to fund its own defense even after admitting there was potential coverage for Navigators to obtain a release from Trilogy.

Navigators Cross-Complained against Trilogy for deductible recovery and declaratory relief.

PLAINTIFF'S CONTENTIONS: Policyholders, especially small local businesses like Trilogy, purchase insurance with the expectation that the insurer will do what it promises -- defend the policyholder against lawsuits and protect its interests. Here, Trilogy paid in excess of approximately $500,000 for its policies. Trilogy relied upon Navigators to provide a defense (the cost of which is significant for a small business), to communicate fairly and honestly, and to put the needs of the policyholder ahead of the selfish wishes of the insurer. Here, instead, Navigators acted in bad faith and made fraudulent misrepresentations to Trilogy's financial detriment and Navigators' financial benefit. As just one example, there is no excuse for Navigators' choices or misbehavior in the underlying case entitled Julius Arroza, et al. v. Centex Homes, Riverside County Superior Court Case RIC1205976 ("Arroza"). Navigators violated its own best practices and committed bad faith. Navigators also misrepresented it would reappoint defense counsel in 2016, but never did and left Trilogy barren and without coverage for the Arroza case. Instead, Navigators fraudulently created coverage/defense
exclusions that did not exist to avoid its obligations, retained defense attorneys that acted against Trilogy's interests, interfered with lawyers at Trilogy's independent defense firm, and sent Trilogy to collections putting its contractor's license at risk after Trilogy questioned inappropriate deductibles.

DEFENDANT'S CONTENTIONS: Navigators argued WRAP and other exclusions applied and it was owed amounts for three underlying construction lawsuits.

Insurer

Navigators Specialty Insurance Company and The Hartford

Result

Settlement was reached after Navigators' motion for partial summary judgment was denied just prior to trial. Navigators agreed to pay Trilogy $1,125,000, release all of its claims, and conclude the policies.

Other Information

MEDIATOR: Hon. Stephen J. Sundvold (Ret.), JAMS