Confidential
Settlement – $182,500Court
L.A. Superior San Fernando
Attorneys
Plaintiff
Defendant
Joseph E. Addiego
(Davis, Wright & Tremaine LLP)
Facts
The plaintiff corporation was a wholesaler/retailer of hard disk drives and had an office with a warehouse location in Valencia. It had an ongoing business relationship with the defendant insurance agent, who provided the plaintiff with commercial insurance coverage. In August and September 1993, the plaintiff sought a new policy including earthquake coverage. The defendant agent obtained coverage, through the defendant surplus lines insurance broker, with the defendant insurance company, a non-admitted carrier. The policy was effective Oct. 13, 1993. On Jan. 17, 1994, there was a severe earthquake in the area and the plaintiff suffered major damage to its premises and inventory. The plaintiff was rendered "out of business" for six days and immediately relocated to another building to conduct business. The defendant agent was not an agent of either the broker or the insurance company. The plaintiff presented its claim for loss of business inventory, equipment, loss of earnings and extra expense. Through June 30, 1995, the defendant insurance company paid the plaintiff $285,000 on the claim. The plaintiff brought this action against the insurance agent, his agency, the surplus line insurance broker and the insurer based on insurance bad faith, breach of contract and negligence theories of recovery.
Settlement Discussions
The plaintiff made a C.C.P. º998 settlement demand for $175,000 to the defendant agent only.
Damages
The plaintiff alleged damages as a result of the co-insurance penalty on loss of earnings to be $175,000 and the deductible and adjustment of claim issues to be approximately $50,000.
Other Information
The settlement was reached approximately one year and one month after the case was filed. MEDIATION: A mediation with all parties was held on Nov. 14, 1996 before Judge Judith Ryan, retired, of American Arbitration Association. The plaintiff agreed to accept $52,500 from the defendant insurer and $12,500 from the defendant broker. No offer was made by the defendant agent. The Court denied the defendant agent's good faith settlement on the basis of the undisclosed second insurance quote and the belief that the defendant agent did not receive a fair opportunity to engage in the settlement process. Subsequent to the court's denial of the good faith settlement, the case settled for $100,000 by the defendant agent, $12,500 by the defendant broker and $70,000 by the defendant insurer.
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