Confidential
Settlement – $16Judge
Court
Nevada Superior
Attorneys
Plaintiff
Defendant
Experts
Plaintiff
Vernon E. Leverty
(technical)
Defendant
Vincent Anderson
(technical)
Facts
The homeowners adjacent to a construction project filed a class action lawsuit in Reno State Court against the contractor and the plaintiff subcontractor, alleging damages as a result of windborne dust. The plaintiff subcontractor began clearing the site on March 26, 1984 but the complaint and notice to the class alleged that damages arose on or about May 1, 1984. Coincidently, plaintiff's liability policy with defendant insurance company ended on April 30th (six weeks after plaintiff began clearing the site) and plaintiff's coverage with a new insurance company began on May 1, 1984. That carrier initially defended the lawsuit and after nearly two years, put defendant insurance company on notice, asserting that the occurrence arose during the defendant's policy period. The carriers agreed to contribute jointly to the defense. Plaintiff subcontractor settled out of the class action lawsuit for $1,100,000 with defendant insurance company contributing 15 percent ($165,000) and plaintiff's new carrier contributing 85 percent ($935,000) based on its respective time on the risk. The question of the general contractor's contractual indemnity rights against plaintiff was left open. The class action plaintiffs then proceeded to judgment against the general contractor, securing $6 million in compensatory damages and $3 million in punitive damages. The general contractor then sued the plaintiff subcontractor for payment of the judgment based on their contractual indemnity agreement. The two insurance carriers again jointly defended plaintiff until it became apparent, because of an adverse law and motion ruling, that plaintiff probably would lose the case. Defendant insurance company then sent out a reservation of rights (3 1/2 years after its initial involvement). Thereafter, a few months before trial, defendant notified plaintiff that it was withdrawing from the defense and refusing indemnity because it had concluded that there was no evidence of an occurrence during its policy period. Plaintiff's new carrier continued to defend, and when the general contractor obtained a judgment against plaintiff for $8.5 million, it paid the remainder of its policy limits of $1,065,000. Defendant refused to contribute, to assist in an appeal, or assist in posting an appeal bond. While the general contractor was executing on plaintiff's assets, defendant insurance company sued plaintiff in federal court seeking a declaration of no coverage. Defendant also sought reimbursement for costs and attorney's fees incurred in connection with defending plaintiff in both of the underlying actions. Plaintiff filed a counterclaim for breach of contract and bad faith. Defendant's claim against plaintiff was later dismissed and plaintiff proceeded to trial against defendant on the counterclaim. The case was trifurcated for trial. In the first phase, the jury found there was coverage, waiver and estoppel, and the court adopted those findings and awarded $8.5 million in compensatory damages to plaintiff. In the second phase, plaintiff claimed that defendant had acted in bad faith with malice, oppression, and fraud because there was a covered claim, and defendant only abandoned the defense of the insured when it was apparent that the general contractor would prevail on the contractual indemnity claim. Plaintiff also claimed that defendant deliberately misled plaintiff and created false and fictitious issues to justify its preconceived decision not to pay a claim it knew it owed. The jury was out seven minutes and found in plaintiff's favor. In the punitive damages phase, financial evidence was adduced and the jury awarded $30 million in punitive damages - the maximum amount requested by the plaintiff's counsel. The total verdict of $38.5 million was, according to plaintiff, the largest bad faith verdict in Nevada history and one of the largest in the country. *** SEE "THE RESULT" FOR CONTINUATION OF FACTS.
Settlement Discussions
At the mandatory settlement conference the plaintiff demanded $20 million and the defendant offered $100,000. After the second phase of the trial finding defendant in bad faith, the plaintiff demanded $20 million and the defendant offered $9.5 million. After the appellate decision, while both parties' petitions for reconsideration were pending, the defendant offered $16,000,000 and the plaintiff accepted.
Damages
The plaintiff claimed $8.5 million in damages.
Result
*** CONTINUATION OF FACTS: In subsequent proceedings, the trial judge reduced the punitive damage award to $6 million and refused to award plaintiff attorney fees (either as collateral "Brandt" damages or under a Nevada statute), finding that defendant had "reasonable grounds" to defend the lawsuit. Both parties appealed and plaintiff sought attorney fees and reinstatement of the punitive damages. Defendant sought a reversal of the judgment. In an unpublished memorandum decision, the Ninth Circuit upheld the compensatory damage and found the remittitur to be within the court's discretion, but sent the punitive damage award back to the trial court with instructions for plaintiff either to accept the $6 million remittitur or proceed with a new trial on punitive damages. Both plaintiff and defendant filed motions for reconsideration. While pending, defendant tendered $16 million of the $18.5 million then due with interest and plaintiff accepted.
Other Information
The settlement was reached approximately six years after the case was filed.
Poll
8-0
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