Facts

Plaintiffs Cellular Fantasy Inc., Payless Cellular Inc. and Payless Accessories Inc. are all owned by the same individual. Cellular Fantasy is a provider of cell phones; Payless Accessories is a provider of cell phone accessories and is a cell phone wholesaler; and Payless Cellular is a provider of discounted cellular airtime, mainly to Cellular Fantasy phone purchasers.

Defendant Allen Baghallian was the insurance broker for plaintiffs for approximately 10 years, and was an agent for Farmers Insurance Company. In 2004, the plaintiffs requested that Baghallian obtain a new property insurance policy for them at a lower price. However, the plaintiffs requested that their new policy have similar coverage to the one they currently owned.

In September 2004, Baghallian obtained a broad business operations policy for the plaintiffs through CNA's wholesale broker, SK Financial Services Inc. (SKFS). The new policy covered inventory as well. In December 2004, cell phones were stolen from plaintiffs in a burglary and cellular airtime for those phones were unable to be sold by Payless Cellular. Although CNA paid out $648,000 in a settlement for the stolen phones, it refused to pay for Payless Cellular's lost profits from its inability to sell cellular airtime.

PLAINTIFFS' CONTENTIONS:
The plaintiffs contended that defendants were negligent in not procuring a policy which would cover the lost airtime in the event cell phones were stolen from plaintiffs. In the alternative, the plaintiffs argued that defendants should have obtained an endorsement from the insurer to obtain replacement cell phones immediately in order to mitigate the possibility of lost profits from the airtime.

DEFENDANTS' CONTENTIONS:
The defendants countered that the policy obtained was the policy requested by plaintiffs. The defendants argued that the endorsement obtained on the subsequent policy by plaintiffs was unique and would not have been sought by the average reasonable insurance broker.

Settlement Discussions

The plaintiffs made an offer of settlement in the amount of $1 million, which represented the insurance policy limit. The defendants countered with CCP 998 offer of $1,000 to Cellular Fantasy, $1,000 to Payless Accessories, and $148,000 to Payless Cellular.

Damages

The plaintiffs sought $2,400,000 in damages for the lost cellular airtime.

Result

The jury found for the defense.

Other Information

Prior to trial, plaintiffs dismissed Farmers Insurance as a defendant. During trial SKFS settled with plaintiffs. Plaintiffs' motion for new trial was denied. Plaintiff Payless Cellular has appealed.

Deliberation

15 minutes

Poll

12-0

Length

seven days