Facts

Plaintiff Northshore Property Owners Association is a planned unit development which contains 236 townhomes in Westlake Village. Plaintiff timely submitted a claim for damages stemming from the 1994 Northridge earthquake to defendant State Farm Fire and Casualty Co. The visible damages were not major and plaintiff eventually withdrew the claim. Plaintiff reserved the right to re-open the claim if damages subsequently surfaced in the units.

In December 2001, plaintiff requested that defendant re-open the claim for the entire complex. It sued, alleging bad faith and breach of contract. Plaintiff claimed that defendant failed to compensate it for damages incurred from the earthquake. However, plaintiff limited defendant's investigation of the damage, forcing defendant to file discovery motions to compel plaintiff to permit it to inspect the complex. It was later discovered that plaintiff had a history of problems caused by design and construction defects, as well as ongoing earth movement, which began prior to the earthquake.

PLAINTIFF'S CONTENTIONS:
Defendant misled plaintiff into withdrawing its claim. Although no formal inspection had been conducted, defendant advised plaintiff's property manager that the damages were minimal. Plaintiff's structural engineer opined that the durability of the drywall decreased when the building experienced some movement during the earthquake. Moreover, the walls could be restored by installing plywood shear panels in the units. In addition, plaintiff asserted that defendant should pay to have the roofs within the complex replaced. Plaintiff also sought to have defendant pay for the replacement of the streets, driveways and walkways within the complex that were allegedly damaged in the earthquake.

DEFENDANT'S CONTENTIONS:
Plaintiff re-invented the claims in order to support a cause of action for bad faith. Per plaintiff's own records, plaintiff voluntarily withdrew its claim in 1994, knowing that the damage was minimal. Plaintiff did not want each of its units to undergo an inspection. In deciding to withdraw the claim, plaintiff had even consulted with its attorney. Defendant could not have prevented plaintiff from withdrawing the claim. Further, plaintiff would not allow defendant to investigate the damage after suit was filed and plaintiff's counsel demanded that State Farm use consultants selected by him. Moreover, the claimed damages arose from poor workmanship, construction defects, deferred maintenance, and an ongoing problem with ground movement which began prior to the earthquake.

Settlement Discussions

Defendant made a $1 million offer under Code of Civil Procedure Section 998.

Damages

Plaintiff claimed $3,944,808 for the interior unit damage and $14,405,000 for the building exteriors, roofing and foundations. In addition, it claimed $1,480,134 for the damage to the streets and walkways.

Result

The judgment was for defendant.

Other Information

On Feb 20, 2007, the court awarded defendant State Farm costs in the amount of $3,820,501.37.

Deliberation

one day

Poll

11-1

Length

44 days