Cal-har, Inc.; and Abdurahman Baharun v. State Farm Fire and Casualty Company
Published: Feb. 21, 1998 | Result Date: Jan. 6, 1998 | Filing Date: Jan. 1, 1900 |Case number: BC150257 Verdict – $5,460,300
Judge
Court
L.A. Superior Central
Attorneys
Plaintiff
Thomas G. Stolpman
(Stolpman Law Group)
Defendant
Bartley L. Becker
(Lewis, Brisbois, Bisgaard & Smith LLP)
Experts
Plaintiff
Gary T. Fye
(technical)
Defendant
Bruce A. Tibert
(technical)
Derek Olin
(technical)
Geoffrey Hill
(technical)
M. Maila Putnam
(technical)
Facts
Plaintiff Abdurahman Baharun was the sole stockholder and president of Cal-har Inc., who operated a dry-cleaning business (System Cleaners) on Crenshaw Boulevard at Exposition in Los Angeles. Plaintiff and his business were insured by defendant State Farm Fire and Casualty Company. On April 17, 1994, a fire destroyed the interior of the premises, causing damage to all of the equipment and inventory. The initial Los Angeles Fire Department report listed the cause of the fire as electrical in origin. Plaintiff asserted that as soon as the claim was submitted to defendant State Farm, the adjuster was instructed by his supervisor, Vicki Brooks, to retain experts, including Geoffrey Hill, a certified public accountant, to examine the books and records of the insured. Derek Olin, an arson investigator, was retained to investigate the cause and origin of the fire. Olin reported that he discovered gasoline-soaked draperies near the area where he thought the fire started and determined that the drapes were soaked with gasoline. He theorized that the fire was an arson fire set by someone with key access to the building and who knew the code to the alarm. Baharun was the only person who had the keys and knew the alarm code. At deposition, Olin stated that whoever set the fire poured gasoline on the drapes, then trailed the gasoline by pouring small amounts of it to the back door, where an open flame was introduced by the arsonist who then exited through the rear door and locked the doors. After being informed of Olin's findings, the fire department changed its report to reflect an incendiary fire started with gasoline. After the plaintiff submitted a claim for the policy limits of $155,000 and a business interruption claim based upon profits of approximately $2,600 per month, plaintiff claimed that State Farm management directed that the proof of loss be rejected and that the claims personnel retain an attorney to conduct further investigation, including an examination under oath of the insured. The accountant testified that he found the books and records of the company to be very confusing and not reliable, such that they did not substantiate the claim for loss of earnings. A loan application filed by the insured one month before the fire claimed that the Northridge earthquake in January 1994 had severely impacted the business and caused the income to be approximately half of the income shown on the income statements submitted to State Farm in connection with the claim. Plaintiff claimed State Farm did not do any investigation to substantiate plaintiff's statements that his business was doing well and that he performed to expand the business by opening satellite stores. State Farm denied the claim in May 1995 on the basis that plaintiff had set the fire, or caused it to be set, and that plaintiff materially misrepresented that the business was doing well and was making a profit. The plaintiff brought this insurance bad faith action against State Farm.
Settlement Discussions
At a mandatory settlement conference, plaintiffs demanded $5 million. The offer was zero. After the jury found in favor of the plaintiff on all issues as to liability, bad faith, comparative bad faith, intentional infliction of emotional distress and malice, fraud or oppression, State Farm offered $3.5 million. Plaintiff responded with a demand of $15 million.
Other Information
The verdict was reached approximately three years and nine months after the case was filed. A settlement conference was held on Sept. 4, 1997 before retired Judge Vernon Foster, resulting in no settlement.
Deliberation
eight days
Poll
12-0 (whether arson committed); 10-2 (emotional distress); 11-1 (punitive damages); 10-2 (punitive damages to Calharr); 9-3 (punitive damages to Baharun); 11-1 (other issues)
Length
six weeks
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