Facts

Plaintiff Milton Lopez owned a residential structure in Fresno that was destroyed by fire in 2009. At the time, the property was insured under an Allstate Landlord Policy. Lopez filed a claim on the loss for $372,000, which exceeded the structural limits of the policy ($133,000) he had with Allstate Insurance Company.

Allstate retained coverage counsel to render a coverage opinion regarding the limit issue. While investigating the possibility of reforming the policy to make it adequate to compensate for the full amount of the loss, about nine months after the fire, Allstate's coverage counsel determined that Plaintiff had made material misrepresentations of fact regarding the size of the structure, and its configuration and use based on a "rental unit limit." Specifically, Plaintiff rented the property to at least six tenants, although Allstate's underwriting guidelines restricted landlord policies to properties with fewer than six tenants. Plaintiff contended that the insuring agreement provided a limitation on the number of "dwellings" that could be insured. "Dwelling" was defined in the policy to mean "family building structures," which Plaintiff contended Allstate's designated underwriter testified in deposition referred only to multi-plexes (duplex, triplex, fourplex), and not to rented bedrooms. Plaintiffs and Defendants disagreed as to the terminology and definitions that should govern the coverage dispute.

Allstate rescinded the policy for misrepresentation and, except for $13,800 in lost rents, paid nothing on the claim. Lopez sued Allstate, alleging breach of the insurance contract and bad faith. Plaintiff Cornejo's claims were adjudicated in favor of Allstate by way of summary adjudication. The matter ultimately proceeded to a jury trial between Lopez and Allstate.

PLAINTIFF'S CONTENTIONS:
Plaintiff's bad faith experts testified that Allstate acted in bad faith by failing to conduct any meaningful investigation after initially concluding that the loss was covered, by failing to keep the insured informed and by misrepresenting the status of the claim over nine months, and by destroying, discarding or otherwise failing to document the claim file.

Plaintiff's economic expert testified that Allstate's failure to pay the claim resulted in him losing not only the subject property to foreclosure, but also three other properties that were supported by the rent from the destroyed structure.

DEFENDANT'S CONTENTIONS:
Allstate contended that Plaintiff provided application information, and confirmed its accuracy on two subsequent occasions, that materially understated the square footage of the house and materially misrepresented its occupancy/use. Allstate claimed that Plaintiff stated the property was 1,600 in square feet, when in fact it was over 3,100 square feet.

Allstate argued that Plaintiff claimed the property consisted of a single-family unit with one family in occupancy when, in fact, it consisted of at least seven rental units that were all rented, and, further, that Allstate did not offer or write Landlords Policies for a structure with more than four rental units. Due to these alleged misrepresentations, Allstate declared the policy void from its inception and rescinded it.

Allstate contended that the policy was void from inception and no benefits were due, as no recoverable damages were sustained.

Damages

Plaintiff claimed in excess of $1 million in property damage, consequential economic damages, and emotional distress.

Result

The jury rendered a defense verdict on the first issue presented, which was whether Plaintiff made a material misrepresentation regarding the size and occupancy of the property, such that the policy was void from inception.

Other Information

On June 12, 2012, the Court entered judgment in favor of Allstate on its summary judgment motion, as to former plaintiff Cornejo and following jury verdict as to Lopez. Plaintiffs' motion for a new trial was denied, as without merit. Plaintiffs are appealing the judgment on grounds of the Court giving the jury policy to interpret, rather than retaining policy decisions for its own interpretation. FILING DATE: March 22, 2010.

Deliberation

one hour.

Poll

11-1

Length

13 days