Facts

Plaintiffs suffered extensive damages following a fire at their residence despite possessing two insurance policies, with one designed to cover fire and water loss damages to an insured residence and both designed to cover damages to personal property, and loss of use thereof.

The plaintiff, Lorraine Erwin, 91, was covered under a Standard Property Homeowners Insurance Policy issued by defendant, Mercury, which insured her home and personal property. In addition to the Mercury coverage, plaintiff Jonie Peterson was also covered under an Auto Club members' referred Renters Policy, which provided coverage for her personal property and loss of use. The property where the losses occurred was a home that Erwin had resided at for over 40 years. The home had been previously used as a pre-school, which had been run by Erwin. Peterson, Erwin's adult daughter, lived in the basement apartment.

On Oct. 27, 2003, a fire occurred in the basement apartment kitchen. As a result of the fire loss, the water damages occasioned by efforts to extinguish the fire, the water and mold damage that resulted from inadequate and improper repair, restoration and remediation efforts, plaintiffs were dispossessed of their residence.

Following the fire loss, Mercury retained Garland Restoration Inc., a licensed general contractor, to perform remediation and repair services. Although Garland was a preferred contractor for Mercury that held itself out to consumers and the general public as a company qualified to perform remediation and repair work on fire damaged property, Garland failed to cover the roof or otherwise protect the property from rain and weather conditions subsequent to the fire loss. As a consequence, plaintiffs' real and personal property were further damaged by water infiltrating into the residence. No construction was commenced until Dec. 2004, a full 14 months following the initial fire loss. At that time, a roof was finally constructed, but without city permits, which were never obtained. Much of plaintiffs' wet personal property items were simply thrown into black plastic bags behind the house.

During the claim process, the house continued to sustain damage. Vandals broke into the home, garage, and windows and stored belongings were stolen or damaged.

PLAINTIFFS' CONTENTIONS:
Due to the negligence of Mercury Casualty Company's "preferred" remediation contractor, Garland Restoration Inc., along with Mercury's inordinate delay in basic handling of the claim, plaintiffs' residence went unprotected after the relatively minor fire loss, and was damaged exponentially after water and mold infiltrated the home.

The plaintiffs alleged that the carriers failed to assist them. As a result, the plaintiffs were forced from their home and have never been able to reoccupy it.

DEFENDANTS' CONTENTIONS:
Mercury contended that all damages were essentially caused by the general contractor hired by plaintiffs to repair and reconstruct the home and asserted that the claims were handled timely and properly.

Auto Club contended that it promptly paid its insured, Peterson, each and every claim she submitted for her personal property losses.

Damages

In addition to property damage and damaged personal property (contents), the plaintiffs' personal injuries were primarily mental and emotional distress.

Result

The case settled for $725,000 new money.

Other Information

Insurer: Mercury Casualty and AAA each for themselves. Mercury Insurance Co. for Garland.