Confidential
Settlement – $500,000Court
San Diego Superior
Attorneys
Plaintiff
John G. Hanlin
(Hanlin Law Firm)
Defendant
R. Gaylord Smith
(Lewis, Brisbois, Bisgaard & Smith LLP)
Facts
Plaintiff is a company that provides telephone answering and paging services to customers in the greater San Diego area. Plaintiff was insured under a commercial insurance policy issued by Defendant insurance company. The all-risk policy provided business interruption coverage arising out of failures of Plaintiff's computer systems. In December of 1991 Plaintiff's telephone answering computer system failed, resulting in a loss of customers, et cetera. The computer was essentially rebuilt; and Plaintiff submitted a claim to Defendant in the amount of $22,000 for losses attributable to the computer failure. Defendant paid the claim without raising any coverage defenses. In March of 1992, Plaintiff experienced another computer failure and submitted a second claim to Defendant in the amount of $10,000. Defendant paid this second claim without raising any coverage issues. Three weeks later, on April 1, 1992, Plaintiff's computer system crashed and could not be restored or repaired. Plaintiff submitted a third claim to Defendant in the amount of $286,000. Defendant denied coverage for the third claim, asserting various exclusions in the policy. Plaintiff sued Defendant for breach of the insurance policy and bad faith; Plaintiff's president also sued for emotional distress damages. Plaintiffs obtained discovery sanctions against Defendant of nearly $3,500, conditional upon Plaintiff's agreement not to use it as evidence of bad faith at trial.
Settlement Discussions
Offers and demands were not disclosed.
Damages
$286,000 business losses (in the 2 months following the computer crash in April of 1992) including lost revenue from customers who cancelled their accounts, technician expenses, and $120,000 for the replacement cost of the computer system (the original computer cost less than $20,000) and business losses attributable to Defendant's failure to pay the claim.
Injuries
Emotional distress (claimed by Plaintiff's president).
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