Facts

Plaintiffs were sued for fraud, breach of contract and related claims by the homeowners' association of a project they renovated and sold as condominiums. They filed a claim with AMCO Insurance Company seeking defense and indemnification, which was ultimately denied. Plaintiffs settled the homeowners' association claims from their own funds and without the insurers' consent.

Plaintiffs sued AMCO Insurance Company and its parent, Nationwide Mutual Insurance Company, seeking expenses and other damages for the costs of defense and settlement of the homeowners' association claim.

PLAINTIFFS' CONTENTIONS:
Plaintiffs contended that the law firm, which brought the action against them on behalf of the homeowners' association, had previously brought a similar fraud and breach of contract action against some of the same plaintiffs arising out of the renovation and sale of another condominium project. In that previous action, defendants defended the claims and participated in a settlement under a reservation of rights.

Plaintiffs claimed that defendants failed to properly investigate plaintiff's claim, defendants breached their duty to defend plaintiffs, defendants unreasonably accused plaintiffs of fraud, and defendants committed bad faith in refusing plaintiffs' claim.

Plaintiffs further contended that Nationwide and its coverage counsel misrepresented numerous facts including the named insured status on the policy as well as coverage. During the course of litigation, plaintiffs were able to establish a prima facie claim of fraud between the company and their coverage counsel in a crime/fraud motion to pierce the attorney-client privilege, according to plaintiffs' counsel.

DEFENDANTS' CONTENTIONS:
Defendants contended that they did not breach their duty to defend plaintiffs because there was no potential for coverage for the action brought against plaintiffs by the homeowners' association. Defendants further contended that the handling of the claim was not unreasonable and that plaintiffs had misrepresented material information on their application, which voided any coverage.

Settlement Discussions

Confidential settlement discussions were conducted before trial.

Damages

Plaintiffs sought economic damages in excess of $20 million, Brandt fees of approximately $2,400,000, non-economic damages and punitive damages.

Result

The jury found Nationwide liable for breach of the implied covenant of good faith and fair dealing as well as fraud, and awarded plaintiffs $2,445,811 in economic damages. The jury also awarded plaintiffs William Ayyad $250,000 and Ralph Giannella $150,000 in non-economic damages. The jury also made a finding of malice, oppression, and fraud. $937,106 were awarded in Brandt fees and $25,000,000 in punitive damages. On defendants' post-trial motions, the court granted a judgment notwithstanding the verdict and reduced the judgment to $8,568,811.

Other Information

The case subsequently settled pursuant to a confidential agreement between the parties.