Myhart Associates, Inc. v. American Equity Insurance Company, et al.
Published: May 15, 1999 | Result Date: Feb. 23, 1999 | Filing Date: Jan. 1, 1900 |Case number: BC187406 Verdict – $0
Judge
Court
L.A. Superior Central
Attorneys
Plaintiff
Defendant
Mark A. Oertel
(Lewis Brisbois Bisgaard & Smith LLP)
Experts
Plaintiff
Warren Ferguson
(technical)
Michael S. Schaffer
(technical)
R. Fulton MacDonald
(technical)
Defendant
Kitty Cullen Sloan
(technical)
Leonard Paulin
(technical)
Facts
The plaintiff, through its broker, defendant Silversmith Agency, Inc. submitted an application for commercial property insurance which included theft coverage for business equipment and personal property with the defendant, American Equity Insurance Company. In response to a question on the application asking about the burglar alarm system, the plaintiff, through his agent, made the following representation, "Being installed." Based on the information contained within the application and the representation that an alarm was being installed, American issued an insurance binder to the plaintiff. When the binder was issued, America's underwriting guidelines required a central station burglar alarm in order to cover a risk of this kind. After the issuance of the binder, a burglary occurred on or about July 27, 1997. The plaintiff approximated its loss of $43,723.41, which represented personal property and other expenses incurred in connection with the burglary. When America's general agent, Montgomery & Collins physically prepared the policy, a "Protective Systems" endorsement was mistakenly requested, rather than the correct endorsement, the "Burglary and Robbery Protective Systems" endorsement. On Aug. 26, 1997, following a routine underwriting review, an American underwriter discovered the previous mistake and corrected it by issuing the correct endorsement. When American denied the plaintiff's claim, the plaintiff filed suit in Los Angeles Superior Court for breach of contract, contractual and tortious breach of the implied covenant of good faith and fair dealing, violation of Insurance Code º382.5, and negligence.
Settlement Discussions
The plaintiff made a C.C.P. º998 settlement demand for $1 million, which was reduced to $900,000 during trial. Defendant American made a $150,000 after with an indication that it would go higher prior to trial, and then defendant Montgomery & Collins settled with the plaintiff for $43,723.41.
Damages
$43,723.41 (for personal property loss and expenses related to a burglary); $1.1 million (in special damages, for lost profits)
Other Information
The verdict was reached approximately 10 months after the case was filed. EXPERT TESTIMONY: The plaintiff's expert, Warren Ferguson, testified that the binder did not comply with the California Insurance Code since it did not specifically state what type of policy was being issued and it did not identify a particular endorsement which limited coverage. He further testified that American Equity acted unreasonably in issuing a post-loss endorsement and denied the claim in bad faith. He also testified that Joseph Silversmith violated the standard of care among brokers by failing to investigate whether any special exclusion would apply in plaintiff's case. The plaintiff's expert, Michael Schaffer, testified that the lost income projections were valid and reasonable based on his background and experience. R. Fulton MacDonald, another expert for the plaintiff, testified that the denial of plaintiff's $42,000 claim resulted in the $1.1 million loss of profits and that, if the plaintiff was paid the claim, the money would have been used towards plaintiff's advertising budget, which would have increased leads and sales. American's expert, Leonard Paulin, testified that American acted reasonably in denying the plaintiff's insurance claim based upon the misrepresentation in the insurance application. He further testified that American did not act unreasonably in issuing a post-loss endorsement. Kitty Cullen Sloan, an expert in the field of inflatable advertising, testified for American that the plaintiff's method of advertising, via mass faxing, was an ineffective method of obtaining sales. She further testified that the size of the plaintiff's production facilities and production personnel were too small to produce the number of inflatable balloons attested to by the plaintiff.
Poll
______-_______
Length
12 days
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