|Thursday, July 4, 1991
Orange County Edition
Section: PART A
O.C. Jury Hits Insurance Firm for $62 Million
By: LYNN SMITH
TIMES STAFF WRITER
An Orange County jury Wednesday awarded $62
million--mostly in punitive damages--to a Cypress
engineering firm and four individuals who contended that
their insurance company failed to honor a liability
At the end of a 10-week trial, jurors said they found
that Truck Insurance Exchange and its parent company,
Farmers Insurance Co., acted in bad faith and committed
"malice, fraud or oppression" toward the
engineering firm, Marmac, its founder and four
stockholders in rejecting their claim for legal defense.
The huge award is one of the largest judgments ever in
A Farmers spokesman said the company will file an appeal.
"It is an extremely excessive award and out of line
with the facts of the case," said John C. Millen,
director of media relations for Farmers Insurance Group.
"We would expect a more favorable decision upon
The jury award constituted only about $1 million in
actual damages and more than $60 million in punitive
"We feel the insurance company really wronged all
the plaintiffs, and this was going on for more than 4 1/2
years since they asked for defense," said jury
member Sheila E. Popely, a nurse from Fountain Valley.
"It seems like an example has to be made that
insurance companies have to look out for their
After seeing the assets of Farmers, Popely said, it was
clear that damages of "1 or 2 million would not have
made an impression." "This is hopefully to
deter future things like this from happening," she
In addition, the jury verdict contradicts recent trends
to let insurance companies slip out of their
responsibilities, said Jennifer King, past president of
the Orange County Bar Assn. "Everybody is taken in
by insurance company propaganda that they are barely
making ends meet," King said. "When you see
their books, it's ridiculous. It's important that any
punitive damage be significant enough to hurt."
The case began in 1986 when Marmac's founder, James R.
Waller of Huntington Beach, sold his stock to four
buyers. When an unhappy minority stockholder sued,
alleging a conspiracy between Waller and the buyers, the
defendants sought to finance their legal defense through
their insurance by filing a claim. Waller, 58, was
exonerated in the original trial, but the case against
the others is proceeding in Orange County Superior Court.
Meanwhile, the defendants were unable to get Farmers to
honor their claim.
"They slammed the door," Waller said. "I
waited almost a year in hopes it would get resolved, but
it didn't work. I couldn't even get anybody to answer my
letters or sit down and talk with me, period."
Representing the plaintiffs, Brentwood attorney William
H. Ford called Farmers' rejection of the claim
"economic knee-jerk," saying the insurer did
not honor the claim because of the expense. "There
was also sandbagging--nonspecific denial for the claim.
'We'll deny, but not tell you the reasons,' " he
said. Over four years, Ford said, the plaintiffs heard
"serial denials. New and different reasons were
coming all the time. All to defeat coverage and keep
Waller out of court." Waller said, "They hoped
I would go away. I just believed in a principle stronger
than the cost."
The suit was filed against the insurance company in 1987.
Farmers' chief executive, Leo E. Denlea Jr., declined to
comment. Ford said he hoped the case would establish a
legal principle. "The case will stand hopefully for
the proposition that when an insurance company denies a
claim, it must do so with specific reasons for the
denial," he said. "They can't sandbag the
insured, as done in this case." Waller said the
jury's decision vindicates his decision to persist with
the suit: "Maybe in the future, insurance companies
will stop, look and listen before they leap."
Descriptors: FARMERS INSURANCE GROUP; TRUCK INSURANCE
EXCHANGE; SUITS; LIABILITY
Copyright (c) 1991 Times Mirror Company