|Wednesday, August 20, 1997
State Farm Quake Policy Suit Settled; Insurance: Couple alleged homeowners were defrauded,
but company denied
By: SOLOMON MOORE
TIMES STAFF WRITER
A Sherman Oaks couple who alleged that State Farm Insurance defrauded earthquake
policyholders have settled their lawsuit for an undisclosed amount of money.
continued to deny any wrongdoing. Krista and Roderick Taylor had accused State Farm of
forging customer forms and cheating policyholders out of claims arising out of the
Northridge earthquake. The Taylor case was the latest in a series of lawsuits alleging
misconduct by insurance companies in handling earthquake claims.
Last week, Farmers Insurance agreed to pay clients $10 million to settle claims over
earthquake damage. Last month, a Los Angeles jury returned a $7.2-million judgment against
20th Century Insurance, a case in which homeowners claimed they had been cheated out of
earthquake insurance coverage.
Under the 65-page draft agreement, State Farm, the largest insurer in California, denies
the company has "any program involving forgery, fraud or any misbehavior that could
harm policyholders," according to a statement issued by both sides in the case.
According to the statement, the agreement will end the case, but the amount paid to the
Taylors was not disclosed.
"I am very happy that we are working toward a resolution," said Bernie Bernheim,
lawyer for the Taylors. "With the accumulation of all this [evidence], there comes a
point when the defense has to think they are just not going to win," he said.
State Farm attorneys would not comment on the agreement except to say that it was only a
few signatures away from becoming official. Bill Sirola, a spokesman for the company, said
State Farm officials were also pleased that a resolution is
In preparing their case, lawyers for the Taylors collected documents and allegations
against State Farm. The strongest, Bernheim said, was the affidavit of Amy Zuniga, a
former State Farm paralegal who worked in the company's regional office in Newbury Park in
Ventura County. Sworn testimony included accusations that State Farm forged earthquake
coverage declination forms and cheated policyholders out of claims arising from the
According to Zuniga's declarations, she was aware that there were many claims arising out
of the Northridge earthquake "involving unauthorized signatures by State Farm
Two days after those statements were filed, State Farm sued Zuniga for allegedly revealing
trade secrets and violating a "code of conduct" she had signed while working in
State Farm's litigation department. State Farm also sought an injunction from the court to
On May 16 Los Angeles Superior Court Judge Aviva Bobbdenied the injunction and threw out
State Farm's lawsuit on grounds that the action was intended to punish and prevent Zuniga
from revealing State Farm's alleged criminal practices.
"State Farm simply runs the risk of its alleged fraud being exposed," the court
ruled. "State Farm has not demonstrated the falsity of Zuniga's allegations."
At one point, the company asked an appellate court to seal the file, but was rebuffed by a
judge who decided, in part, that "to preclude disclosure of information . . . would
work a fraud or injustice."
Stephen Prater, a Santa Clara insurance lawyer who has served as an expert against State
Farm in several lawsuits around the country, said the impact of the Taylor case will
probably be felt for years to come. Zuniga's declarations, he said, have now become part
of a canon of court papers circulating through a loose network of lawyers around the
nation who are fighting State Farm.
"I think we'll see more whistle-blowers," said Prater, who believes Zuniga's
testimony may embolden other State Farm employees to come forward with allegations of
wrongdoing. Sources inside the company say State Farm's defense bills alone will be more
than $2 million.
---- START OF CORRECTION ----
For the Record;
Los Angeles Times Friday, August 29, 1997
Valley Edition; Metro; Part B; Page 3; Zones Desk;
1 inches; 35 words;
Type of Material: Correction
Insurance verdict--A Times story on Aug. 20 erroneously reported that Farmers
Insurance agreed to pay $10 million in a lawsuit over earthquake coverage. The
defendant was in fact Western Home Insurance Co., which a jury ordered to pay
---- END CORRECTION TEXT ----
Descriptors: SETTLEMENTS; INSURANCE INDUSTRY -- SUITS;
EARTHQUAKES -- LOS ANGELES; STATE FARM INSURANCE;
CONSUMER FRAUD; INSURANCE CLAIMS;
Copyright (c) 1997 Times Mirror Company