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 claim.

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 Orange County.

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 appeal."
The jury award constituted only about $1 million in actual damages
and more than $60 million in punitive damages.
"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 policyholders."
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 said.
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