Californians settle with Farmers Insurance for $20 million in Northridge quake flap By Sandra Pickett

A group of San Fernando Valley condominium owners exacted $20 million from Truck Insurance Exchange, a subsidiary of Farmers Insurance Group, on March 7. Attorneys for Farmers offered the money after a jury determined that Farmers had acted in bad faith in dealing with claims from the owners of Nordhoff Townhomes in the wake of the 1994 Northridge earthquake. The jury had already awarded the homeowners $4 million for actual damages.

The homeowners had asked Farmers to pay to rebuild the condominium complex, citing structural damage. Farmers denied the claim, having already paid out $2.5 million for repairs to the building, according to Kurt Peterson, lead attorney for Farmers in the case.

"The homeowners association was given $600,000 as an advance towards engineering work and an engineering analysis," says Peterson. "They were given another $1.9 million to make repairs."

During the trial, Peterson argued that Farmers had acted in good faith in dealing with the homeowners. "What the jury found was that the independent adjusters did steer the homeowners association toward repairs rather than tearing down and starting over," he says.

Prosecuting attorney Bernie Bernheim tells a different story, noting that Farmers initially denied owing anything on the claim, then spent two years investigating the case. According to Bernheim, the $20 million settlement is the most ever paid to settle a single earthquake "bad faith" insurance claim. Farmers declined to settle the case for $3.3 million when the legal action was first filed a year ago.

"From our point of view, we felt that this was a good case," says Peterson. "But we knew that it would be a difficult case to defend with LA jurors who had lived through the earthquake." According to the Insurance Information Institute, property damage from the earthquake, in 1998 dollars, is in the range of $14 billion to $22 billion.