Verdicts & Settlements Weekly
SENTRY INSURANCE COMPANY v. MESA WEST INC.
JURY VERDICTS WEEKLY (CALIFORNIA)
Jury Verdict Weekly (California)
Copyright 2002 JURY VERDICTS WEEKLY
SENTRY INSURANCE COMPANY v. MESA WEST INC.
Case No. 791310,May 22, 2002
TOPIC: INSURANCE: Bad Faith/Sentry belted with bad faith verdict for refusing to defend
RESULT: Defense on complaint; $ 9,764,592 on cross-complaint; On the complaint, the jury returned a defense verdict in favor of Mesa West. On the cross-complaint, the jury returned a verdict in favor of Mesa West and awarded $ 9,764,592 ($ 4,876,296 damages, and $ 4,882,296 punitive damages).
INJURY: The insurer sought settlement contributions and "Buss" fees (defense fees paid to defend its insured between covered and non-covered causes of action, see Buss v. Superior Court (1977) 16 Cal. 4th 35), for the underlying breach of warranty lawsuit it defended under a reservation of rights
Mesa West claimed damages including over $ 1 million in attorney's fees for the defense of the underlying lawsuits, Cumis counsel fees and Brandt fees (see Brandy v. Superior Court (1985) 37 Cal.3d 813). It also sought loss of profits of $ 900,000 and loss of goodwill of $ 1.4 million to $ 1.8 million. It additionally claimed settlement contributions of approximately $ 600,000 including $ 310,000 to satisfy a lien against it arising from one of the lawsuits, plus borrowing or financing costs incurred in order to obtain settlement money or pay its attorneys.
STATE: California
COURT: Superior Court of Orange County, Santa Ana, CA
JUDGE: Robert H. Gallivan
PLAINTIFF COUNSEL: James A. Williams, Murchison & Cummings, Los Angeles, CA
DEFENDANT COUNSEL: Paige Merrill Baker, Baker & Baker, Santa Ana, CA; William Baker, Baker & Baker, Santa Ana, CA; Nathan D. LaMoure, Law Office of Nathan D. LaMoure, Lake Arrowhead, CA; Neil Pedersen, Pedersen Law & Dispute Corp., Irvine, CA
SUMMARY: Plaintiff Sentry Insurance Co. refused to defend its insured, Mesa West Inc. of Anaheim, in two underlying breach of warranty lawsuits but agreed to defend it in a third under a reservation of rights. Sentry lost the suit it defended and Mesa West settled the other two. Sentry then sued Mesa West, claiming that it had no duty to defend, indemnify or provide "Cumis" or independent counsel (see San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358.) It also sought a settlement contribution for the one suit it chose to defend. Sentry asserted that it followed the advice of counsel and that it had policy releases in the two underlying lawsuits it refused to defend.
Mesa West cross-complained for denial of policy benefits and for bad faith for breach of Sentry's duty to defend, its duty to provide Cumis counsel, its duty to settle, and its duty of candor in the three underlying breach of warranty lawsuits. It also alleged bad faith in the insurer's extraction of policy releases in two of the underlying lawsuits.
Mesa West asserted (i) invalidity of the two policy releases (ii) an actual conflict of interest triggered by a reservation of rights giving a right to Cumis counsel; (iii) a duty to settle all cases within the $ 1.5 million policy limits; (iv) inadequate defense and (vi) bad faith.
P-EXPERTS: David J Weiner, (economics) Los Angeles, CA; Edmund J. Mooney, (metallurgical testing) Orange, CA
D-EXPERTS: Michael Carter, (bad faith) Downey, CA; Robert L. Kehr, (legal ethics) Los Angeles, CA; Vanita M. Spaulding, (valuation) Woodland Hills, CA
MISCELLANEOUS: Trial Length: 6 weeks; EDITOR'S NOTE Plaintiff's counsel did not contribute to this report.
POST TRIAL MOTION: POST-TRIAL The case was ultimately settled confidentially.
SETTLEMENT TALKS: DEMAND On the complaint, Sentry demanded $ 300,000. On the cross-complaint, Mesa West demanded $ 100,000; OFFER Sentry's last offer was $ 4,000,000; Mesa West did not make an offer.
ISSUE: VOLUME 2, NUMBER 32