Thursday, September 25, 2008

Farmers Insurance loses $130-million jury verdict to Oklahoma homeowners

Farmers Insurance loses $130-million jury verdict to Oklahoma homeowners
From Bloomberg News
September 25, 2008

Farmers Insurance Co., the Los Angeles-based subsidiary of Zurich Financial Services, lost a $130-million jury verdict to a group of Oklahoma homeowners who alleged the company underpaid on claims.

The homeowners, who said Farmers improperly failed to pay for general contractors, contended breach of contract, bad faith and fraud. This cost each one an average of about $575 in unpaid bills for fixing damaged homes, said Derrick Morton, one of their attorneys. The group includes about 76,000 people, he said.

The Lawton, Okla., jury last week awarded the homeowners $50 million for breach of contract, $50 million for bad faith and $30 million in punitives. The verdict includes duplicate actual damages, which will reduce the total judgment to $80 million, homeowners' attorney Michael Burrage said.

"The $50 million will have to be collected on the contract claim or on the bad-faith claim," Burrage said in a phone interview. "We can't collect it twice." The homeowners will also receive 15% interest on actual damages and attorneys' fees if the verdict is upheld, he said.

Farmers will appeal the award, company spokesman Jerry Davies said in a phone interview. He declined to comment further.

The jury verdict is the 14th largest in the U.S. this year, according to data compiled by Bloomberg.

The homeowners include Farmers customers in Oklahoma who made claims from June 1994 through mid-2007, Morton said. The homeowners say Farmers should have covered compensation for overhead and profits for general contractors.

Source: LA Times

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