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July 18, 2005
CA: Jury Verdict of $9,890,187.55 Against Farmers Insurance Exchange
A Los Angeles County jury returned a verdict of $9,890,187.55 against Farmers Insurance Exchange over the insurer's bad faith refusal to defend two of its insureds. (Walker, et al. v. Farmers Group, Inc., et al., BC312281)
The plaintiffs, Ms. Walker and Ms. Williams, were insured under a liability policy Farmers issued to their homeowners association. The policy provided liability coverage for their liability as condominium owners arising out of accidents occurring on the common areas. The plaintiffs were sued in 2002 by a neighbor who was badly injured when she was allegedly hit by the plaintiffs' garage door. The neighbor alleged that the homeowners association failed to maintain the common areas in a safe condition and should have foreseen that the design of the walkway around the garages, the recent installation of electrically operated garage door openers, and the design of the garage doors which swung outward when opened, would one day lead to an accident when a door was opened with a remote controller.
When the neighbor, who was 86 years old, sued Ms. Walker and Ms. Williams and the homeowners association, Farmers refused to defend plaintiffs, but did defend the association. Farmers also directed its lawyers to file a cross-complaint against Ms. Walker and Ms. Williams on behalf of the association.
Ms. Walker, who is 80, and Ms. Williams, who is 65, used their credit cards to retain a lawyer. Faced with a probable jury verdict of $300-350 thousand dollars, which would have forced them to lose their home, Ms. Walker and Ms. Williams borrowed enough money from friends to settle with the neighbor just before trial.
Ms. Walker and Ms. Williams sued Farmers in March 2004 for breach of the insurance contract and breach of the implied covenant of good faith and fair dealing. In a bench trial in May, Judge James R. Dunn ruled that Farmers had breached its insurance contract by not providing Ms. Walker and Ms. Williams with a defense. A jury trial was then conducted to determine whether Farmers acted in bad faith in failing to provide a defense to investigate the insureds' claim for coverage or to follow its own procedures in handling such claims.
The jury returned its verdict at the end of its second day of deliberations, awarding $51,931.80 in contract damages, $1,500,000 in emotional distress and $8,338,255.75 in punitive damages. The jurors were unanimous in their finding of liability and in the amount of damages. The plaintiffs' post-trial motion for attorney's fees has not yet been heard.
Posted by joewest at 10:06 AM
July 14, 2005
Texas Court Finds 'Occurrence,' 'Property Damage,' Multiple Occurrences From Defective EIFS
Affirming in part and reversing in part, a Texas appeals court on June 2 ruled that "occurrence" and "property damage" elements were satisfied regarding damage from defective synthetic stucco, that each damaged home is a separate occurrence, that business risk exclusions don't apply, that excess insurance cannot be reached and that fact issues exist on other issues (Lennar Corp., et al. v. Great American Insurance Co., et al., No. 14-02-00860-CV, Texas App.; 2005 Tex. App.).
From early 1996 through late 1999, Lennar built more than 400 homes in the Houston area with a synthetic stucco called Exterior Insulation and Finish System (AEIFS@). According to Lennar, the manufacturers of EIFS marketed it as an ideal product for wood-framed houses. However, Lennar contends it later discovered that EIFS is defectively designed such that it traps water behind it and does not allow the water to drain. Consequently, the trapped water can cause damage, such as wood rot, mold, and termite infestation, among other problems, to other parts of the home.
Through the spring of 1999, Lennar had received a few complaints from homeowners about EIFS-related problems. In the spring of 1999, the complaints increased after television programs regarding EIFS aired. According to Lennar, it initially accepted the manufacturer's position that the problems were caused by installation error and/or were typical of wood-framed homes. Therefore, Lennar addressed these complaints on an individual basis. However, by September 1999, after spending the summer responding to complaints, Lennar became convinced EIFS is a defective product.
Thereafter, Lennar removed the EIFS from all the homes and replaced it with a traditional stucco. According to Lennar, it also repaired resulting water damage to the homes although the extent to which any homes sustained damage is disputed. Lennar then sought indemnification for all its replacement and repair costs from the carriers. The carriers refused to indemnify Lennar for the EIFS claims contending there is no coverage under their policies.
Posted by joewest at 10:38 AM
July 13, 2005
CO: homeowners allowed to sue subcontractors for construction defects caused by negligence
The subcontractors were sued by the Yacht Club II Homeowners Association, which charged that the subcontractors were responsible for a host of building defects.
In the decision, handed down on June 26, the Colorado Supreme Court ruled that subcontractors, as well as builders, "owe homeowners a duty of care, independent of any contractual obligations, to act without negligence in the construction of homes."
This is important because builders don't actually build homes, said -McKenzie, principal of McKenzie Rhody & Hearn, a law firm that specializes in residential defect litigation. Instead, builders subcontract the work to framers, carpenters, electricians, plumbers and others.
Homeowners typically not only don't have contracts with the subcontractors, but they played no role in negotiating the contract between the builder and the subcontractors, -McKenzie said.
McKenzie said with this ruling, the court rejected what is known as the "economic loss rule," which generally limits homeowners' remedies to those specified in limited warranties or contracts between the builders and the subcontractors. Those contracts typically provide limited remedies to homeowners, he said.
The court also ruled that homeowner associations can bring negligence suits on behalf of the homeowners, McKenzie said.
"So if you have 100 condo units in a project, you don't need to file 100 individual suits, or file a class-action lawsuit," he said, because the association can file one suit on behalf of all of the owners. [Full Opinion]
Posted by joewest at 10:22 AM
July 12, 2005
ACLU v. Galaxy condo in free speech suit (New Jersey)
The American Civil Liberties Union has filed a lawsuit against the Galaxy Towers condominium association and its president, Martha Norget, saying the organization was stifling the free speech of building residents.
The case, which is being handled by Frank Askin, an attorney and professor at Rutgers Law School in Newark, is currently proceeding with discovery and is scheduled to go to trial in November.
"It has to do with whether or not the state Constitution applies to private communities such as the Galaxy," Askin said.
"Owners want the right to put fliers under apartment doors," Askin said. "The association does it whenever they want, but owners aren't allowed."
They also want an equal voice on the condo's in-house cable station, Time Warner Access Channel 26, and publication, the Galaxy Newsletter.
Stanley Maron, 71, a unit owner at the Galaxy for 11 years, is so upset he's decided to relocate to Massachusetts next month. "My biggest reason for leaving is the stress of such a restrictive environment," he said.
Michael DeLuca, president of the Concerned Unit Owners Group, said the board of directors would not allow their opponents to campaign inside the building before the March election.
"They wouldn't let us put up posters in the complex, so we rented trucks to put posters on across the street," he said.
"We were told (by the election committee) we couldn't wear buttons or hats with the candidates' names," said Lynn Miles, an owner at the Galaxy for about a year and a half. "They came out with these rules about a week before the election and we didn't want our candidates disqualified, so we followed."
"It was never written down; it was all verbal," she said.
Joel Price, vice president of the condominium association, refused to comment. "The case is in the discovery stage and our legal team has advised us not to discuss it." (From The Jersey Journal, July 11, 2005)
Posted by joewest at 9:39 AM