CBC Framing v. National Union Fire Insurance (Los Angeles, California)

One of California’s largest residential framing companies, CBC Framing, and AIG’s National Union Fire Insurance, which was CBC’s workers compensation carrier, sued each other after their eight-year business relationship ended.

According to Mark Palin (Atkinson Andelson) on behalf of CBC, National Union attempted to extort $14M by raising CBC’s annual rate from $6.1M to $14M on the date of renewal, without notice and without providing enough time to find an alternative insurer.

Palin explained that CBC nonetheless quickly found another workers compensation carrier for just $7.5M. Palin said that National Union responded to CBC’s policy cancellation with “unbridled vengeance” by immediately launching a fraud investigation against CBC, and by inducing the new insurer to cancel its coverage of CBC. Although CBC had misclassified many of its workers as receiving union-level wages, which qualified CBC for a lower insurance rate, Palin said that National Union knew about the misclassifications through its annual audits, and never objected, and even directed some of the misclassifications. Instead, according to CBC, the real fraud was National Union’s mishandling claims, and granting claims that should have been denied, which raised CBC’s costs and National Union’s profits. CBC sought damages of $9M+ for bad claims handling.

“I think the evidence is overwhelming,” said Mr. Palin, “that they tried to set up CBC with a $14M quote on the last day, and then when CBC went somewhere else, they tried to torch that relationship…And it’s simply staggering that you have an insured that you’re trying to get back while you’re investigating them for fraud. The timing on this is absolutely incredible.”

For National Union, Ed Oster (Barger & Wolen) told the jury that CBC’s misclassification of the employees was a deliberate, active fraud designed to improperly decrease its expenses and expose National Union to risk that CBC was not paying for. In addition, Oster told the jury that the insurance agreement required that CBC keep accurate payroll records, and that CBC knew or should have known that the failure to do so would have consequences. Oster characterized CBC as having sales of $167M, and therefore was not small or unsophisticated. National Union requested damages in excess of $30M.

On behalf of CBC’s owner and president John Vojtech, Jon Mower (Mower Carreon & Desai) told the jury that his client did not and could not concoct and execute a scheme to defraud the world’s largest insurance company for eight years. Why, asked Mower, would AIG’s underwriters have renewed CBC’s policy for eight years if they were being defrauded of millions and millions of dollars? National Union almost certainly knew about the misrepresentations in the early years, and there was no evidence that they relied on the class codes to price the contract, said Mower. Instead, the insurance contract was intended to be sold as a market-driven policy based on what they expected their losses to be, and nothing else.

On CBC’s breach of contract claim against National Union, the jury found that CBC’s non-performance under the contract was excused, and National Union breached the contract. The jury awarded CBC damages of $604,002.

On CBC’s covenant of good faith and fair dealing claim against National Union, the jury found that National Union breached the implied covenant and awarded CBC additional contract damages of $798,173. However, the jury did not find oppression, fraud, or malice, which would have justified a punitive damages award against National Union.

On National Union’s breach of contract claim against CBC, the jury found that CBC breached the contract, and National Union was harmed by CBC’s breach, and awarded damages of $5,183,931.

For each of the various remaining causes of action by National Union against CBC and John Vojtech (Intentional Misrepresentation, Negligent Misrepresentation, and Concealment), the jury found either that no false statement was made or important fact concealed, or the error was not reasonably relied upon by National Union.

CVN webcast openings and closings, plus the reading of the verdict, for CBC v. National Union.

In Bosetti v. US Life Insurance, an assistant principal asserted that the Palos Verdes Peninsula Unified School District’s long-term disability insurer should have covered her disability claim based on degenerative back disease and depression.

Plaintiff attorney Tyron Sheppard told the jury that Linda Bosetti’s disability began in January or February of 2003, when Ms. Bosetti was 57 years old, and that she should have received two-thirds of her salary, plus cost-of-living increases, from the onset of her total disability until age 65.

“The evidence will show,” said Mr. Sheppard, “the claims adjusters decided that despite the evidence…of physical disability, these claims adjusters — and the evidence will show that those adjusters were not medical doctors, had no medical training, merely administrators of a claim — they decided…that Ms. Bosetti’s disability was purely mental,” that she had no physical pains or conditions that contributed to her disability, and therefore she was entitled to only 24 months of disability benefits under the policy.

For the defense, Wilson Elser’s Michael Brisbin told the jury that the Ms. Bosetti had only mental, not physical, complaints on January 2, 2003, and on January 13, 2003 she was advised that she was being laid off, effective March 3, 2003. Further Ms. Bosetti’s medical diagnosis on January 22, 2003, included no physical components. On January 23, Ms. Bosetti turned in her keys and began administrative leave. According to Mr. Brisbin, no fibromyalgia or other physical impairment was diagnosed prior to the termination of her employment.

The jury found that physical problems contributed to Ms. Bosetti’s disability before March 3, 2003, and that she continued to be totally disabled after March 26, 2005. The jury awarded Ms. Bosetti approximately $150,499.43.

Watch CVN’s webcast of Bosetti v. US Life Insurance.

CVN will provide a live webcast of Gillette v. OneBeacon Insurance, an insurance liability case involving environmental remediation costs and defense costs associated with groundwater contamination resulting from the release of solvents at a former Gillette manufacturing facility in Santa Monica, California.

The trial will be heard in Boston, before Hon. Judge Christine Roach. The defendants, OneBeacon Insurance, SPARTA Insurance, and Northern Assurance, like Gillette, are all headquartered in Massachusetts. The plaintiff claims coverage under primary comprehensive general liability, umbrella, and excess liability policies.

In the underlying claim, the California Regional Water Quality Control Board (CRWQCB) and the City of Santa Monica alleged that a PaperMate ball point pen factory located at 1681 26th St., in Santa Monica, released solvents during cleaning and degreasing operations that contaminated the Olympic Well Field, which is used as a source of drinking water by the City of Santa Monica.

In its complaint, Gillette claims to have submitted more than $14.5M in covered but unpaid defense, investigation, and indemnification costs, with additional costs anticipated.

CVN will webcast Gillette v. OneBeacon live.

“This is a suit about keeping promises,” plaintiff attorney Michael Keating of Foley Hoag told the jury in SWINC v. Lloyd’s Underwriters. 

The plaintiff, SWINC, represented the bankruptcy estate of Stone & Webster, a large projects engineering company that had declared bankruptcy. The defendants were insurers that had issued a professional liability policy to Stone & Webster. 

Stone & Webster had won a contract from the Maine Yankee to decommission the Maine Yankee nuclear power plant and transform it into a greenfield. However, before the work was completed, Maine Yankee terminated Stone & Webster’s contract.

SWINC claimed that Stone & Webster had failed to comply with its schedule, failed to obtain required permits, and was unable to complete the job on time. The contract specifically provided for termination based on these performance defects, which, the plaintiff said, did in fact occur, and “is precisely the conduct that a professional liability policy is intended to cover.”

The defendants claimed that Stone & Webster’s contract was not terminated because of poor performance, but instead was terminated because of Stone & Webster’s insolvency, and therefore the loss resulting from the termination was not covered by the professional liability policy. Further, according to the defendants, Stone & Webster had misled the insurers as to its financial condition when the policy was issued, which was material because “a contractor that is hurting financially does a bad job.”

Watch the CVN webcast of SWINC v. Lloyds Underwriters.