A jury in Oklahoma recently returned a $130 million verdict against Farmers Insurance Co., the Los Angeles-based subsidiary of Zurich Financial Services. A group of Oklahoma homeowners, who alleged the company had underpaid on claims, contended that Farmers improperly failed to pay for general contractors. They alleged claims for breach of contract, bad faith and fraud. Each one of about 76,000 people had an average of about $575 in unpaid bills for repairing damaged homes. The jury awarded the homeowners as compensatory damages $50 million for breach of contract, and $50 million for bad faith and $30 million were assessed as punitive damages. The verdict includes duplicate compensatory damages, which is improper. That will result in the total judgment being $80 million. The homeowners will also receive 15% interest on actual damages and attorneys’ fees if the verdict is upheld. Farmers will appeal.

The homeowners include Farmers’ customers in Oklahoma who made claims from June 1994 through mid-2007. The homeowners contended that Farmers should have covered compensation for overhead and profits for general contractors. Michael Burrage and Derrick Morton, who are from Oklahoma, represented the homeowners in the case and did a very good job.

Source: Bloomberg News

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