Farmer’s Insurance Bad Faith


Insurer Faulted for Firing Adjuster Over Quake Claims
Wednesday, February 23, 2000

A Los Angeles Superior Court jury ordered Farmers Insurance to pay a former adjuster $9 million in punitive damages Tuesday after charging the company fired him for refusing to underpay claims following the 1994 Northridge earthquake, his attorney said.

Kermith Sonnierwas also awarded $1.46 million in compensatory damages after jurors found Farmer’s supervisors unfairly fired him for resisting Farmers directives to reduce loss estimates on quake-damaged homes, Sonnier’s attorney Steven Ball said.

“Farmers argued that Mr. Sonnier was let go because the work was running out,” Ball said in a statement. “But the evidence showed Farmers, to this day, has kept every other adjuster who didn’t complain about their orders from Farmers.”

Officials with Farmers could not immediately be reached for comment.

Sonnier worked as a commercial claims adjuster for Farmers from January 1994 to August 1997 and handled some of the largest quake claims, including apartment complexes and condominiums, according to Ball.

But as payouts mounted, Ball said the insurance Farmers officials started to put pressure on its adjusters to lower estimates of losses.

In one instance, a loss first estimated at $20 million was lowered to less than $10 million, Ball said

Sonnier was fired for urging that a loss estimate at a condominium complex, where asbestos was found, be reduced, Ball said.

Valley Couple Win $12 Million in Suit Against Insurer;

Friday, May 21, 1999

A Los Angeles jury awarded nearly $12.3 million to a Woodland Hills couple whose insurance company refused to pay their claim stemming from damage due to an aftershock of the 1994 Northridge earthquake.

Nancy and Jefferey Pomerantz filed suit in November 1995 after claiming that Mid-Century Insurance Co. wrongfully denied their $125,000 property damage claim. Mid-Century is part of the Farmers Insurance Group.

After an eight-week trial, the jury found Wednesday in favor of the plaintiffs and awarded them $260,000 in compensatory damages and $12 million in punitive damages.
Los Angeles Superior Court Judge Owen Kwong will determine next week how much to award the plaintiffs’ lawyers for their fees and costs incurred in prosecuting the case.

“The jurors sent a message to Farmers that the public will not stand an insurance company not honoring its policy,” said plaintiffs’ attorney Patricia Moore. “The Pomerantzes were subjected to a grueling, lengthy legal battle with a relentless insurance company. But $12 million is a powerful message.”

Lawyers for Farmers could not be reached for comment.

Tuesday, January 19, 1999

Quake Toppled Companies, Renewed Others;


On Jan. 17, 1994, the San Fernando Valley’s business community got the wake-up call of a lifetime.
For some business owners, the terrifying temblor was a startling jolt that roused them from years of vocational slumber, and helped create invigorated enterprises that today enjoy revived revenues and increased profits.
For others, the deadly Northridge shaker came out of the night like an icy hand, pulling the covers off firms that, already weakened by years of regional recession, could not take the weight of the shifting earth and the resulting structural collapse.
The toll exacted by this seismic alarm clock was staggering: at least 57 people dead and an estimated $40 billion in damage, making it the costliest natural disaster in U.S. history.

More than 22,000 firms in the region, most of them in Los Angeles County, turned to the Small Business Administration for help on the heels of the 6.7 magnitude quake. They collected more than $1.4 billion to replace broken fixtures, water-logged inventory and crushed computers.

With destruction on such a scale, it’s unsettling to think of any “winners” arising from these scattered ashes.

Still, there are firms, even industries, that have emerged from the adversity stronger than ever. It is testament to the resilience of the entrepreneurial spirit and the strength of the desire to make a buck.


A large steel beam came crashing down into the office from which Al Gold ran his not-quite-50-year-old business, Gold’s Graphics Mfg. Inc., a Pacoima-based company that makes, among other things, promotional banners typically strung on light poles.

During the Northridge earthquake, the roof on Gold’s Graphics gave way.

“If I’d been in the building, I would have been killed,” said Gold, who founded the company and serves as its chairman and CEO. “The whole place was a mess.

“I thought we were done for.”

As luck would have it, two days before the earthquake, Gold had moved $1.5 million worth of inventory to new, rented space two blocks from his existing facility. Though the new place had no heat or power, at least it was still standing. So he moved the rest of his operation to the new facility and started over.

Gold took advantage of the involuntary remodeling to go high-tech. Investing $5 million, including more than $1 million in loans from the SBA, Gold revamped his operation and in the process, quadrupled his sales.

“Before I was kind of fat and happy,” said Gold. “Then, we were in a crisis, and we had to prevail.”

Gold, who received a Phoenix award from the Valley Economic Development Center for his post-quake comeback, said that bringing his company back from the brink gave him one of the biggest thrills of his life.

“We’ve gone through an awful lot, but we’ve come out better than we were.”

That better-than-ever sentiment was echoed by John Rooney, president of the Valley Economic Development Center.

“There was a big shakeout, and a lot of businesses went under,” Rooney said. “But there was a lot of capital infusion into the area. The businesses that did survive invested in their businesses and have become more competitive.”

Rooney added that he also saw an emotional effect from the quake.

“It created a real entrepreneurial spirit,” he said. “There’s a can-do attitude.”


Of course, not every story has had a happy ending.

Woodland Hills bankruptcy attorney Kenneth Jay Schwartz said fully half of his clients, homeowners and business owners, mention the earthquake as the root cause of their slide into bankruptcy.

“A lot of people are still trying to dig out from the effects of the earthquake,” said Schwartz, who’s been a bankruptcy lawyer since 1981. “A lot of people would mark that as the beginning of their decline but they just kept holding on.”

Before surrendering to bankruptcy, some business owners tried to sell, but couldn’t find buyers.

“We noticed an incredible drop in the number of businesses for sale for six to nine months after the earthquake,” said Peter Siegel, publisher of California Businesses for Sale magazine. “People wanted to get out, but they couldn’t get the price they wanted for their business.”

Some of the most heart-rending post-quake stories come from businesses and homeowners who are still fighting with their insurance companies over unpaid or underpaid claims.

Those gripes have led to one of the flourishing post-quake growth industries: attorneys handling claims against insurers and contractors.

“We had tons of earthquake work, but the construction defects work stopped,” said Alan I. Schimmel of Schimmel, Hillshafer & Loewenthal in Sherman Oaks. He estimates that, even taking into account the decreased load in other types of cases, the earthquake increased his firm’s business by 25% to 30% overall.

“We have 17 bad-faith cases,” against the Farmers Insurance Group and its related insurance exchanges, said Schimmel, who represents several homeowner associations. “We’re talking about literally thousands of families.”

Farmers Group, the nation’s third-largest insurer, also was the focus of ire Sunday as a small group of North Hills condo owners and their supporters held a public protest against what they contend was unfair treatment by the insurer. While acknowledging that Farmers has paid them $2.5 million, the group says the insurer owes them thousands more, funds they say are needed to bring their building back to pre-earthquake condition.

Lorraine Enriquez, a spokeswoman for Farmers, said the company feels it has handled the North Hills case–and Northridge claims in general–fairly.

“Farmers has done an excellent job of settling the majority of Northridge earthquake claims,” she said, with only 183 claims still unresolved out of 36,750 filed.

Last month, Woodland Hills-based 20th Century Insurance was ordered to pay $3.3 million in damages to a Northridge family that filed suit after the company failed to promptly pay earthquake claims.

It was one of 12 suits filed against 20th Century as a result of earthquake disputes, according to company spokesman Ric Hill. In four of those cases, more than $4 million in additional payouts were ordered. The rest, he said, were dismissed or a determination was made that the claims were not valid.

Hill, who has been with the company for 22 years, defended his firm’s handling of earthquake claims.

“Twentieth Century has been extremely responsive to policyholders, without a doubt,” said Hill, who added that the company to date has spent about $1.057 billion on claims and the “evaluation effort” associated with those claims.

Hill, whose parent company posted a 16% increase in profits for the first nine months of 1998, could not give a breakdown on how much of that $1 billion plus went to reimburse policyholders and how much was for internal administrative costs.

As more court cases are filed, and findings appealed, the insurance issue threatens to keep the wounds of the Northridge earthquake fresh in the minds of many for years to come.

For many others, the quake will be remembered as the day we awoke to find that we were stronger and smarter than even we had suspected.

Said Rooney, of the economic development center:

“It’s been an amazing experience–that I never want to repeat.” Making Contact:

The Valley Economic Development Center has a $6-million loan fund available to help businesses harmed by the Northridge earthquake. For more information, call (818) 907-9977 and ask for Roberto Barragan. *

Valley @ Work runs each Tuesday. Karen Robinson-Jacobs can be reached at * SHARED MEMORIES: Quake survivors reveal naked truth about preparedness.

For the Record;
Los Angeles Times Friday, January 22, 1999
Valley Edition; Metro; Part B; Page 3; Zones Desk;
2 inches; 45 words;
Type of Material: Correction

Quake suits–An article Tuesday incorrectly stated the number of lawsuits related to the Northridge earthquake filed against 20th Century Insurance. Less than 230 suits have been filed, 12 have gone through litigation, about 100 are pending and others have been settled or dropped, according to a company spokesman.


By MARY ANNE OSTROM, Mercury News Staff Writer

Stuck in a bureaucratic nightmare, six families whose condominiums burned in March are still out of their Morgan Hill homes because they’ve been waiting for Farmers Insurance Group to pay off on the fire damage.

Construction work stopped the first of July at Park Place Condominiums because the insurer was so far behind in paying for repairs — and then promised but never delivered enough money for the contractor to finish up, homeowners say. That is until Monday, when, after receiving calls from the Mercury News, Farmers hand-delivered a $90,000 check to complete repairs.

But homeowners, who spent most of the last two months haggling, cajoling and pleading with the insurer, say they shouldn’t have had to go through this.

”First we were fire victims, now we’re victims again,” said Colleen Di Nardo, whose unit sustained major damage. A different insurer who covered her personal belongings was becoming so impatient that it suggested it would cut off paying her interim rent because repairs took so long.

For their part, Farmers officials say it was a case of “miscommunication.”

”If we were aware of the situation, we would have done something about it,” said Steve Roditti, a regional claims manager, “and when we became aware, we did.”

But homeowners and the contractor said they called and wrote Farmers several times asking why they were holding up payment on the $240,000 job. After all, the insurer had approved the contractor’s bid and work was ahead of schedule. But, they say, Farmers refused to tell them. Or help. Now, contractor Ralph Dominguez says he’s about a month behind schedule and is rushing to get everyone moved back in by the end of August — six months after the fire. Dominguez said he became irate when a Farmers adjustor suggested to his office manager that if he couldn’t wait 90 to 120 days to be paid, “I should get out of the building business.”

Meanwhile, Greg and Kim Quirke cannot afford to pay rent, plus their mortgage and condo association dues, so they are living with Greg’s parents.

”It’s a mental headache. All of our things are in storage,” said Greg. “I’ve called the adjustor for Farmers. Their bottom line is that a claim of this size takes a lot of time and is out of their hands.”

When the condominium association’s president called to see why a promised check hadn’t arrived, a local Farmers adjustor said his office couldn’t do anything: “When I asked ‘Where do we go from here?’ he said he had no idea,” Nancy Spencer said.

”We pay our premiums on time,” Spencer said. “If we failed to pay for this length of time, we would have been dropped.”<

Complaint: Farmer’s Insurance
Date: 10/15/98
Name: Dave Snowden

Farmer’s Insurance $650,000 Delay Game by Denial After one year, Farmer’s denied coverage on a total loss with no evidence

We lost our home to fire on May 20, 1995. Farmer’s Insurance denied coverage in April, 1996, based on “fire of suspicious origin”. We’ve entered an extended lawsuit wherein our attorneys and their expert witnesses have established there is zero evidence to support Farmer’s claim and this whole thing is about delay of payment.

When presented with our evidence, Farmer’s hired a second “Fire Investigator” (approximately 18 months after the fire), to try and strenghten their case. They then made a weak attempt at settlement. This was in Oct., 1997.

It is now October of 1998 and we have been delayed payment three and one-half years since the fire. We’re waiting for a court date as the previous three have been delayed. Our attornies advise us it will probably go to five years (statue of limitations) before we’ll get to court. And then Farmer’s will probably try to settle.

Meanwhile our family and our financies have been devastated. We purchased the best “deluxe” policy available and paid on it for many years. When we need it, we learn the insurance business is a big game. Its all about “delay of payment” as the interest Farmer’s earns on the $650,000 they owe us is over $5,000 per month income to them. Six years (one year to deny the claim and five to get to court) at $5,000+ compounded monthly interest income will earn them more than the $650,000 they owe us.

Further, they routinely deny over 50% of large claims hoping the people will give up, divorce, get discouraged and take less or just die. What a glowing example of integrity and empathy from an American Insurance Company.

As I see it, an insurance company only has three avenues to make money: Charge more, pay less, or invest agressively; each of these carrying their own separte risks. Very unfortunately my family is experiencing Farmer’s most unrisky money making avenue: “Screw the customer, let them rot in Hell, and either never pay or wait long enough to have the claim help pay its self.”