Farmers Insurance: $40-Mil Award


LOS ANGELES —A Los Angeles Superior Court jury Wednesday awarded a former San Bernardino County contractor $40 million in punitive damages for his bad faith claim against an affiliate of Farmers Insurance Group.

Craig Rossell, the attorney who represented contractor Perry Hanstad, 48, said the case was “part of a huge pattern of denying and delaying payments on claims,” similar to allegations that arose out of the company’s handling of Northridge earthquake claims.

This case, which was unrelated to the earthquake, stemmed from Farmers’ decision not to pay a 1993 fraud award imposed against the contractor, who was insured by Truck Insurance, an affiliate of Farmers.

That fraud judgment came out of an arbitration case, following a poorly done remodeling and expansion job in Arcadia.

Even though fraud was covered by Hanstad’s policy, Farmers balked at paying, ultimately forcing Hanstad into bankruptcy, according to Hanstad’s 1996 bad faith lawsuit against Truck. The insurer also claimed it was not obligated to defend Hanstad against the fraud allegations.

The jury also awarded Hanstad about $2 million in compensatory damages last week.

In a prepared statement, Farmers said it did not have a “contractual obligation to defend” Hanstad.”