Insurance Firm to Pay $40 Million

A Canadian-based women’s sportswear firm has won a $40.3-million verdict in a bad-faith insurance case that arose out of a 1978 accident in which a Torrance man lost a leg.

A Los Angeles Superior Court jury awarded $5.3 million in compensatory damages and $35 million in punitive damages to Winnepeg-based Tan Jay International Ltd. from the Canadian Indemnity Co. The total figure, awarded Tuesday by a unanimous jury, constitutes one of the largest sums ever won in this type of case, attorneys said.

The action arose out of an accident that occurred when Tan Jay employees attempted to tow a sailboat on a trailer from Marina del Rey to Gardena without lowering the mast. The mast struck a power line, and a passenger, Douglas Michaelson, 26 at the time, suffered electrical shocks that caused severe burns and led to the loss of a leg.

Although Tan Jay had purchased a comprehensive business liability policy from Canadian Indemnity, the insurer claimed that the policy did not cover the incident.

Michaelson won a $4.4-million judgment from Tan Jay and another defendant in 1983, which was later reduced to $2.15 million, according to Douglas G. Gray, Tan Jay’s attorney.