Insurer Faces Up to $30-Million Damages in Suit : * Litigation: A Superior Court ruled that Western Underwriters Insurance Co., which specializes in the Chinese-American market, had lost a lawsuit by default for failure to obey court orders.
A small Orange County insurer that specializes in the Chinese-American market faces up to $30 million in potential damages after a court ruling in a legal battle with a co-founder who now operates competing businesses.
A Los Angeles Superior Court judge ruled last week that Western Underwriters Insurance Co. in Huntington Beach had lost a lawsuit by default for its repeated failure to obey court orders during four years of litigation. The company had been ordered twice to produce documents supporting its claims.
At stake is a commercial liability insurance market of at least $40 million in annual premiums covering businesses in the Little Saigon district of Orange County and areas of Los Angeles County with large Asian populations.
Lin Wu Lan, who founded Western in 1982 with other investors, still must prove her damages at a court hearing to be scheduled at a later date.
Because of Western’s failure to obey court orders, Superior Court Judge Stephen E. O’Neil threw out its lawsuit against Lan and her companies in November without reaching a decision on the merits of the case. Then, last week, Judge Patti S. Kitching threw out Western’s answer to Lan’s suit, saying that Western had insufficient evidence to support its claims or to defend against Lan’s counterclaims.
Lan seeks $10 million in damages for fraud, slander, breach of contract, racketeering and other claims. Racketeering laws provide for the trebling of damages, which could give Lan up to $30 million, and attorney fees of more than $500,000.
Her lawyer, Daniel J. Callahan of Newport Beach, said he expects to be able to prove the damages to Lan and her companies, United Chinese American General Agents (UCA) and Unico Insurance Agency. Currently, the lawyers said, the two groups (Western and Lan’s companies) split the Chinese-American insurance market, with UCA and Unico using other underwriters to issue policies.
Western’s lawyer, Gary A. Waldron of Newport Beach, said he doubts that Lan could prove the racketeering claim or much of the damages she seeks. In addition, he said, the company will seek to overturn the rulings, based on new claims that Lan had the information she sought all along. Callahan denies that contention.
“This is such a unique event,” Waldron said. “It’s very rare that you have a case go through four years of litigation and then have this kind of sanction imposed on discovery.”
The two groups have been fighting since late 1987, when Western’s directors forced out Lan, claiming that she had a conflict of interest. As Western’s president, she used her agencies to funnel orders to Western and handle the underwriting documentation. Waldron asserts that her efforts to maximize profits for her companies conflicted with her efforts to make Western as profitable as possible.
Western sued Lan and her companies for failing to pay $1.8 million in premiums on Western policies that her companies sold and, making other claims, sought $10 million in damages. She countersued for the same amount.
Her companies eventually paid Western $1.5 million, the lawyers said. The state Department of Insurance also revoked the licenses of Lan, UCA and Unico and issued probationary licenses for failing to maintain separate accounts for funds.
