Company Wins Judgment Against Insurer’s ‘Bad Faith’

A Placentia company that makes medical devices won a default judgment Tuesday in a bad-faith case against its insurance carrier, which had failed to defend the company in a patent lawsuit.

Orange County Superior Court Judge C. Robert Jameson issued the default judgment in favor of Surgin Surgical Instrumentation Inc. after its carrier, Farmers Insurance Group, refused to comply with a court order.

Jameson had previously ordered Farmers, as part of pretrial proceedings, to turn over to Surgin its policy and procedure manuals on handling insurance claims. Surgin alleged that Farmers didn’t follow its own procedures before denying coverage to it in the patent case.

After spending $270,000 in attorney fees, Surgin ran out of money for its defense and settled the patent case, giving up a 5% share of the market for a disposable device used in cataract surgery, Surgin’s lawyers said in the bad-faith case.

Surgin, which is privately held, will now seek more than $7 million in compensatory damages and will ask for more than $62 million in punitive damages to deter Farmers from acting in bad faith again, said Surgin’s attorneys, Daniel J. Callahan and Steven L. Dickinson of Irvine.

The lawyers said that punitive damages need to be more than $62 million because Farmers was not deterred by a $62-million jury verdict in July, 1991, in another bad-faith case.

Farmers will appeal the decision, said Peter Lichtman, a lawyer for the group.