Insurers to Pay $386 Million in ‘Stonewall’ Case : Courts: L.A. jury awards Amoco Corp., which was insured by a Lloyd’s-led consortium, in one of the largest ‘bad-faith’ verdicts in state history.

A Los Angeles jury Tuesday socked Lloyd’s of London and other insurers with $386 million in punitive damages for their failure to pay claims arising from a series of product liability lawsuits against a unit of Amoco Corp.

The award--together with $39 million in compensatory damages assessed last Friday--is believed to be one of the largest insurance “bad-faith” verdicts in California history. It follows a two-month trial in Los Angeles County Superior Court.

The jury punished the insurers for what Amoco’s lawyer called “a six-year stonewall.”

Lloyd’s, through its Los Angeles attorney, David Parsons, declined to comment.

The case arose from lawsuits initiated in the mid-1980s by six municipal sewer and irrigation districts in the Western United States that had purchased reinforced plastic pipe up to 12 feet in diameter made by a former Amoco division in Riverside. The municipalities--in California, Alaska, Hawaii and North Dakota--claimed the pipe was defective.

Chicago-based Amoco won three of the suits and lost three, sustaining $34 million in judgments and $5 million in legal fees and interest, according to Amoco’s attorney, Ronald M. Oster of the Los Angeles firm of Paul, Hastings, Janofsky & Walker. The largest verdict--$12.2 million--went to the Cawelo Water District, near Bakersfield.

But when Amoco turned to its insurers for reimbursement, the stonewalling began, Oster said Tuesday.

Amoco, as is typical for large corporations, was insured by a consortium of carriers that included 40 Lloyd’s syndicates plus 50 other companies from around the world. “A huge proportion of the world insurance industry was represented in the courtroom in this case,” Oster said.

After six years of getting little more than a runaround, he said, Amoco filed suit in 1991.

During the trial, representatives of the Lloyd’s block of companies took the position that Amoco had never filed a proper claim--a “preposterous argument,” Oster said, adding that the Lloyd’s group “simply never responded to what Amoco sent in.”

The other carriers said it was just taking them a long time to investigate the claim.

Another contention by some of the insurers was that Amoco had knowingly sold defective pipe, which would have voided the terms of its insurance contracts, Oster said.

The jury took all of November to deliberate the case, but after reaching the initial verdict Friday, the panel needed only two more days to assess the punitive damages.

Lloyd’s is facing severe problems on other fronts as well. The insurance market is still reeling from billions of dollars of losses in its most recent business years and faces lawsuits filed by hundreds of its individual investors, or “Names.” In London on Tuesday, leaders of groups representing the Names rejected a proposed $1.34-billion offer from Lloyd’s to settle their claims for losses.