Judge, Wife Get $1.5 Million in Fire Insurance Lawsuit : Courts: Hancock Park couple is awarded the sum for distress caused by firm’s handling of their claim.

A jury awarded $1.5 million in compensatory damages Tuesday to a federal judge and his wife for mental and emotional distress they suffered because of the way an insurance company handled their claim after their Hancock Park house was seriously damaged by fire in December, 1990.

The Los Angeles Superior Court jury ruled that United Services Automobile Assn. of San Antonio violated “the duty of good faith and fair dealing” in processing the claim of U.S. District Judge Laughlin E. Waters and his wife, Voula.

The jury ordered the company to pay the judge $1 million and his wife $500,000.

“It certainly is a major victory for the judge and his wife,” said attorney William Shernoff of Claremont, the lead lawyer for the couple. “They’ve made the point they wanted to make in this trial--that USAA was guilty of bad faith.”

Judge Waters declined comment until the jurors conclude their deliberations. They are still debating whether the Waterses should also be awarded punitive damages.

On Tuesday afternoon, the jury foreman told Superior Court Judge G. Keith Wisot that the jurors had been divided 8 to 4 on the issue of punitive damages since Friday. A 9-3 vote is needed for a verdict.

Wisot asked the jurors to continue deliberations starting at 9 a.m. today and thanked them for their persistence.

The Waterses filed suit nearly three years ago, charging that the insurance company had “low-balled” them in negotiations over how much it would cost to repair their house. The two sides were apart by about $120,000 at the time the lawsuit was filed.

Shortly after the couple sued, the insurers accepted a bid of $424,000 by the company that the Waterses wanted to use, and renovations began. The insurance company also paid the couple $11,000 a month in relocation expenses for the 15 months they were out of the house. But the couple did not drop their suit, saying the company should be punished for mistreating them.

In response to a question on a verdict form, the jurors said Tuesday that USAA was 100% responsible for the damages suffered by Judge Waters but only 75% responsible for the damages suffered by Mrs. Waters. The jury said she was 25% responsible for the damages she suffered.

No explanation was available on the jurors’ reason for this decision, because the verdict form asked only for a “yes” or “no” answer.

Shernoff said he was unsure why the jurors had made that decision. Guy Kornblum and Paul Fine, attorneys for the insurance company, declined comment on the verdicts.

Wisot rejected a motion by Kornblum for a mistrial on the grounds that jurors had been influenced by a Times article on the case that was published May 8, the day before deliberations began. Wisot polled the jury, and no juror reported reading the article or being influenced by it.