Chatsworth Firm Wins Ruling Against Insurer

A Chatsworth firm won a key court ruling against its insurance company last month in federal court in Los Angeles, which forced the insurer to pay for defense costs and damages in a trade-secret misappropriation lawsuit.

The local firm, Sentex Systems Inc., was a start-up manufacturer of commercial and residential security systems in 1990, when a larger rival, Electronic Security Services Inc., filed suit against it. That complaint alleged that Sentex had hired a former Electronic Security sales manager and used confidential, trade-secret information to steal customers and designs. The lawsuit sought damages of more than $1.5 million.

Sentex’s insurer, Hartford Accident & Indemnity Co. refused to pay for Sentex’s defense costs, Sentex said. In August, 1993, Sentex said, it agreed to settle the trade-secret suit by paying Electronic Security $35,000. The same month, Sentex sued Hartford for bad faith.

Last month, federal court judge Richard A. Paez in Los Angeles ordered Hartford to pay Sentex’s costs for the Electronic Security suit. The amount that Hartford will have to pay is estimated at $130,000, including the amount of the settlement and legal fees, said attorney Carol Meedon of Callahan & Gauntlett, which represented Sentex.

“That might not sound like much,” said Meedon. But forcing Sentex to pay for continuing litigation “would have bankrupted the company,” she said.