Judge Slashes Jury’s Punitive Damage Award Against Insurer

A Los Angeles Superior Court judge has reduced to $500,000 a jury’s $6.75-million punitive damage award against 20th Century Insurance for its refusal to pay a Northridge earthquake homeowners claim.

A jury found 20th Century guilty of fraud and bad faith in July for denying a quake-damage claim filed by schoolteachers James and Lorraine Meyer of Tarzana.

20th Century, however, filed a motion for a new trial. Two weeks ago, Judge Daniel A. Curry ruled the punitive damage award was excessive, and said if the Meyers did not accept the reduced sum there would be a new trial to determine only the punitive damages award.

The judge let stand the jury’s fraud and bad faith verdicts against 20th Century, plus its award of $306,000 to cover the Meyers’ home repairs and for emotional distress, plus $174,000 for attorneys fees and expenses.

20th Century spokesman Ric Hill said it was “encouraging that [the court] removed what was clearly an excessive verdict.”

David Prestholt, one of the Meyers’ attorney, said his clients “were understandably disappointed.”

But the Meyers are intent on going ahead with a new trial to try and win a sizable punitive damage award, Prestholt said.

“If anything, it has strengthened their resolve to basically be the ones to bring 20th Century’s conduct out in the open,” Prestholt added. “At some point 20th Century will just have to recognize what they did was wrong and pay the claim.”

It will be at least a year before a new trial can begin, he said.

The Meyers’ case became something of a lightning rod for consumer activists because it resembles hundreds of other cases against various insurers over unresolved Northridge quake claims.

In it, 20th Century’s defense was essentially based on its controversial interpretation of a one-year time limit to file a damage claim.

In some instances, 20th Century sent a claims adjuster who found only modest quake damage. Later, some policyholders found more serious damage to their homes and filed a new claim, but 20th Century typically denied those claims if they were made after the one-year time limit.

Last spring, state Insurance Commissioner Chuck Quackenbush finally addressed the time-limit issue, berating some insurance companies who “are using this as a blatant stall tactic to [avoid] paying out claims.”

During the Meyers’ trial, Paul Castellani, the former top claims executive for 20th Century, testified as a witness.

In earlier court documents, Castellani had said 20th Century was taking shortcuts in the handling of some quake claims, and that he was against blanket time-limit denials for quake claims.

20th Century, based in Woodland Hills, was nearly put out of business by the 1994 temblor when it was swamped with 46,000 quake-damage claims. The company has paid out about $1 billion to cover such claims.