Homeowners Win $20 Million From Insurer in Settlement

An affiliate of the Farmers Insurance Group has agreed to pay $20 million to settle a suit filed by owners of a condominium complex who claimed the insurer balked at rebuilding their homes after the 1994 Northridge earthquake, attorneys said Monday.

“I think in a way we showed the insurance industry that the little man can win,” said Myron Mikkelson, president of the homeowners association at Nordhoff Townhomes, 9047 Langdon Ave. “We took on a giant and we beat him with a stick.”

In the case, one of the many lawsuits still pending against insurers following the January 1994 temblor, the association alleged bad faith, fraud and intentional concealment against Truck Insurance Exchange, part of the Farmers Group, for its handling of the claim.

The homeowners, who are mostly minorities, alleged that Farmers, through Truck, had “unjustly” refused to pay to tear down and rebuild their earthquake-damaged building, according to North Hollywood attorney Bernie Bernheim, who represented the association.

Bernheim presented a videotape from a former Farmers insurance adjuster who testified, among other things, that he was given a target dollar figure for the claim by a Farmers supervisor who had never seen the damage to the 50-unit complex.

Farmers fired the man, Kermith Sonnier, who sued and was recently awarded $9 million in punitive damages and $1.46 million in compensatory damages.

Thursday, after deliberating three days, a jury of five women and seven men agreed with the association. Sunday, two days before the case was scheduled to move into the punitive phase, a settlement agreement was reached, according to lawyers on both sides.

The settlement, which Bernheim described as one of the largest single claims arising out of the 6.7-magnitude earthquake, was formally presented in Los Angeles Superior Court on Monday.

Kurt Peterson, the lead attorney for Truck, said the company decided to try to settle the matter after the jury, in the first phase, awarded the association $3.98 million in compensatory damages--”exactly what the association was asking for.”

“When Truck looked at all of the options, plus the two or three years for the appellate process . . . the company made a decision that the case should be settled,” Peterson said.

Peterson noted that the carrier already had paid the group about $2.5 million over the years to cover repairs--which he said was evidence they had tried to act in good faith.

Bernheim said that by the time attorney’s fees and costs are deducted, the homeowners association will probably receive $9 million to $10 million. Among the costs was a $200,000 study, commissioned by the association, that Bernheim said showed structural problems including badly damaged framing and split studs.

Bernheim said he took out a second mortgage on his home to help bankroll the case.

Homeowners president Mikkelson, a decorated Vietnam veteran, said the association board has not yet decided how to proceed: whether to rebuild or sell the property for its land value.

Mikkelson bought into the building in 1998, paying $41,500 for a HUD-owned unit, unaware of the reported structural defects.

“Now that we know, we can’t sell the property, so actually it’s worth nothing,” he said.

Harry Underwood, 52, has lived in the modest complex, where, pre-quake, units sold for less than $100,000, for nearly 16 years.

Underwood, also a decorated veteran, said he would like to see the complex rebuilt.

“This is my home,” said Underwood. “It’s been my home for almost 16 years.

“When Mother Nature took over, she remodeled it her way. Now, I want it remodeled back the way I want it.”