Failure to pay $1 million policy costs insurance company over $9 million

Healy Scanlon has settled a bad faith claim against an insurance company for over $9,000,000 for failing to settle for the $1,000,000 policy limit. The case stems from a construction site injury when a dump truck owned and operated by JMS Trucking ran over and killed a 63-year-old laborer. He was underneath the dump truck measuring a manhole cover on a City of Chicago street in January of 2004. A lawsuit was filed and a demand for JMS’ $1,000,000 policy limits was made shortly thereafter. The settlement demand was rejected and Healy Scanlon Law Firm proceeded to trial almost 3 years later, resulting in a jury’s verdict in favor of Plaintiff on May 1, 2007. The jury awarded $9,264,600, reduced by 10% comparative/contributory negligence to $8,338,140. (No. 04 L 401).

Subsequent to the verdict, JMS Trucking declared bankruptcy. The U.S. Bankruptcy Trustee retained Martin Healy, Jr., Plaintiff’s attorney in the underlying claim to pursue a bad faith claim against JMS’ insurer, Occidental Fire & Casualty Company of North Carolina. In addition, the driver of the truck Sam Indendino assigned his separate cause of action against Occidental to the Plaintiff. After the underlying verdict, Occidental paid the $1 million policy plus interest.

Occidental contended it did not act in bad faith because Plaintiff’s attorney made only one settlement demand. The letter was before any depositions had been taken and stated that the demand would expire in 30 days. Occidental further contended that it was reasonable in defending the case due to fact that the laborer was underneath a running dump truck at the time of the accident. Occidental believed that Colella could be found close to or over 50% at fault. Occidental also claimed it did not act in bad faith because it made an offer of $500,000 prior to trial, which was rejected by the laborer’s family.

In addition to Martin Healy, Jr., Kevin Veugeler, Dennis Lynch and Patrick Anderson of Healy Scanlon represented the Bankruptcy Estate of JMS Trucking, in the bad faith case. As additional counsel, Richard Prendergast and William Harte were brought in to represent the Plaintiff as assignee of the truck driver. Occidental was represented by Rebecca Ross, James Sanders and William Pipal of Troutman Sanders. The case proceeded to trial before Judge Raymond Mitchell, but was assigned to Judge Lorna Propes on the onset of trial for a pre-trial, which resulted in the settlement.

In the end, Occidental paid the entire verdict of $8.3 million in addition to approximately $800,000 in interest. According to Settlement Reporter records, it is the largest recorded recovery for a bad faith failure to a policy limit claim. The U.S. Bankruptcy Court recently approved and paid the final portion of recovery.