Maryland Casualty ordered to pay $7.9 million in case

August 28, 1991|By Peter H. Frank

Maryland Casualty Co. has been ordered to pay nearly $7.9 million to a San Diego business that claimed the insurer failed to properly defend the company in a multimillion-dollar legal battle.

A San Diego Superior Court judge strongly admonished the Baltimore-based insurer for improperly arguing that its customer's policy had lapsed and failing to provide a full legal defense for the policyholder.

"I think that there has to be a message sent to the corporate board, and there has to be a flushing-out of this attitude that has been demonstrated by this case," Judge Donald Meloche said from the bench during a June 20 hearing at which punitive damages were first set at $2.2 million. "It is absolutely unbelievable, the actions that have been taken by these people."

Judge Meloche, petitioned by both sides to reconsider the award, increased punitive damages to $7.5 million at a hearing Friday. The plaintiff,James E. Ethridge, an owner of a small trucking company in southern California, also was awarded $381,000 in compensatory damages.

Sarah Adams, a spokeswoman for Maryland Casualty, said that the company would appeal the decision. "Our position is that we JTC believe that the judge has made errors in both fact and the law," she said.

Although a sizable award, Maryland Casualty Vice President John Anderson played down the financial impact the payment of damages would have on the company.

"While obviously we're concerned about an award of this magnitude, it's obviously not going to have a damaging impact on our finances," he said. Owned by the Zurich Insurance Group, a Swiss company,Maryland Casualty had $3.65 billion in assets as of June 30.

The case stems from a 1985 accident in which a 5-year-old boy was pinned under a pile of building debris that had been dumped at a site in a San Diego suburb. The boy suffered from oxygen deprivation when concrete slabs fell on his chest, leaving him a quadriplegic.

Mr. Ethridge, one of a number of defendants who had delivered the construction material to the site, was sued by the boy's family. The other defendants have settled.

Earlier this year, Maryland Casualty settled the lawsuit filed by the boy's family for $3.3 million.

Maryland Casualty argued that the insurance policy had been canceled months before the accident occurred because the premiums had not been paid, Ms. Adams said. The company claimed it should not be held liable for the damages under that policy.

Mr. Ethridge filed suit, claiming that the coverage was still in effect and that the insurer had not provided for his defense. Judge Meloche found that because the insurer failed to tell California's Public Utilities Commission that the policy had lapsed, as required by state law, Mr. Ethridge retained coverage and was entitled to legal defense by his insurer.

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