An insurance company Thursday was ordered to pay a Palos Verdes Estates man $12 million in punitive damages because it unjustly denied his $50,000 claim for fire damages on a Manhattan Beach rental house four years ago.
Torrance Superior Court jurors voted 9 to 3 to order the company to pay the $12 million to compensate for its treatment of Bart Cleveland, the owner of the house. The jurors also voted unanimously to order Farmers Group Inc. and its subsidiary, Fire Insurance Exchange, to pay actual damages of $167,000.
According to Cleveland and his attorney, Michael Whitehill, Farmers tried to implicate Cleveland as a suspect in a June 3, 1987, arson at a Manhattan Beach home he had purchased four months earlier.
After private and government investigators cleared Cleveland of any wrongdoing, Farmers demanded that Cleveland turn over income tax records for the previous five years, paperwork for any other insurance claims that he had ever made and documentation for all other property, medical, disability and life insurance he held.
When Cleveland refused and sued the company for bad faith four months after the fire, the company rejected the claim and refused to discuss settling the case, Whitehill said.
"They were being totally unreasonable. What they wanted was absolutely ridiculous," Cleveland said after the jury's verdict was announced late Thursday afternoon. "Fortunately, I'm financially pretty well set . . . so I was able to fight."
Whitehill said he urged jurors to award a large punitive judgment to encourage Farmers to change the way it handled claims involving arson.
"The company is worth $4 billion, so $12 million is about two weeks' profit," he said. "They advertise fast, fair and friendly service. Mr. Cleveland didn't get fast, fair or friendly service, that's for sure."
Attorneys and officials for Farmers did not return telephone calls seeking comment Thursday.