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Insurer Settles Fraud Case for $20 Million

March 07, 2000

NORTH HILLS — 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, 50, president of the homeowners association for Nordhoff Townhomes. "We took on a giant, and we beat him with a stick."

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 alleged that Farmers, through Truck, had "unjustly" refused to pay to tear down and rebuild their earthquake-damaged building, said North Hollywood attorney Bernie Bernheim, who represented them.

During the trial, Bernheim presented a videotape from a former Farmers insurance adjuster who testified 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.

On Thursday, after deliberating for three days, a jury agreed with the homeowners. On Sunday, two days before the case was scheduled to move into the punitive phase, both sides reached a settlement agreement, according to lawyers on both sides.

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

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