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Nationwide Insurance subsidiary loses in California earthquake insurance verdict

A Los Angeles jury has awarded almost $7 million in earthquake repair costs and bad faith damages to a California condominium owners association.

"It feels great like we've been vindicated. Now we're finally able to get back to where we were."

The June 15, 2001, decision in Tara Hill Homeowners Association vs. Scottsdale Insurance Co. is the first jury verdict for Northridge earthquake insurance benefits under a law signed Oct. 1, 2000, that extended the statute of limitations for new lawsuits involving the 1994 Northridge quake until the end of 2001.

According to Brian Kabateck, the attorney for the association, the condominium owners alleged in the case that Scottsdale Insurance, a subsidiary of Nationwide Mutual Insurance Co., deliberately misled them by first advising them that they had suffered no damage from the Northridge earthquake, and then by "low-balling" and underestimating the damage after the claim was reinstated under the new law.

"It feels great, like we've been vindicated," says Ben Dudley, a member of the Tara Hill Association. "Now we're finally going to be able to get back to where we were."

The month-long trial ended when the Los Angeles jury awarded the Tara Hill Association $5.2 million to repair earthquake damage, and an additional $2 million in damages caused by Scottsdale Insurance's bad faith handling of the claims. The jury also determined that the policy's deductible was $500,000.

Although the jury also concluded that Scottsdale Insurance acted with malice and defrauded the homeowners out of their insurance benefits — a ruling that would entitle the association to ask for punitive damages — Los Angeles Superior Court Judge George Wu ruled that the legislation that allowed the suit was punishment enough for the insurer, according to the condominium association's lawyers.

Scottsdale Insurance, however, has challenged the verdict, and is confident that the decision will not stand.

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