Daily Journal
May 8, 2009

Rare Verdict for Policy Holder In Insurance Coverage Dispute

By Jason W. Armstrong
Daily Journal Staff Writer

SAN BERNARDINO - In what a plaintiffs' lawyer called a rare judgment, a Superior Court jury Thursday found State Farm negligently underinsured a San Bernardino man's home that burned to the ground in the 2003 wildfires that swept through his neighborhood.

After a five-day trial, the jury found the insurance company should have notified 88-year-old retired attorney Ed Keller that his $198,000 homeowner's policy limit should have been at least $338,000. Keller couldn't afford to rebuild a similar home after the blaze, his lawyer said. The trial focused on State Farm's alleged negligence; the insurer agreed beforehand to pay Keller $350,000 plus court costs in the event negligence was found.

Keller's attorney, Ricardo Echeverria of Claremont, said the verdict was unusual because insurance companies generally have "no responsibility" for making sure homeowners' limits will adequately cover losses. Many homeowners don't realize they lack sufficient insurance, Echeverria, a name partner with Shernoff, Bidart, Darras & Echeverria, said.

"In a very narrow exception, we were able to prove that State Farm misrepresented that [Keller's] policy was in fact a full replacement cost policy," Echeverria said Thursday. "He was assured that he was fully insured, and he wasn't."

James Robie, whose Los Angeles-based firm, Robie & Matthai, was co-counsel for State Farm in the case, said the insurer would be "looking at its options," in light of the verdict.

Randall N. Nunn, a San Diego lawyer who defended the company in the trial, argued State Farm wasn't negligent and that it was Keller's responsibility to determine his appropriate insurance limits, among other things. Nunn, a name partner with Hughes & Nunn, could not be reached Thursday.

When Keller signed up with State Farm to insure his custom-built 50-year-old home in 1999, he argued, he thought his coverage limits seemed too low. But when he voiced his concerns to the company, he said, representatives told him his policy was "substantially above" the cost of rebuilding the house and that State Farm kept track of construction cost hikes that might affect the limits.

Four years later, Keller's home was one of dozens destroyed in the so-called Old Fire, which blackened thousands of acres in the mountains above San Bernardino and in the northern section of the city.

Keller couldn't afford to rebuild a similar home and eventually sold the lot where his home sat, Echeverria said.

To get the lawsuit before the jury, Echeverria cited state case law, holding that an insured can argue insurer negligence when an agent makes certain representations about coverage but later fails to provide that coverage.

The trial was heard in the courtroom of Judge John Wade. The case is Keller v. State Farm General Insurance Company, SCVSS119747 (San Bernardino County Super. Ct., filed 2004).