Judge Awards Apartments 2.1 Million Against Insurance Company

Posted By Hicks Thomas LLP || 31-Jan-2001

(Houston) - On January 31, 2001, a jury added $995,000.00 in lost business income and attorneys' fees to District Judge Dale Wainwright earlier award of 2.1 million to the owners of the Spring Creek Village Apartments in Baytown as compensation for tornado damages. Judge Wainwright award upheld a January 1999 independent umpires ruling.

The awards brings to a close the first round of a disputes to the amount of loss caused by a February 1998 tornado. Spring Creeks original insurance policy with Reliance Insurance Company of Illinois, stipulated that in an event of the disagreement as to the amount of loss, they would enter into the appraisal process. The appraisal provision in the policy in the policy stated, the umpires decision would be binding as long as one of the two parties agreed to the ruling.

The tornado damage was significant and Spring Creek's were not unreasonable. The umpire realized this and found damages to be 2.1 million," says Grant Cook, Partner, Thompson Knight Brown Parker & Leahy LLP, who represented Spring Creek at trial. Reliance still did not want to honor it's obligations. The best they could do was fight back with wild claims."

Reliance and its excess carrier General Star Indemnity Co. refused the umpire judgment, arguing that the award was inflated for several reasons, including Spring Creek's failure to mitigate its damages in the months following the storm. The refusal sent the claim before Judge Wainwright, where La Salle National Bank joined Spring Creek in the suit. La Salle, which holds Spring Creeks property mortgage , was represented at trail by Brian Keller of Hick's Thomas and Lilienstern LLP.

"The judge disallowed all the arguments for not abiding by the umpires ruling except one, the mitigating damages, which he allowed to be heard by the jury," says Keller. "General Star decided to pursue the failure to mitigate, but after four weeks , that was thrown out as well for having no merit. In the end, all the jury had left before them was the lost business income and attorney fees. Reliance and General got nothing out of pursing this and lost more in the process more in the process than they would if they had just accepted the umpire's award.

The judgment has not yet been entered," adds Keller. "But we expect it will be for an amount in excess of $4 million including penalties and prejudgment interest."

The second round of this dispute will be resolved in an up-coming trial in which Spring Creek is expected to seek treble damages for bad faith and statutory violations by both insurance companies.

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