In 1989 Fareed and Rashida Cassim bought their home and insured it with Allstate Insurance Co. But in December 1990, a fire resulted in at least $40,000 damage to the home, plus about $43,000 damage to their furnishings.
When Fareed and Rashida filed their claim with Allstate, they were promptly paid a $10,000 advance toward living expenses because the house was uninhabitable. But after Allstate investigated the fire, Allstate’s adjuster concluded the fire was caused by arson.
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Instead of paying to replace the $43,000 damaged furnishings, Allstate offered to pay only $7,000. Allstate also stopped paying living expenses for Fareed and Rashida, resulting in financial hardship.
Having to pay their own living expenses, plus trying to keep up mortgage payments, Fareed and Rashida eventually lost their home by foreclosure because Allstate refused to make prompt payments.
Fareed and Rashida sued Allstate for “bad faith” failure to pay their insured claims. During the 38-day jury trial, evidence showed the fire was arson, but not caused by the Cassims.
An expert testified the fire was a “message fire” that was intended by the arsonist to cause great discomfort to the occupants (Fareed is of Iranian descent; Rashida is of Indian descent).
If you were the judge would you uphold the jury’s award of $8.6 million total actual and punitive damages against Allstate for bad faith failure to promptly pay the full insured property losses?
The judge said yes!
Although the facts of this case were complicated, the judge explained, the evidence showed Fareed and Rashida did not cause the fire and should have been promptly and fully compensated by Allstate for their insured losses.
Instead, Allstate exhibited egregious bad faith by taking advantage of the financial distress of the insureds after the fire, he emphasized. Although Allstate accused the insureds of arson and inflating their insured claims for loss of personal property, the evidence presented at the trial was contrary, the judge noted.
Although the insureds lost their home by foreclosure because Allstate delayed payments that should have been made promptly, the jury’s award of $1.8 million compensatory damages to Fareed and Rashida each, plus $5 million punitive damages, should more than compensate for Allstate’s bad conduct, the judge ruled.
Based on the 2004 California Supreme Court decision in Cassim v. Allstate Insurance Co., 16 Cal.Rptr.3d 374.
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