BREACH OF CONTRACT
INSURANCE CLAIM: Arson Fire

VERDICT:	$664,950.00
CASE/NO:	Handley v. American States Insurance Company 225409RAW - Kern County Superior/ June 1, 1995
JUDGE:	Rebecca A. Wiseman, Department "13"
ATTORNEYS:	Plaintiff - Michael H. Whitehill (Kussman & Whitehill, Los Angeles) Defendant - Gordon M. Park, Julie A. Noble (McCormick, Barstow, Sheppard, Wayte & Carruth, Fresno)
LEGAL EXPERTS:	Plaintiffs - Robert Lowe, Fire Investigator, San Juan Capistrano Bruce Bunker, Esq., Legal Access Expert, Bakersfield Defendant - Anthony Cannon, Esq. Bad Faith/ Claim Handling, Tustin Tom Koski, Inventory Specialist, Bakersfield Chris Money, Accountant, Costa Mesa Captain Randy Cohl, Kern County Fire Department, Bakersfield Captain Mike Haynes, Arson Investigator, Kern County Fire Department, Bakersfield Edward Rudloff, Esq., Bad Faith/ Claims Handling, San Francisco

FACTS: Plaintiffs Jerry and Kathie Handley, own Designer's Choice in Paso Robles, which sells wicker baskets, silk flowers and pottery on a wholesale and retail basis. In September 1992, Plaintiffs purchased a 12,000 sq. ft. warehouse in McFarland, California which they intended to open as a wholesale outlet. The only means of access to the warehouse was over a dirt road. There is no recorded easement over the dirt road and the farmer who owned the dirt road contended that he told Plaintiff Jerry Handley six weeks prior to the fire to stop using the road. Another McFarland resident testified he also informed Plaintiff about potential access problems over the dirt road. Mr. Handley denied knowledge of both conversations.

Plaintiff hired born again Christians with prior criminal records to clean the warehouse and to help unload the merchandise which was shipped to the warehouse. In late October 1992, after the warehouse was fully stocked, Plaintiff inventoried and photographed the merchandise. Plaintiff thereafter laid off all his employees and placed new locks on all the gates as well as the exterior doors to the warehouse. In addition, plaintiff moved into the warehouse his recently insured motor home which he intended to use as an office once the business opened in several weeks.

Prior to the business opening, on November 7, 1992, at approximately 7:00 p.m., the warehouse was completely destroyed in an arson fire. The fire department personnel who arrived at the scene determined that there had been no forced entry into the warehouse although an empty safe inside the warehouse appeared to be pried open. Mr. Handley was contacted at home at approximately 9:00 p.m. and arrived at the scene at 11:00 p.m. All of the exterior locks to the warehouse and gates were locked when the fire department arrived with the exception of one gate for which the lock was missing. Keys fitting the exterior locks to the warehouse and gates were found around midnight in the grass near the open gate.

It was undisputed the cause of the fire was arson. The fire department contended there was a liquid trail of gasoline leading from inside of the warehouse through a locked door. Mr. Handley was the only person with keys to the warehouse but maintained an additional set of keys on a ledge inside the warehouse. The fire department considered Plaintiff the prime suspect in the arson fire.

CONTENTIONS: Plaintiffs contended their claim was wrongfully denied and that American States acted in bad faith by working with the fire department and witnesses in an attempt to make a criminal case against Plaintiffs. Plaintiffs contended there were many other possible suspects in this arson fire including, among others, disgruntled employees, a known arsonist and gang members. Plaintiffs submitted a proof of loss for $690,000.00, consisting of a personal property claim of $475,000.00, building loss of $200,000.00 and business interruption of $15,000.00.

Defendant contended Plaintiffs' claim was properly denied because Mr. Handley either set the fire or paid someone to set the fire. American States also claimed Mr. Handley had made material misrepresentations during the handling of the claim concerning access to the property and inflated the personal property claim. Although invoices to the personal property had burned in the fire, Defendant's accountant testified that Plaintiffs' cancelled checks demonstrated the amount spent to purchase the personal property in the burned warehouse was less than $100,000.00.

TRIAL JURY LENGTH: 16 days DELIBERATION: 3 days

JURY POLL: 12/0 Breach of contract and damages. 12/0 No bad faith.

SETTLEMENT DISCUSSIONS: Plaintiffs demanded $350,000.00 and defendant American States Insurance Company offered $100,000.00.