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Settlement
Amount:
$1,625,000
Case Name:
CITY OF SAN DIEGO v. LEXINGTON INSURANCE COMPANY
Case Number:
07CV-0475 DMS (NLS)
Case Settled:
11/08
Plaintiff:
The City of San Diego
Defendant:
Lexington Insurance Co.
Facts and Background:
On October 23, 2003, the City of San Diego was besieged by the
confluence of four, out-of-control, wildfires. Qualcomm Stadium and the
surrounding vicinity became coated by a thick, stubborn layer of smoke,
ash and soot that continually fell from the sky and covered the playing field,
parking lots, outdoor seating and the walkways and infiltrated the HVAC
system, the scoreboard and other electrical equipment. On October 25,
2003, Mayor Dick Murphy directed that the Monday Night Football Game,
which was to be played on the evening of October 27, 2003, be cancelled.
As a result, the City suffered lost revenues of approximately $600,000.00.
The City submitted a claim to Lexington Insurance Company under the
BUSINESS INTERRUPTION provisions of its insurance policy. Lexington
handled the claim from its London, England office. Over the next two years,
Lexington not only failed to conduct a full and complete investigation of the
claim, but disregarded strong and substantial evidence supporting its
payment.
Plaintiff’s
Contentions:
Plaintiff claimed that there was "direct physical loss or damage" to the
insured premises because: (1) ash, soot and smoke covered all of the field
as well as all exposed parts of the open-air stadium; (2) the ash and soot
impaired the playing field; and (3) stadium personnel were unable to remove
the ash and soot from the field in order to make it suitable for play. Plaintiff
further contended that Lexington breached the implied covenant of good
faith and fair dealing by failing to perform a prompt and fair investigation of
the matter, including its failure to determine that the National Football
League cancelled the game, which triggered coverage under the Business
Interruption insurance.
Defendant’s Contentions:
Lexington contended that there was no coverage under the policy because,
except for some soot and ash, the stadium was essentially unharmed by
the fire; thus, there was no "direct physical loss or damage" to the insured
premises.
Damages:
The $1.625 settlement consisted of $600,000 in lost revenue and $1,025,000 in
insurance bad faith damages.
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