Verdict Amount:
$13,554,612.00
Income reduction claim:
$ 4,504,612
Emotional distress claim:
$50,000
Punitive damages:
$9,000,000

Case Name:
UNITED PACIFIC INSURANCE COMPANY v.
KILROY INDUSTRIES, et al.

Cross-Complaint:
Kilroy Industries, et al. v.
United Pacific Insurance Company

Case Numbers:
CV84-2370-MRP and CV83-5156-MRP

Plaintiff/Cross-Defendant:
United Pacific Insurance Company

Defendant/Cross-Complainant:
Kilroy Industries

Facts and Background:
On August 14, 1982, Kilroy Industries owned an 11-story office
building (SEA-Tac II) adjacent to the Seattle/Tacoma Airport. The
King County Building Department ordered the entire building
vacated so that it could be determined if the building met
seismic standards and other building codes. Kilroy Industries had
a $50 million "income reduction" policy with United Pacific
Insurance Company. On June 16, 1983, Kilroy Industries presented
a $3.5 million claim under that policy. Without accepting or
denying the claim United Pacific filed a declaratory relief
action seeking to rescind the insurance policy.

United Pacific Insurance Company claimed their insured failed to
disclose certain facts concerning the SEA-Tac II Complex; fraud
and misrepresentation.

Kilroy Industries cross-complained and filed an action for breach
of the implied covenant of good faith and fair dealing. The
actions were consolidated and assigned to the Los Angeles Federal
Court.

During the trial, evidence was introduced that proved United
Pacific actually concealed disclosures made by their insured
(Kilroy Industries). Further evidence indicated that United
Pacific had formed the opinion that Harvey Levine was "Mr. Bad
Faith" in California. It could, therefore, be anticipated that he
would subpoena the entire claims filed. Because of this, United
Pacific engaged in a conscious effort to suppress and destroy
documents which clearly showed that Kilroy Industries had, in
fact, supplied all of the information needed to issue the
insurance policy.

Plaintiff’s/Cross-Defendant’s Contentions:
United Pacific argued fraud and misrepresentation served as the
basis of United Pacific’s contention that the insurance policy be
rescinded.

Defendant’s/Cross-Complainant’s Contentions:
Kilroy Industries claimed that United Pacific breached the
implied covenant of good faith and fair dealing. Also, that
cross-defendant violated section 790.03(h)(5) of the California
Insurance Code.

Damages:
Loss of rental income and emotional distress to the
office building owner.