Callahan & Blaine

Surgin Surgical Instrumentation Inc. was a manufacturer of certain devices for cataract surgery and had about ten percent of the market with projected annual profits of $7 million when Alcon, a competitor, filed a series of patent infringement and unfair competition lawsuits against the company. Truck Insurance, a subsidiary of Farmers Insurance Group, denied Surgin’s requests to defend all but one of the suits; it agreed to defend one which had already been dismissed.

After incurring $270,000 in legal costs, Surgin could no longer afford to litigate the case, and was forced to settle. As part of the settlement Surgin had to agree to no longer make the devices, resulting in lost profits. In addition, this settlement gave Alcon a monopoly and allowed it to charge the public an additional $140 million in increased health care costs.

Surgin hired Callahan & Blaine to bring suit against Truck Insurance for denying its insurance claim. In the course of the suit, Callahan discovered that the insurance company had engaged in systematic destruction of documents requested in discovery. This was testified to by Michael D. Conn, a former Vice President of Farmers Group, Inc. in charge of Farmers Investigation Department. Conn stated that Farmers closed all 18 investigation units nationwide, sent all the investigators home, and shredded the documents relevant to pending proceedings, including Surgin’s case.

The court found that Truck Insurance deliberately broke a contract to defend Surgin in the Alcon lawsuits. After successful litigation by Callahan & Blaine’s senior partner, Daniel J. Callahan, Orange County Superior Court Judge C. Robert Jameson awarded Surgin $57 million plus costs and $527,000 in attorneys’ fees.

The judge then instructed Attorney Callahan to notify California Insurance Commissioner John Garamendi of the outcome of the case. This notification prompted Garamendi and Assembly Judiciary Committee Chairman Phil Isenberg, D-Sacramento, to propose legislation to ban all companies, insurance carriers included, from passing on the costs of punitive damages awards to stock holders and policy holders. Legislation was also proposed to require court rulings in bad-faith matters to be reported to the Department of Insurance. Mr. Garamendi subsequently commenced an investigation into Farmers’ handling of claims.

Callahan & Blaine has a nationwide reputation as one of the premier insurance litigation law firms in the United States. Under the leadership of the chair of its Insurance Law Department, Edward Susolik, Callahan & Blaine has been on the cutting edge of insurance law, insurance litigation and the representation of policyholder interests for over 25 years.

Callahan & Blaine has a wide expertise in insurance coverage and bad faith litigation covering the full spectrum of insurance law. In addition to representing policyholders — both corporate and individual — Callahan & Blaine also has extensive experience in representation of insurance and professionals, including agents, brokers and insurance companies in disputes within the insurance industry, including litigation with reinsurers, excess insurers and the Department of Insurance. Callahan & Blaine attorneys are also frequently called upon to render expert witness advice in litigation.

Contact Callahan & Blaine for expert representation in your insurance matter.