SAN FRANCISCO — A $55 million Alameda County jury award in favor of a Pennsylvania-based company against its insurers in 2016 has been reversed in a recent appeals court ruling that states the trial court committed too many errors for the verdict to stand.

In its ruling handed down Feb. 26, Division 2 of California's 1st District Court of Appeal found that Alameda County Superior Court committed enough errors during the trial of Victaulic Co.'s lawsuit against its insurers that the jury's large award should be reversed. The trial court erred when it allowed the use of requests for admissions (RFA) responses and in its questioning of an insurance examiner who ultimately invoked the Fifth Amendment after she allegedly perjured herself, Judge James A. Richman wrote in the three-judge panel's unanimous ruling.

California's First District Court of Appeal Justice James A. Richman
California's First District Court of Appeal Justice James A. Richman

"We conclude such error was prejudicial and thus reverse on that ground, without the need to address the insurers' other arguments," Richman wrote in the 45-page ruling.

The other two members of the appeals court's panel in the case were Judges Therese M. Stewart and Marla J. Miller.

The ruling was handed down in the appeal by the plumbing products manufacturer's insurers, American Home Assurance Co., Insurance Co. of the State of Pennsylvania and National Union Fire Insurance Co. of Pittsburgh, which are members of the American Insurance Group (AIG).

In August 2016, an Alameda County Superior Court jury awarded Victaulic about $55.3 million in damages against the AIG companies, which broke down to about $9.3 million for breach of contract and bad faith while $46 million was for punitive damages. At the time, the verdict was reported to be the largest in Alameda Superior Court for previous 10 years.

The case, in which Victaulic sued its insurers over nine product liability claims against the company, spent weeks before the jury on Victaulic's bad faith claim "during which numerous witnesses testified and over 100 exhibits were introduced," the appeals court ruling said. Part of the AIG companies' appeal focused on one of those witnesses, Nancy Finberg, examiner for the majority of the product liability claims and who verified the insurers' responses to Victaulic RFAs, according to the appeals court ruling.

While being questioned by Victaulic counsel, the trial court concluded Finberg "made an admission that she perjured herself" and "abruptly halted" proceedings for an in-chambers conference, the appeals court ruling said.

"Finberg's testimony was stopped at that point, and when she resumed the stand the next day, represented by personal counsel, the court ruled that she could, on a blanket basis, claim the Fifth Amendment privilege against self-incrimination - and would do so in front of jury," the appeals court ruling said. "And so came Victaulic's closing arguments, with their focus on 'Finberg', 'RFAs', 'lies' and 'penalty of perjury', words used so often, and so interrelatedly, that it is truly difficult to count."

The jury deliberated "for some five hours" before returning its verdict, the appeals court ruling said. In addition to the monetary award, the jury also voted 9-3 to find the AIG companies "acted with fraud, oppression, or malice committed by a managing agent," the appeals court ruling said.

The AIG companies' appeal claimed "six separate claims of error why the verdict cannot stand," the appeals court ruling said. "We agree with the insurers there was error, beginning with the court's allowance of the use of the RFA responses, compounded by the court's intensive questioning of Finberg and compounded further by several errors in how the court handled Finberg's invocation of the Fifth Amendment privilege."

The errors were too many for the jury's verdict to stand, according to the appeals court's ruling. 

"The series of trial court errors in handling Finberg's testimony, coupled with Victaulic's exploitation of those errors in closing argument, surely influenced the bad faith verdict, especially as the vote was nine to three," the appeals court ruling said.

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