Case: Custom Wood Creations et al v. FCCI Commercial Insurance

Case no: 08-051774

Description: Breach of contract

Filing date: Oct. 24, 2008

Trial dates: Jan. 15-Feb. 6, 2013

Judge: Broward Circuit Judge Jeffrey Streitfeld

Plaintiff attorneys: Steven J. Hammer, Scott P. Schlesinger, Jonathan R. Gdanski and Charles B. Patrick, Schlesinger Law Offices, Fort Lauderdale

Defense attorneys: Kristen Van der Linde, Boyd & Jenerette, Jacksonville; Nickolas Berry, Hinshaw & Culbertson, Coral Gables

Jury award: $6 million

Details: Debra and Ronald Peters owned custom furniture and cabinetmaking businesses, Custom Wood Creations Inc. and Hardware Inc., in Pompano Beach. When Hurricane Wilma struck in 2005, their shop was heavily damaged. Their insurer paid about $343,000, but the claim was more than $1 million.

Rather than pay in full, FCCI transferred the case to its internal special investigations unit headed by Troy Walker. He alleged to the state Division of Insurance Fraud that Debra Peters fraudulently filled out the insurance application. FCCI sought to have the state file criminal charges.

Peters was charged with a felony count of filing a false insurance claim April 30, 2007. She spent one night in jail.

For a year, she was under pressure to take a plea bargain or face up to 30 years in prison. Her criminal defense attorney, David William Macey of Miami, persuaded the Broward state attorney’s office to dismiss the charge.

The couple then sued FCCI for breach of contract and malicious prosecution. FCCI filed a counterclaim and up until the day before trial was demanding repayment of the $343,000.

Plaintiff case: Through discovery of FCCI correspondence with state insurance regulators, the couple’s attorneys looked into how the fraud allegation developed. Debra Peters answered "no" when asked whether she had ever "canceled, declined or nonrenewed" a previous insurance policy. She believed the question meant whether she had been denied an insurance renewal.

Records submitted to the court showed the state Division of Insurance Fraud refused to prosecute her based on that answer.

Walker went to an FCCI underwriter seeking an affidavit stating that had Peters answered the question otherwise, she would have been refused coverage. The underwriter refused and instead wrote an affidavit stating she would have investigated further.

Again, the Division of Insurance Fraud refused to prosecute. Walker went to the underwriter again and said the state had a strong case and the underwriter needed to submit an affidavit worded as Walker originally requested. She did.

Susan Kaufman, an insurance expert witness, told the jury Peters did nothing wrong. Criminal defense expert Jeffrey Harris testified the extent to which Walker directed what should have been an independent state investigation was inappropriate and amounted to collusion.

Plaintiffs also showed the jury company records that revealed the special investigations unit was treated like a profit center. Seeking prosecution of policyholders was a common tactic used to avoid payouts and recover payments by using state prosecutors as proxy bill collectors demanding restitution for allegedly fraudulent claims. FCCI investigators also were given financial incentives to seek prosecutions.

Defense case: Defense attorney Kristen Van der Linde argued correspondence between Debra Peters and her previous carrier showed she attempted in three letters to maintain a policy. There remained a reasonable doubt as to whether she chose not to renew, Van der Linde argued.

She said the prosecutor dismissed the case because the state could not prove Peters’ prior carrier canceled the policy. The prosecutor never mentioned the underwriter’s affidavit, Van der Linde said.

A state investigator testified she was not pressured by FCCI’s investigator, defense counsel noted. And FCCI also claimed that of all its Hurricane Wilma claims, Peters’ was the only one referred to the state for investigation.

Van der Linde asked the jury not to allow any other claims on the policy because the Peterses did not fully cooperate with FCCI’s requests for information.

Outcome: The jury concluded FCCI breached its contract and the couple made no misrepresentations. For that, the jury awarded $1.22 million for damage to property and equipment.

They jury also found FCCI maliciously sought criminal prosecution and filed a false report to further that goal. Debra Peters was awarded $2.4 million in past and future pain and suffering. And she was awarded $200,000 for her legal costs. Ronald Peters was awarded $1 million for loss of consortium.

In addition, the jury found FCCI’s behavior warranted punitive damages of $1.2 million, bringing total damages to $6.02 million.

Comments: "It is a pretty unique situation where an insurance company goes after an individual and charges them with insurance fraud and the individual has the wherewithal to withstand the pressures of the criminal system. Debra Peters insisted she was innocent, which she was. She had the gumption to stand up to the criminal system," lead attorney Steven J. Hammer said. "FCCI took somebody who has never been in trouble before, never been in jail. They took away everything this couple had worked so hard for and that is tragic and the jury agreed."

Post-verdict: No post-trial motions have been filed. Debra and Ronald Peters were never able to rebuild their business, and Ronald has been supporting the family by working for another mill. The trial did not include damages for the couple’s business loss, and the Schlesinger Law Offices is preparing a second trial to collect damages on that issue.