Fire insurer refuses to pay after fire destroys leased building. $7.8M. Monterey County.


Sentry Select Insurance says auto dealer did not have an insurable interest in its leased premises.

The Case

  • Case Name: Borjon Auto Center King City, Inc. v. Sentry Select Insurance Company
  • Court and Case Number: Monterey County Superior Court / M132410
  • Date of Verdict or Judgment: Thursday, July 11, 2019
  • Date Action was Filed: Friday, June 19, 2015
  • Type of Case: Insurance – Bad Faith, Claims Handling
  • Judge or Arbitrator(s): Hon. Marlo O. Anderson
  • Plaintiffs:
    Borjon Auto Center King City, Inc.
  • Defendants:
    Sentry Select Insurance Company
  • Type of Result: Jury Verdict

The Result

  • Gross Verdict or Award: $7,805,061.00
  • Net Verdict or Award: $8,740,149.25
  • Award as to each Defendant:

    Contract damages: $1,412,311.00 (phase1 verdict)

    Additional bad faith damages: $152,750.00 (phase 2 verdict)

    Punitive damages: $6,240,000.00 (phase 3 verdict)

    Brandt fees: $716,445.23

    Prejudgment interest: $240,831.39

    Costs:  $119,747.90. Offset for prior settlement: ($142,854.86) 

  • Economic Damages:

    Contract benefits: $1,412,311.00

    Bad faith damages (lost profits): $152,750.00 

  • Non-Economic Damages:


  • Punitive Damages:


  • Trial or Arbitration Time: 17 trial days.
  • Jury Deliberation Time: Phase 1: one day; phase 2: half day; phase 3: one hour.
  • Jury Polls: Phase 1: 10-2; phase 2: 10-2; phase 3: 11-1 (Foreperson wanted to award higher punitive damages.)
  • Post Trial Motions & Post-Verdict Settlements: Brandt fees, prejudgment interest, offset determination and costs were awarded on post-trial motions; Sentry moved for new trial which was denied in its entirety on March 13, 2020

The Attorneys

  • Attorney for the Plaintiff:

    Willoughby, Stuart, Bening & Cook by Alexander F. Stuart, San Jose.

    The Biegel Law Firm by Lawrence E. Biegel, Monterey.

  • Attorney for the Defendant:

    Selman Breitman by Alan B. Yuter and Rachel E. Hobbs, Los Angeles.

The Experts

  • Plaintiff's Technical Expert(s):

    Greg McKinnon, future earnings and lost profits.

    Timothy Walker, insurance claims handling.

  • Defendant's Technical Expert(s):

    John Alstadt, future earnings and lost profits.

    Kelley Beck, insurance claims handling.

Facts and Background

  • Facts and Background:

    Plaintiff Borjon, a GM and Chrysler new car dealer in King City, lost its auto dealership building when a fire spread from an adjoining property and destroyed all but a small portion of the building. Defendant Sentry insured the building, which Borjon was leasing, against all risks of physical loss, including fire. Sentry knew that Borjon leased the building when it sold, and later renewed, its building coverage.

    The limit of Sentry's building coverage was $2,059,000. Immediately following the fire, Sentry asked to see Borjon's building lease. Upon reviewing the lease, Sentry determined that Borjon owed no duty to the landlord to rebuild the dealership building or to purchase building coverage. However, Borjon was dependent on the dealership building to maintain its franchise agreements with GM and Chrysler as a new car dealer selling and servicing GM and Chrysler vehicles. There was no other building in Borjon's dealership territory to which it could relocate its business.

    Focusing on Borjon's lease, and refusing to consider Borjon's franchise agreements requiring that Borjon operate from the dealership building in King City, Sentry decided that Borjon lacked an "insurable interest" in the dealership building, and on such grounds retroactively voided Borjon's building coverage. Without building coverage, Borjon could not rebuild the dealership building and therefore was required to terminate its franchise agreements with GM and Chrysler, forcing Borjon out of business.

    Five months after Sentry forced Borjon to shutter its business, Borjon requested reconsideration, informing Sentry that Borjon might have an opportunity to resurrect its Chrysler franchise. Sentry refused to reconsider its decision.

  • Plaintiff's Contentions:

    That Sentry wrongfully voided its building coverage by focusing on the building lease and ignoring Borjon's franchise agreements which required that Borjon operate from the dealership building in King City. Also, that the decision to void coverage was based on an improper investigation and a conscious decision by Sentry's senior management to focus on Sentry's interests over those of Sentry's insured.

    Further, that its "insurable interest" exceeded Sentry's building coverage limit of $2,059,000. Plaintiff contended that the decision to void coverage, and later to deny Borjon's request for reconsideration, was the product of malice, oppression or fraud justifying punitive damages.

  • Defendant's Contentions:

    That Borjon lacked an "insurable interest" in the dealership building because Borjon did not own the building and the lease neither required Borjon to rebuild the building or purchase building coverage.

    That the building coverage at issue did not cover lost profits. Only the separate business income coverage covered lost income, and Sentry fully paid under that provision.

    Further, that its decision to void building coverage was reasonable, and that Borjon suffered no loss from the voiding of its building coverage because Borjon had not made a profit prior to the fire.

Injuries and Other Damages

  • Plaintiff lost the opportunity to earn profits from continued operation of its franchised auto dealership business. 

Additional Notes

The jury awarded $1,412,311 as the value of Borjon's "insurable interest" in the dealership building based on evidence that Borjon would have earned future profits from operating at the building in King City for the remainder of its lease term, plus optional terms. The jury also awarded $152,750 for lost profits between the voiding of its coverage and the date of trial.

Sentry moved for a new trial, claiming that the contract damages of $1,412,311 and the punitive damages of $6,2340,000 were excessive. The court denied the motion in its entirety on March 13, 2020.