Bad Faith Claim Defeated on Summary Judgment

April 1, 2008

In a bad faith lawsuit handled by Jean M. Lawler and Carolyn A. Mathews, summary judgment was granted in favor of the insurer who had denied coverage on various grounds.  

Mr. Shaikh owned a warehouse in Carson, which he leased to a fabric dyeing company, Spectra USA Print, Inc.  Century Surety insured Spectra, and Shaikh was an additional insured.  Shaikh and Spectra had a long history of litigation over payment of the rent. Shaikh had obtained a lien on Spectra’s machinery, etc. as security for the lease.  Spectra stopped paying rent and subsequently moved out of the warehouse and shipped all of the machinery and extensive electrical equipment to Korea. Century Surety’s policy was cancelled for non payment of premium several months before Spectra moved out of the warehouse.

Shaikh subsequently made a claim for damage to the warehouse, which was denied for a number of reasons, including the fact that the policy was not in force at the time of the claimed loss.  Shaikh claimed the policy was in force because, even though notice of cancellation was given to Spectra, it was not given to him.  The court disagreed and granted summary judgment to the insurer.