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Judge Won’t Undo $5M Warehouse Fire Verdict

Law360, New York (August 17, 2016, 2:26 PM ET) — An Illinois federal judge on Tuesday refused to scrap a $5 million verdict against American States Insurance Co. for failing to reimburse a Chicago-based import company after a warehouse fire, striking down the insurer’s claim that erroneous evidence warranted a new trial or immediate judgment.

U.S. District Judge Manish S. Shah denied American States’ bid for a new trial, judgment as a matter of law or a lowered verdict award, after an Illinois federal jury in March sided with Chicago Import Inc. on its claim that the insurer breached its contract after denying coverage of a 2007 warehouse fire. The judge on Tuesday also nixed Chicago Import’s attempt to collect prejudgment interest.

Judge Shah was unpersuaded by American States’ argument that numerous evidentiary mistakes were made during the trial, starting with Chicago Import’s electrical engineer expert being allowed to testify even though his opinions were speculative because he never personally inspected the fire scene. In actuality, that expert’s role was to rebut testimony that an electrical fire couldn’t possibly have caused the blaze, and he was more than qualified to offer that opinion, Judge Shah ruled.

Even without that electrical expert’s opinion, there was plenty of other evidence at trial that the electrical system could not be ruled out as a cause, for example the testimony from a ComEdemployee on scene that the fire broke out within minutes of their replacement of a blown fuse.

American States had also argued that the court wrongly barred evidence related to prior fires and subsequent insurance claims by Chicago Import’s company president, Ashokkumar Punjabi, which it said should have been admissible to prove motive and lack of accident.

Judge Shah wasn’t buying it, writing Tuesday that the evidence was excluded because American States had presented no evidence to establish there was something suspicious about the prior fires or claims, or that there was something specific about the claims that would motivate Chicago Import to pursue an improper claim in the future.

“General familiarity with insurance claims was a weak and overbroad theory to show motive, and the miniscule value of this evidence was substantially outweighed by the unfair prejudice that could potentially result from a jury drawing an improper propensity or general bad character inference,” Judge Shah wrote, defending his earlier decision.

American States had issued Chicago Import a $5 million commercial property policy that was in effect in May 2007 when a fire devastated a rented Chicago warehouse. The importer filed a claim saying the fire destroyed that much value in inventory losses and debris removal costs, which the insurer denied, and Chicago Import sued. In March, an Illinois federal jury awarded it $5 million.

Along with the evidentiary issues American States voiced, the insurer also argued that judgment as a matter of law was warranted because Chicago Import allegedly made misrepresentations in its proof of loss, and that it failed to segregate its damages.

Neither of those efforts persuaded Judge Shah, who wrote Tuesday that there was evidence in the record from which the jury could reasonably conclude that Chicago Import’s damages were $5 million, including testimony from American States’ own hired salvager, who valued the lost merchandise at about $5 million.

For that same reason, Judge Shah also denied American States’ bid to knock the jury’s award down to $1.5 million.

“The award is not excessive and is rationally tied to the evidence,” Judge Shah wrote. “American States’s motion for remittitur is denied.”

Chicago Import attorney Mark Roth of Orum & Roth LLC told Law360 Wednesday they were “always confident that the district court’s rulings, both before trial and during trial, were correct. We also fully expect that the district court’s denial of American States’ post-trial motion will be affirmed on appeal.”

Representatives for American States on Wednesday did not immediately return a request for comment.

Chicago Import is represented by Mark Roth of Orum & Roth LLC.

American States Insurance is represented by Cheryl Mondi, Peter Kanaris, David Heiss, Nicole Gallagher, Christopher Ransel and Jefferson Patten of Fisher Kanaris PC.

The case is Chicago Import Inc. v. American States Insurance Co., case number 1:09-cv-02885, in the U.S. District Court for the Northern District of Illinois.

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