Masonite Awarded $93 Million in ‘Bad Faith’ Case Against Wausau

December 20, 2001

Masonite Corporation, a former subsidiary of International Paper, was awarded $93 million in damages for an insurance dispute relating to the nationwide class action lawsuit, Naef Class v. Masonite, involving Masonite hardboard siding.

The announcement was made by the trial team of Howrey Arnold Simon & White, which represented Masonite in the suit.

According to the law firm, Masonite sued Employers Insurance of Wausau in November 1995 for an alleged failure to defend Masonite in the Naef case. Masonite’s claims against Wausau for breach of contract, bad faith and fraud, oppression and malice were tried over a 6-week period before a 12-person San Francisco jury. San Francisco Superior Court Judge Alex Salamando was the trial judge.

The firm further reported that following three days of deliberation, on Nov. 2, 2001 the jury returned a verdict finding Wausau had breached its contractual obligations to Masonite and ordered Wausau to pay Masonite $13,130,939.86 in defense costs incurred by Masonite in the Naef case. The jury further found that in breaching its contract with Masonite, Wausau acted in bad faith and awarded Masonite an additional $10,706,392.22 in damages and interest of $1,186,625.

Additionally, The jury found that Wausau had acted with fraud, malice and oppression and, following a second jury phase, ordered Wausau to pay an additional $68 million in punitive damages.

Masonite and International Paper originally sued Wausau in 1995 in California Superior Court in San Francisco, seeking a ruling that, among other things, Wausau was obligated to pay the costs of defending Masonite, which was then an International Paper subsidiary.

At that time the class action suit concerning Masonite’s hardboard siding manufactured in the 1980’s was pending in Mobile County, Ala. Wausau was the primary insurance carrier for Masonite from September 1979 through 1985. Howrey Arnold Simon & White maintain that each Wausau policy contained a provision requiring that they provide a defense to Masonite in the event of litigation asserting claims potentially covered by the insurance policy.

International Paper and Masonite amended their complaint in 1998 to add a claim that Wausau had acted in “bad faith” by failing to fulfill its obligation to pay for Masonite’s defense. The jury found Wausau liable for the defense costs relating to the Naef case, that Wausau had acted in bad faith, and was, therefore, liable for Masonite’s attorneys’ fees incurred during the coverage case that concluded on Nov. 2, 2001.

Because the jury found that Wausau “acted with oppression, malice, or fraud in breaching its duty to defend Masonite in bad faith,” the jury found that Wausau was liable for punitive damages. Thus, on Nov. 5, 2001, after further deliberations, the jury found that Wausau was liable to pay an additional $68 million in punitive damages.

On Dec. 12, 2001 the Court held that, in addition to the jury’s findings, as a matter of law the Naef case triggered Wausau’s defense obligation when Wausau was tendered the complaint in 1995.

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