Farmers Overhead and Profit Litigation

In 2004, a group of lawyers led by NP partners Cary Patterson, Michael Angelovich, and associate Chad Ihrig, filed a proposed national class action against a group of Farmers insurance companies alleging the Farmers companies improperly failed to pay contractor’s overhead and profit on some structural loss claims where three or more construction trades were involved. The suit alleged it was customary in the insurance industry to pay contractor’s overhead and profit to the insured before the cost of a contractor had to be incurred by the insured, if the claim involved three or more trades. NP contended Farmers sought to increase its own bottom line at the expense of its policyholders by simply not paying contractor’s overhead and profit according to industry custom.

After six years of contentious litigation led by NP, a national class settlement was reached with Farmers, with an estimated value of $794,000,000. The settlement provides a structured, tier-based system for class members to be compensated for Farmers’ failure to pay contractors’ overhead and profit, based on the size and date of the loss. The class consisted of over 1.8 million Farmers’ insureds who made a structural loss claim during a designated time frame. NP led the litigation through countless pleadings and numerous depositions, hearings and multiple mediation sessions with a nationally renowned mediator.  Discovery in the case was substantial – the Farmers companies produced over 50 million pages of documents. NP successfully developed a system for review and proper synthesis of this massive number of documents in context of both the substantive and class allegations.

In its Final Approval Order, the court noted NP had “vigorously pressed the interests of the class throughout the course of this litigation” and that NP had provided “excellent representation” to the class. Based on the size of the recovery for the class and the diligence and skill shown during the litigation, the Court awarded $37,185,000 in attorney fees.