Harold L Bostick v. Atlantic Mutual Insurance Company, et al.

Leon Bostick sued Atlantic Mutual Insurance Company on a bad faith breach of contract theory claimed that Defendant acted despicably and with malice and oppression in wrongfully refusing to settle a personal injury case in 2002.



On January 4, 2001, Leon Bostick was working out on a "Smith" weightlifting machine at Gold's Gym in Venice Beach, California when he lost control of the weights, which broke his neck, rendering him a quadriplegic. This tragic accident could have been prevented if the manufacturer had included safety devices that would have cost $75.



The 39-year-old former Marine was doing squats on a machine at Gold's Gym in Venice when the horizontal bar of weights bearing a couple hundred pounds of weight fell on his neck. The machine did not have adjustable safety stops installed.



Bostick filed suit against Flex Equipment and Gold's Gym. By December 2001, Atlantic knew Bostick's medical bills were over $600,000. Atlantic knew that if Flex was found liable, a jury would come back with an award of $5m-$10m. However, Atlantic heard "rumors" that the accident did not happen on the Flex machine and decided to defend on that basis.



After learning that Flex only had a $1m insurance policy, on December 14, 2001, Bostick's lawyers offered to settle his claims against Flex for the $1m insurance policy. Atlantic was given 30 days to respond, then was granted an extension of another 17 days.



Before the expiration of the policy limits demand, a lawyer retained by Atlantic to defend Flex and independent counsel of Flex both advised Atlantic to settle. On January 17, 2002, Atlantic concluded that "plaintiff was definitely using the insured's machine." However, the next day, Atlantic decided that it wanted to "reject" the policy limits demand.



On Friday, July 25, 2003, a Los Angeles jury rendered a verdict in the amount of $16.2m in favor of Mr. Bostick. Flex assigned to Mr. Bostick its rights to sue Atlantic for bad faith refusal to settle within the policy. On Monday, January 29, 2007, the California Court of Appeal affirmed the judgment against Flex. On Tuesday, November 18, 2008, the jury in the bad faith case awarded $10 million to Mr. Bostick.



Bostick's medical bills approached $700,000 in the first year after the accident.

Plaintiff's verdict for $10 million plus pre-judgment interest for a total potentially due on the resulting judgment of $18.6 million.

Editor's Note: Insurance companies, like Atlantic Mutual, that do not accept settlement offers like the one made by Mr. Bostick to insured like Flex Equipment essentially assume the risk when they fail and refuse to settle cases like the one that Mr. Bostick filed against Flex. The gym apparently settled for $7.3 million before trial.