When a business pays years of premiums for liability coverage, it expects its insurer to stand beside it the moment a lawsuit arrives. Too often, that promise evaporates when the bills start adding up, leaving a company to fight expensive litigation alone while the very carrier it trusted looks for ways to walk away. This predicament can force a profitable business into a settlement it never should have had to accept, simply because it could no longer afford to keep fighting on its own.
At Callahan & Blaine, PC, we built our reputation by holding insurance companies accountable when they abandon the businesses they are paid to protect. Our case results reflect four decades of similar victories against powerful insurers and corporations that assumed a smaller opponent could not fight back. The case of Surgin Surgical Instrumentation Inc. v. Farmers Group Inc. remains one of the clearest examples of what happens when we are given the chance to expose that kind of conduct in court.
A Manufacturer Left to Fight Alone
Surgin Surgical Instrumentation manufactured devices used in cataract surgery and held roughly ten percent of that market, with projected profits of seven million dollars a year. A competitor, Alcon, filed a series of patent infringement and unfair competition lawsuits against Surgin. Truck Insurance, a subsidiary of Farmers Group, had a contractual duty to defend Surgin against these claims, yet the carrier refused to defend all but one of the suits, and even that single case had already been dismissed by the time Truck agreed to step in.
Left to cover its own defense, Surgin incurred $270,000 in attorney fees before it could no longer afford to litigate the matter. The company was forced to settle and agree that it would stop manufacturing the devices altogether, which meant walking away from its projected profits entirely. That settlement handed Alcon a monopoly in the market and, according to the case record, allowed it to charge the public an additional $140 million in increased health care costs.
The Cost of an Insurer’s Refusal
The financial damage to Surgin illustrates how quickly a company can lose everything it built when its insurer breaks its promise to defend. Once Surgin turned to litigation against its own carrier, our senior partner, Daniel J. Callahan, took on the case and began investigating why Truck Insurance had refused to honor its obligations in the first place.
Uncovering Truck Insurance’s Document Destruction
During the course of Surgin’s suit against its insurer, Mr. Callahan discovered that Truck Insurance had engaged in the systematic destruction of documents that had been requested during discovery. This conduct came to light through the testimony of Michael D. Conn, a former vice president of Farmers Group, Inc. who had overseen the company’s investigation department. Conn testified that Farmers closed all eighteen of its investigation units nationwide, sent every investigator home, and shredded documents relevant to pending proceedings, including records tied directly to Surgin’s case.
Carriers doing business in California are held to specific obligations regarding how they handle claims and communications with policyholders, standards outlined in the state’s Fair Claims Settlement Practices Regulations. Evidence of deliberate document destruction during active litigation strikes at the heart of those obligations, and it became a central issue once the true scope of Truck’s conduct was revealed in court.
A Landmark Verdict and Its Ripple Effect on Insurance Regulation
Orange County Superior Court Judge C. Robert Jameson awarded Surgin $57 million plus costs, along with an additional $527,000 in attorney fees, a combined result of roughly $60 million against one of the state’s largest insurance companies. Judge Jameson went a step further and instructed Mr. Callahan to notify California Insurance Commissioner John Garamendi of the case outcome.
That notification set off consequences far beyond the courtroom. Commissioner Garamendi and Assembly Judiciary Committee Chairman Phil Isenberg proposed legislation to ban insurance carriers from passing the cost of punitive damages awards on to their shareholders and policyholders, and separate legislation to require that bad faith court rulings be reported directly to the Department of Insurance. Commissioner Garamendi also opened his own investigation into how Farmers handled claims across its book of business, a direct result of the record our firm built in Surgin’s case. This is the kind of outcome our attorneys pursue in every complex business litigation matter we take on, whether the opponent is an individual company or an entire industry.
Why This Verdict Still Matters Today
Cases like Surgin show why we invest heavily in trial preparation and discovery before a case ever reaches a jury. Insurers rarely volunteer evidence of misconduct, and it typically takes a firm willing to dig through records, depose former executives, and follow the facts wherever they lead to bring that conduct into the open. Edward Susolik, who now leads our insurance litigation team, has continued that same approach in the disputes he handles for businesses and individuals across California.
Verdicts of this size also send a message to carriers weighing whether to honor their duty to defend a policyholder or gamble on a costly breach. When an insurer calculates that fighting a smaller company is cheaper than fulfilling its contract, a result like the one we obtained for Surgin changes that calculation for every carrier watching from the sidelines.
Hire Callahan & Blaine, PC to Handle Your Litigation Matter
For more than 40 years, our firm has taken on insurance companies and large corporations that assumed a business or individual could not afford to fight back. We have built our history around trial-ready litigation, and our results reflect a record most firms of our size cannot match.
If your business is facing an insurer that has refused to defend you, delayed your claim, or engaged in conduct you believe crosses the line into bad faith, we encourage you to contact us to discuss the facts of your situation. Our attorneys understand the tactics carriers use to avoid their obligations, and we know how to build the record needed to hold them accountable.
