On Tuesday, November 19, 2008, Harold Leon Bostick, William D. Chapman's client, was awarded $10 million on a bad faith case against Atlantic Mutual.  A federal jury in Los Angeles deliberated for 45 minutes before unanimously finding Defendant, Atlantic Mutual liable for "bad faith," despicable conduct, malice and oppression in wrongfully rejecting a reasonable settlement offer.  Here are the facts:

The Accident
At about 7 PM on January 4, 2001, Leon Bostick and Selena Leal walk in the front door of the Golds Gym in Venice Beach, California. They check in at the front desk, go all the way to the back room where they spend about 20-30 minutes warming up on exercise bikes before starting their weightlifting routine. On this night, they are doing exercises to strengthen their legs. They are doing squats, which is when they have the barbell behind their neck with weights on the bar and squat down to an almost sitting position, then lift the weights back up. Leon is on his second or third set of repetitions doing squats when something happens.

The Injury
No one knows exactly what happens but Leon loses control of the weights, which come crashing down, breaking his neck and causing a spinal cord injury. In an instant, Leon Bostick goes from being a healthy, active, educated young man to being paralyzed from the neck down for the rest of his life.

Defect
This tragic accident could have been prevented if the manufacturer had included certain safety devices that were available at the time and even present on a prior model of the machine where the accident happened. These safety devices are called "adjustable safety stops," which allow each user to adjust certain metal bars that stop the weightlifting bar from going any lower than where the stops are positioned. This is a safety design in case the person lifting weights should slip or for some reason unexpectedly drop the weights. The cost of adjustable safety stops was about $75.

Bostick's Background
Prior to his accident, Mr. Bostick had become an amateur weightlifter and bodybuilder. He did part-time acting. He earned a bachelor's degree in chemical engineering from the University of Pennsylvania, an MBA from Rice University in Texas and had just finished his first semester of law school at Pepperdine University School of Law.

Gold's Gym
In June of the summer before the accident, Leon and Selena move to the LA area so that Leon can enroll in law school. They buy a "gold" membership to Gold's Gym so that they can go to any one of the various Golds Gym facilities in the area. After moving around a bit, in about October of 2000 they move into an apartment in Culver City and start regularly working out at the Golds Gym in Venice Beach at least three times a week. This is the original Golds Gym and is considered the "Mecca" of bodybuilding, near the old "Muscle Beach" of Santa Monica, three streets from the beach. Celebrity weightlifters and bodybuilders come to this gym from all over the world. This facility is the site of the 1977 famous movie, "Pumping Iron," starring the young new actor, Arnold Schwarzenegger.

Smith Machine
As with many serious weightlifters, Leon and Selena focus their weightlifting on different muscle groups on different days. Once a week, they focus their workout on strengthening their leg muscles. Each workout lasts 1-2 hours. Most of the squat machines used for working out their legs are all the way in the back room, or the 3rd room as it is called. The type of machine they use for their leg workout is called a "Smith machine." On a Smith machine, the bar that holds the weights is on a track and slides up and down as you lift the weights.

Flex Machine
From October 2000 to January 2001, Leon and Selena use the same Smith machine for their leg workouts once a week. The machine they use is one of three Smith machines lined up together in the back room of the gym. During the entire time they work out three months before the accident, on the day of the accident and when they returned subsequently, the machine Leon is using is in the middle between the two other Smith machines. Neither Leon nor Selena focus on the brand name of the machine. However, walking to that back room and doing a 1-2 hour workout once a week for three months, neither one of them is confused about what the machine looks like.

The machine Leon is using at the time of the accident is all black and smaller than the other ones. It has large panels on the side and Mr. Bostick likes using this machine because it faces the mirror when he is working out and he can see himself in the mirror during his workout. It angles up and away from him as he faces the mirror. There are hooks on the bar that face towards the mirror and allow him to spot himself by latching it off across certain pegs as he is going up or coming down. Both Selena Leal and Leon go back to the Venice Beach Gold's gym after the accident and discover that the manufacturer of the machine Leon was using at the time of the accident is a Flex machine, with the name spelled out right on the side of the machine. They just never notice that before the accident.

Life Fitness
The second Smith machine in the area where Leon is working out at the time of the accident is manufactured by a company called Life Fitness. This machine is part black, part gray and much larger than the Flex machine. The track that the bar is attached to tilted slightly towards the mirror, instead of away from it as the Flex machine did.

Icarian
The third Smith machine in the area is manufactured by a company named Icarion. This machine is easy to distinguish because it is all white.

Easily Identifiable
For approximately 12 weeks before the accident, Leon and Selena walk all the way to the back room and work out on the Flex Smith machine. The Flex machine is always in the middle between the other two Smith machines. None of these Smith machines is ever located outside the building and they always are in the same position with the Flex machine in the middle. Neither Leon nor Selena is ever confused about which machine the accident occurred on. They both point it out readily when they visit the scene after the accident. They are also able to point it out when they are shown a photograph of the machines.

Lawsuit/Insurance
Leon Bostick files suit against Flex Equipment and Golds Gym. He alleges that Flex designed a defective piece of equipment which injures him and Golds Gym is negligent for allowing such a piece of equipment to be used in its gym. Flex is served with a lawsuit on April 23, 2001. Atlantic Mutual is notified of the lawsuit on May 3, 2001. Atlantic confirms that Flex is covered under an Atlantic policy of insurance, but only for up to $1 million. Flex had renewed this policy for each of the 3 years before the accident and paid a premium in each of those 3 prior years of $55k/year. Flex expects and hopes that if sued, Atlantic will defend it and get it out of any lawsuits without trial, if at all possible.

Harrison
Atlantic assigns an adjuster by the name of John Harrison to handle the Bostick case. Mr. Harrison is selected in part because he has experience handling serious injury claims. Mr. Harrison works out of an Orange County office of Atlantic and has three supervisors overseeing his work. The highest level of authority for Atlantic on this claim is a supervisor named Rosa Greaves, who works in the home office in New Jersey. All of the Atlantic Mutual people who work on this case keep records of important communications on Mr. Bostick's case in an electronic file referred to as a "Notepad."

Tasker
Atlantic hires a trial lawyer who has extensive experience defending serious injury cases. His name is John Tasker. Mr. Tasker communicates regularly regarding Mr. Bostick's case with John Harrison and occasionally with some of Mr. Harrison's supervisors. Letters go back and forth between Mr. Tasker and Mr. Harrison and other Atlantic employees working on the case.

Catastrophic Injuries
In entries in the Notepad on the day Atlantic is first notified of the claim, it acknowledges that Mr. Bostick is a quadriplegic. The day after Atlantic is notified of the claim it is informed that Mr. Bostick's lawyers believe that the case is worth $14 million. After his injury, Mr. Bostick spends three weeks at the UCLA Medical Center and his bills there are about $120,000. He is then transferred to Rancho Los Amigos Medical Center, which specialized in trying to help patients with spinal cord injuries to undergo rehabilitation. Mr. Bostick is at Rancho for two months and the total fees are about $350,000. He is then transferred to the VA hospital in Long Beach where he stays as an inpatient for about eight months. Total charges were $210,000. Atlantic estimates that if Flex is found liable, a jury would come back with an award of $5 million-$10 million.

ID Issue
When Atlantic first receives this claim, it knows that Mr. Bostick's injuries are such that any jury verdict in his favor against Flex will far exceed Flex's $1 million policy limits. However, Flex begins telling Atlantic right from the beginning that they do not believe that the accident happened on their machine. Flex is a relatively small business and knows that this case could put them out of business. Two of Flex's officers, Mark Nalley and Dan Block, begin an investigation of their own to try to prove that the accident did not happen on their machine. First, they tell Atlantic that a Gold's Gym manager will sign a declaration stating so. That never happens. Second, they say that a personal trainer by the name of Perry Williams will sign a declaration that the accident did not occur on a Flex machine. That never happens, either. As it turns out, Mr. Williams has a client named Scott Adair, who is Selena Leal's boss. However, Mr. Williams is not present on the night of the accident nor is his client. This information is supposedly communicated from Selena Leal to Scott Adair to Perry Williams to John Harrison. Later, John Tasker refers to this kind of evidence as "rumors" that are not enough to exonerate Flex.

Policy Limits Demand
After learning that Flex only has a $1 million insurance policy, on December 14, 2001, one of the attorneys for Leon Bostick, Rob Hadlock, writes a letter to John Tasker offering to settle all of Mr. Bostick's claims against Flex for the $1 million Atlantic Mutual policy of insurance. Mr. Hadlock, in his letter, gives Mr. Tasker 30 days to respond. On January 8, 2002, Mr. Hadlock and Mr. Tasker are in court on the case. The judge asks whether there have been any settlement discussions between the parties and Mr. Hadlock says that he has offered to settle the case for the $1 million Flex insurance policy with Atlantic Mutual. Mr. Tasker says that he was unaware of that offer. Mr. Hadlock faxes him the letter the same day.

Request for Extension
Mr. Tasker tells Mr. Hadlock he wants more time to respond to the settlement offer. Mr. Hadlock says that his firm will consider extending the settlement offer if Mr. Tasker will explain the reasons why he needs more time. This conversation takes place nine months after Atlantic Mutual started handling the claim. Mr. Tasker says he would like an additional 30 days to inspect the machines at the Gold's Gym, take the depositions of Selena Leal, Mr. Bostick and the Gold's manager. However, he gives no reason as to why he needs these depositions. Ultimately, Mr. Hadlock agrees to the inspection of machines and the deposition of Selena Leal. However, because Mr. Tasker also says he wants to bring Life Fitness into the case, Mr. Hadlock says he is not willing to subject his client to two depositions, one now and a second time after Life Fitness comes into the case. Nonetheless, Mr. Hadlock agrees to give Mr. Tasker another 15 days, for a total of 45 days to respond to the demand.

Tasker's Advice to Atlantic Mutual
On Wednesday, January 16, 2002, about two weeks before the policy limits demand expires, Mr. Tasker faxes a letter to Atlantic stating that Bostick's medical bills and lost wages will exceed $2 million. If he proves the accident happened on the Flex machine, he will recover general damages for pain and suffering in addition to the $2 million for his medical bills and lost wages. Therefore, Mr. Tasker advises Atlantic that Mr. Bostick's damages far exceed the policy limits of $1 million. He tells them that the key issue in the case is whether the product is defective and he has learned that Flex had previously manufactured a Smith machine that did have the safety stops. However, he would like to speak with his expert witness, Roman Beyer, on the defect issue.

Mr. Tasker goes on to advise Atlantic that in California, the jury instructions in a product liability case shift the burden of proof to a defendant and favor of the plaintiff. Finally, Mr. Tasker informs Atlantic that Golds Gym has statements from its own employees who confirm that the accident happened on the Flex machine and, "therefore, it does not appear that the rumor that the accident occurred on a different machine has any validity."

Expert Admitted Defect
On Thursday, January 17, 2002, the next day, Mr. Tasker faxes another letter to Atlantic stating that he has spoken with his expert, Mr. Beyer, who has confirmed that Flex has manufactured squat machines in the past which did have removable safety stops. Furthermore, the expert advises that it would be easy for an engineer to create a removable stop which would have prevented the bar "from going down far enough to cause a cervical injury."

Atlantic Concludes Flex Machine
On this same day, Thursday, January 17, 2002, Mr. Harrison writes a note in his Notepad conceding that "it has now been established that plaintiff was definitely using the insured's machine."

Dangerous to Reject Demand
On Friday, January 18, 2002, Tasker again communicates with Atlantic, this time on the phone. It is not written in a letter but is recorded in the Notepad, where Atlantic makes a record of all important communications. On this date, Mr. Tasker tells Atlantic that he has not "changed" his opinion that "it may be dangerous to reject the plaintiff's current offer." In the next entry in the Notepad, Mr. Harrison records that he spoke with Rosa Greaves, the senior Atlantic person on this claim, and informed her that "we want to reject the policy limits demand." This decision was made by Mr. Harrison before the deposition of Selena Leal and before the site inspection to look at the machines. The decision was made almost 2 weeks before time expired to make a decision.

Cable and Ward Statements
On Tuesday, January 22, 2002, the day after the weekend and Martin Luther King Day, Mr. Tasker again writes Atlantic. This time he encloses copies of the statements taken by the private investigator for Golds Gym of Matt Cable and Michael Ward, both employees of Golds Gym and at the gym at the time of Mr. Bostick's accident. Both Mr. Cable and Mr. Ward confirm that Mr. Bostick was injured on the Flex Smith machine.

Ferdie's Letter
On Thursday, January 24, 2002, the corporate attorney for Flex, Ferdie Franklin, writes a letter to Atlantic stating that from the perspective of Flex, the Bostick case appears to be a serious injury case with a significant potential for an adverse judgment. He demands that Atlantic Mutual protect the interests of its insured by settling this case. He goes on to state that if the case does not settle and an adverse judgment results in excess of the policy limits, Flex will look to Atlantic to pay the entire judgment regardless of the amount.

Selena Leal's deposition
On Friday, January 25, 2002, Selena Leal's deposition was taken. Ms. Leal testifies that she and Mr. Bostick had used the same Smith machine every week for 12 weeks before the accident. She does not remember the name of the machine but when showed a photograph, immediately pointed to the Flex machine. On Monday, January 28, 2002, Mr. Tasker sends a letter to Atlantic summarizing the deposition of Ms. Leal. He reports that she was "definitive and unequivocal" in identifying the Flex machine as the one on which Mr. Bostick was injured. Although she is inconsistent in her description of Mr. Bostick body position after the accident, she identifies the Flex machine as the one on which the accident occurred with a "tremendous amount of conviction." Second, when she testifies about the accident, she appeares to be genuinely sorrowful and breaks down and cries which will generate sympathy for Mr. Bostick. Mr. Tasker concludes that at this time, there appears to be a significant likelihood of liability on the part of Flex.

Win Big or Lose Big
On Tuesday, January 29, 2002, Mr. Tasker advised Atlantic that if it did not accept the settlement demand, it was going to "win big or lose big" and if the jury believed the accident happened on the Flex machine, there was going to be a verdict "far in excess of the policy limits." He understood that Atlantic was "not interested in paying the policy limits."

Demand Expires
On Wednesday, January 30, 2002, there is not a single entry in the Notepad of Atlantic Mutual. There are no phone calls recorded, no letters exchanged and no meetings. The opportunity to settle Mr. Bostick's case against Flex within the $1 million policy limits passes. Atlantic Mutual decides not to even respond to the demand. It is willing to take a chance and go to trial.

Jury Verdict
On Friday, July 25, 2003, a Los Angeles jury brings back a verdict in the amount of $16.2 million in damages in the Bostick case. Mr. Bostick is found 10% at fault for his own injuries and Flex is found 90% responsible, with all others 0%. On May 18, 2004, Flex assigns to Mr. Bostick its rights to sue Atlantic for bad faith refusal to settle within the policy limits in exchange for Mr. Bostick's agreement to refrain from collecting against Flex unless Atlantic Mutual obtains a defense verdict in the bad faith case. On Monday, January 29, 2007, the California Court of Appeal affirmed the judgment against Flex.