Insurance companies to pay $112M after failing to repair old Studebaker plant

Published: May. 26, 2023 at 5:47 PM EDT
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SOUTH BEND, Ind. (WNDU) - A jury seated in South Bend sent a $112 million message to the insurance industry.

That’s how much seven sued companies will have to pay in damages for refusing to pay claims.

The trial went on for nine days in U.S. District Court in South Bend. The jury deliberated for about two and a half hours on Thursday before awarding $112 million in damages.

The controversy centers on a massive million-square-foot factory off Chippewa Avenue that was built to make aircraft engines for use in World War II.

The flood waters of 2016 damaged the plant. The owner’s insurance carriers refused to replace the very part of the plant that made it valuable—its elaborate, high-capacity electrical system with its six underground substations.

“They restored one transformer, gave us about 10 percent of the power capacity back, and said that was replacement cost fix. Astonishing was the argument that they made to the jury, which was, ‘Well, this place is run down, and it’s kind of a dump; therefore, we don’t have to pay for it,” said South Bend Attorney Clint Zalas, who represents Industrial Realty Group in the case.

On Thursday, a jury used its power to decide who pays what. The panel ordered more than $24.7 million in compensatory damages to upgrade the electric system and rid environmental contamination in the building.

Jurors also ordered each of the seven insurance companies involved to pay $12.5 million in punitive damages for a total of $87.5 million.

Punitive and compensatory damages together total more than $112 million.

The jury found that the companies had acted in bad faith in handling the claims. “We hired an environmental consultant to give us an idea as to how this thing should be managed and cleaned up. The insurance companies secretly hired him away from us, paid him $10-thousand dollars an hour to write reports that would favor their position,” said Zalas.