California Apparel News

A car fire outside the warehouse for Un Deux Trois Inc. destroyed the facility with smoke and fire damage, and the Commerce, Calif.–based girls and juniors brand had hoped it could recoup losses from the company’s fire insurance policy. Instead, the brand ended up suing its insurer, United States Fire Insurance Co. The suit alleges that U.S. Fire underpaid its reconstruction expense or costs by more than $425,000.

Last month, UDT filed a suit in Los Angeles County Superior Court against U.S. Fire for breach of contract and bad faith. The New Jersey–based insurance company has not answered the complaint and did not answer phone calls from California Apparel News. Un Deux Trois Chief Executive Officer Colin Shorkend said that the company lost business because of the insurance company’s drawn-out investigation process.

“They were happy to take our premiums, but as soon as we made a claim we were treated like adversaries,” Shorkend said. “The claims process was drawn out and very lengthy. Ultimately, they denied a substantial portion of our reconstruction costs, leaving us with a huge unpaid construction bill.”

The events detailed in the suit started on Sept. 10, 2010, when a fire destroyed the warehouse. UDT hoped to rebuild quickly after receiving an insurance payout. But according to the suit, the insurance company dragged its feet on investigating and settling the matter. Vagrants squatted in the warehouse, vandals tagged the building with graffiti, and by March 2011, the Los Angeles Police aDepartment demanded that UDT comply with city codes and take down the interior walls of the building so vandals couldn’t deface them, said lawyer Travis Corby of firm Shernoff Bidart Echeverria Bentley, who is representing UDT.

The insurance company then made a decision. A payout would be denied. The insurance company said that UDT caused extensive damage because it made an elective decision to remove the walls. UDT’s complaint also alleges that the insurance company hired biased experts to search for reasons to deny the claims. It also hired an attorney to examine the claim and find a reason to scuttle it.

“U.S. Fire spent almost two years engaging in a protracted, inquisition-style claims investigation and unreasonably delayed the reconstruction of UDT’s facility and the reimbursement of UDTs reconstruction expenses,” the complaint said. Since then, UDT rebuilt the warehouse out of its own funds.

Bill Kulchin, chief executive officer of Tarzana, Calif.–based Apparelinsurance.com, a carrier that specializes in the apparel industry and is not involved in the case, said that everyone in the insurance industry is aware of bad-faith disputes. “The threat of bad faith is prevalent, and it tends to keep carriers in check and forces them to do what’s right,” he said.