Ex-Insurer Ordered to Pay Whittaker $27.3 Million

Whittaker Corp. has won $27.3 million in damages from its former insurance broker, Alexander & Alexander, because the broker dropped part of the Los Angeles company’s product liability insurance shortly before railroad cars manufactured by Whittaker began to crack.

A Los Angeles Superior Court jury on Wednesday found that New York-based Alexander & Alexander was negligent and breached its contract with Whittaker. The damages represent Whittaker’s actual expenses caused by the rail car cracking problem and lawsuits that followed.

Alexander & Alexander is considering an appeal of the verdict, general counsel Nora Winay said. The award will not have an adverse financial effect on the company, she said.

Whittaker, a diversified manufacturer that reorganized last year to focus on technology products for the defense, aerospace and automotive industries, employed Alexander & Alexander as its insurance broker from 1979 to 1984.

In its lawsuit, Whittaker contended that Alexander & Alexander dropped the company’s product liability coverage for railroad cars and boats in November, 1979, without consulting Whittaker.

In December of that year, Whittaker learned that coal-carrying railroad cars manufactured by one of its divisions were cracking because of a design defect. Whittaker later learned that it was not insured against the losses because of Alexander & Alexander’s oversight, the suit said.

Whittaker also sued the designer of the railroad cars, receiving a $7.75-million settlement. Whittaker has since sold its railroad car division.

“This really was a major disaster for Whittaker,” said Jeffrey I. Weinberger, a lawyer with Munger, Tolles & Olson who represented Whittaker. The jury awarded Whittaker the full amount of actual damages it had sought, he said.