On July 26, 2009, plaintiff Milton Lopez, a landlord, learned that a residential structure that he owned on W. Robinson Avenue in Fresno, where he rented multiple bedrooms, was destroyed by a fire. At the time, his property was insured under an Allstate Landlord Policy. Lopez filed a claim that exceeded the structural limits of the policy ($133,121), which he had with Allstate Insurance Co. The estimated cost to repair the property was approximately $372,000. After the loss, Lopez claimed that Gary Gonzalez, an Allstate agent, incorrectly stated the size of the structure to be 1,600 square feet, rather than its actual size of 3,100 square feet, resulting in the structure being underinsured by around $240,000. Gonzalez claimed Lopez failed to disclose the fact that he rented various bedrooms in the unit when he was applying for insurance for the property. Lopez contended that Allstate investigated the limit discrepancy and determined that the fault lay with the agent. He claimed that the recommendation was to reform the policy to cover the entire loss and Allstate determined that the claim should be referred to the agent’s E&O carrier for payment of the excess liability. The E&O carrier, however, advised Allstate that it would not accept the claim until Allstate denied Lopez’s claim on the policy. In order to find coverage for the insured, Allstate retained coverage counsel in October 2009. While investigating the claim, Allstate’s coverage counsel determined that Lopez had made material misrepresentations of fact regarding the size of the structure, as well as its configuration and use. As a result, Allstate rescinded the policy for misrepresentation, refunded the premiums to the insured and, except for $13,800 in lost rents, paid nothing on the claim. Lopez and his ex-wife, Anamaria Cornejo, sued Allstate Insurance Co., alleging breach of the insurance contract and bad faith. They also sued Allstate agent Gary Gonzalez for negligence. Cornejo’s claims were disposed of by summary adjudication, and Gonzalez settled the claims against him prior to trial. Thus, the matter proceeded to a jury trial between Lopez and Allstate. Lopez claimed that the plain and simple language of the policy’s dwelling coverage did not limit the number of rental units contained in a residential structure. In this regard, he noted that the dwelling limit applied only to “one-, two-, three-, and four-family building structures,” which Allstate’s designated underwriter testified in his deposition meant a residence, duplex, triplex and fourplex. Lopez further argued that the term “rental unit” did not appear in the insuring agreement and that it was defined to mean “that portion” of the dwelling held out for rent. Furthermore, he claimed everyone directly involved in the claim handling, including the only two adjusters who inspected the structure, had found coverage for the loss. Lopez also argued that the existence of coverage was shown by Allstate’s refusal to state that any language in the insuring agreement was ambiguous and by not producing any underwriter at trial to address the meaning of the insuring language. The plaintiff’s bad faith experts testified that Allstate acted in bad faith by failing to conduct any meaningful investigation after initially concluding that the loss was covered, and by failing to keep the insured informed. The expert also testified that Allstate acted in bad faith by misrepresenting the status of the claim over nine months and by destroying, discarding or otherwise failing to document the claim file. Allstate contended that Lopez provided misinformation during the application process in order to obtain the minimum amount of coverage, because both Lopez and Cornejo testified that they did not expect a loss. Defense counsel contended that this was later verified by fellow Allstate agents in Gonzales’ office who overheard Cornejo tell Lopez, “That’s what you get for buying cheap insurance.” Allstate further contended that the information provided by Lopez when applying for insurance was confirmed on two subsequent occasions. Allstate claimed that Lopez stated the property was 1,600 in square feet, when in fact it was over 3,100 square feet, and that the property consisted of a single-family unit with one family in occupancy, when in fact it consisted of at least seven rental units that were all rented. Allstate further contended that it did not offer or write Landlord Policies for a structure with more than four rental units, under its underwriting guidelines and in accordance with California Law. Due to these alleged misrepresentations, Allstate declared the policy void from its inception and rescinded it. The defense’s bad faith expert further contended that Allstate acted in good faith, and was consistent with the industry standard., The plaintiff’s economic expert testified that Allstate’s failure to pay the claim resulted in Lopez’s losing not only the subject property to foreclosure, but also the property he was living in at the time. Thus, Lopez claimed in excess of $1 million in property damage, consequential economic damages, and emotional distress. Allstate contended that the policy was void from inception and no benefits were due, as no recoverable damages were sustained.