A jury in Napa, Calif. has awarded Marin School InsuranceAuthority $4.66 million stemming from a lawsuit against third partyclaims administrator, ESIS, Inc., a unit of ACE USA, for sloppyclaims handling.

The Feb. 20 verdict in California Superior Court came in anaction that alleged breach of contract, negligence and promissoryestoppel.

Marin Schools Insurance Authority consists of 21 agencies inMarin County, Calif.--including 18 school districts, one communitycollege, one county office of education, and one pupiltransportation agency.

Philadelphia-based ESIS, based in Philadelphia, was sold byCIGNA to ACE in 2000.

According to the Marin School Insurance Authority's lawfirm--Thelen Reid Brown Raysman & Steiner LLP--ESIS had servedfor decades as the workers' compensation claims administrator forthe Marin risk pool's comp claims.

According to the firm, an independent audit commissioned by theschool districts in 2004 found that Marin's claims, handled out ofESIS' Fremont, Calif., claims office, were not properlyadministered.

Some of the mishandling was said to include failing to givetimely notification of when claims could pierce the self-insuranceretention level, thereby triggering excess liability coverage;failing to properly investigate new claims; and failing to objectto unreasonable and excessive medical treatments.

"The Fremont, Calif., claims office of ESIS was in seriousdisarray," said Daniel Sovocool, with the Thelen law firm, whorepresented the school districts. "ESIS actually rehired a formercorporate officer, presumably to have him fix things, but heultimately testified against ESIS at trial."

After an almost five-week trial, the jury took less than a halfday of deliberation to return unanimous verdicts on the breach ofcontract and promissory estoppel causes of action. They ruled 11-1in the plaintiff's favor on the negligence cause of action,according to the Thelen firm.

"This victory is especially rewarding considering how uncommonit is for public risk pools to sue their claims administrators,"Mr. Sovocool said. "With the complexity of this type of case, itcan take considerable resolve to hold claims administratorsaccountable for poor claims practices."

Mr. Sovocool made a prediction that more scrutiny will now begiven to third-party claim administrators, and said he believesthis case could propel similar suits around the country.

One other named defendant, the Schools Excess Liability Fund,was dismissed late in the trial.

Asked about the casem a spokesperson for Ace said by e-mail, "Wedo not comment on any matters in litigation, according to companypolicy."

This article updated 3:29 p.m. EST