From National Law Journal Jun 04 1998 - The Weekly Newspaper for the Profession

Insurer Gets $35 Million In Punitive

Houston – A Jury May 19 assessed former Houston jeweler Gerald Milici and some associates $35.8 million, including $ 35 million in punitive damages, for allegedly staging robberies to defraud a customer and Jewelers Mutual Insurance Co., of Neenah, Wis.

The case appears to be the first in which an insurance company received punitive damages for property insurance fraud, said Jeweler Mutual attorney Michael W. Johnston, of Fort Worth’s Johnston & Minton L.L.P. “The verdict expressed a strong community feeling that insurance fraud is not to be tolerated,” he said.

None of the defendants or their attorneys was on hand for the two-day trial. Mr. Milici’s attorney in the lawsuit did not return calls.

The allegedly faked robberies occurred in 1991 and 1992 at Mr. Milici’s now-defunct stores in Houston. Jewelers Mutual paid the initial claim for $295,000 but denied the 1992 claim for $341,000, according to court records, after a law-enforcement investigation found the goods had not been stolen but concealed by Mr. Milci in a complex series of transactions.

After the investigation, Mr. Milici was charged but received deferred adjudication, Mr. Johnston said.

In 1995, Jewelers Mutual joined as cross-plaintiff in a lawsuit filed in 1994 by Kenneth Gilde, of Houston, against the insurance company, Mr. Milici and others. Mr. Gilde alleged that he consigned jewelry to Mr. Milici to sell, but he neither received compensation for the jewelry nor got the jewelry back, Mr. Johnston said.

Mr. Gilde claimed he was told by Mr. Milici that his jewelry, along with that belonging to several other customers, had been stolen, but hey would recover their losses from the insurance company, said Mr. Johnston. Kenneth J. Gilde v. Jewelers Mutual Insurance Co. et al., No. 93-061188.

In a May 22 judgment, state District Judge Katie Kennedy upheld an award of $318,000 in actual and $9.1 million in punitive damages to Mr. Gilde and $938,887 in actual, plus $15.9 million in punitive damages, to Jeweler Mutual. After the jury’s verdict, the plaintiffs learned that one of the defendants, who were assessed $10 million in punitive damages, had declared bankruptcy, Mr. Johnston said. He said a motion to lift the bankruptcy stay has been filed.

Mr. Johnston said he was not “looking for a check in the mail” anytime soon, but an effort would be made to try to locate the defendants and collect the money. Mr. Milici was reported to be living in Florida.