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Insurance company pays $2.15 million in hotel arson case

A family-owned hotel business settled its insurance bad faith claim against Seneca Specialty Insurance Company (Seneca) for $2.15 million after the insurer failed to pay for fire damage caused by an arson.

The West Columbia, South Carolina business, Vagish LLC and Va Va Vagish LLC (collectively, Vagish) was in the process of renovating the hotel and adjacent restaurant into a new Super 8 Motel franchise when, in July 2013, an incendiary fire was set on the hotel’s fourth floor. Investigators quickly determined that the catastrophic blaze was the result of arson. Vagish made an insurance claim, but after five months, the insurance company had neither accepted nor rejected the claim.

Vagish filed suit alleging breach of contract and insurance bad faith and conducted lengthy discovery into the insurance company’s handling of the claim. Vagish argued in court filings that Seneca refused to accept the claim in the hopes that the hotel’s manager–also the son of the hotel’s majority owners–would be implicated in the arson. When the police closed the case without making an arrest, the insurer still refused to pay base on a suspicion it never investigated. The family business argued that had Seneca conducted an investigation, the insurance company would have learned facts that eliminated the hotel’s manager as a suspect.

Despite Seneca’s refusal to accept and pay the hotel’s $1.7 million claim, Vagish succeeded in repairing, renovating, and re-launching the Super 8 franchise.

A report by Phillip Bantz of South Carolina Lawyers Weekly quoted Dick Harpootlian explaining, “Insurance companies tout the fact that if something bad happens they’ll pay immediately, but oftentimes they don’t[.]” Seneca litigated the case for almost three years before a settlement was reached in October 2016.

Vagish was represented by Dick Harpootlian and Chris Kenney of Richard A. Harpootlian, P.A., Leigh Leventis of the Law Offices of Leigh J. Leventis, and Jim Griffin of Griffin Davis.

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