A Chubb unit urged a California federal court to rule that it needn't pay a software company CEO and his wife millions of dollars for living expenses related to a 2017 water damage claim, saying the couple made misrepresentations regarding the habitability of their Beverly Hills estate.

In its proposed findings of fact and conclusions of law filed Tuesday, Federal Insurance Co. said Unicom founder, president and CEO Corry S. Hong and his wife, Christine H. Hong, are not entitled to coverage for extra living expenses while their home's HVAC chiller system undergoes additional repair.

The insurer said the Hongs' claim for declaratory relief relates to coverage for future additional living expenses/extra living expenses, or ALE/ELE, that was demanded in a June 2021 proof of loss, and subsequently denied that December in a letter, though they are now seeking a larger amount of money. In the letter, Federal said, it denied the Hongs' claim for $288,410 in previously incurred hotel expenses, as well as $1.8 million in future expenses that had not yet been incurred, due to material misrepresentations in their demand for ALE/ELE relating to hotel stays in April 2021.

Federal asserted that the Hongs' ability to challenge that denial is barred by the policy's one-year suit limitation provision.

Moreover, because the Hongs "misrepresented material facts in connection with their additional living expense claim to Federal … there is no coverage under the Federal policy for plaintiffs' entire loss, including but not limited to any present or future ALE/ELE claim," the insurer said.

The coverage dispute stems from a claim for water damage that the Hongs made in November 2017, after they discovered a leak originating from the property's underground HVAC chiller system. The Hongs later submitted three additional water damage claims for the property's subterranean garage, changing room and west wing.

According to court filings, Federal ultimately paid approximately $3 million for the damage and for several stays at the Beverly Hills Hotel while the chiller system was inoperable.

In December 2024, the insurer denied the Hongs' claim for relocation expenses that they expected to incur during the second phase of repairs on the chiller system, saying the claim had been "expressly denied" in the December 2021 letter. The couple filed the present action in California state court shortly after.

The suit, which was removed to federal court, alleged that Federal's denial constituted a breach of the policy and the implied covenant of good faith and fair dealing. The Hongs also asserted that the property will be uninhabitable for up to two years while the chiller system is repaired, and that the insurer must pay for the family to relocate to a comparable home.

In an in-chambers order issued Oct. 7, U.S. District Judge R. Gary Klausner partially granted Federal's bid for summary judgment. The judge found that the Hongs' breach of contract claim was barred by the policy's one-year suit limitation provision and that their bad faith claim failed, but allowed the declaratory judgment claim to proceed to trial.

The Hongs asserted in their own proposed findings of fact and conclusions of law, also filed Tuesday, that the December 2021 denial letter was not legally sufficient to notify the couple that Federal was terminating their rights to request ALE/ELE in the future.

"In denying Federal's motion for summary judgment, this court ruled the letter was ambiguous, which means, as a matter of law, it was not clear and explicit and thus was not a valid notice for this purpose," the Hongs said.

Because the property will be uninhabitable during the repairs, the Hongs said Federal must pay for comparable housing "to maintain the household's usual standard of living," which is estimated to be $600,000 per month for approximately two years while work is completed, plus a $600,000 security deposit.

The insurer must also pay a minimum of $1.1 million to remove, store and return all furniture and furnishings, the Hongs said.

Federal, however, asserted in its filing that the repair work will not render the home uninhabitable, that the estimated period of time to restore the property is unreasonable, and that the $600,000 per month ALE/ELE claim is inflated.

Representatives of the parties did not immediately respond to requests for comment Thursday.

Unicom and the Hongs are represented by Glen L. Kulik and Christiana Kim of Kulik Gottesman Siegel & Ware LLP.

Federal is represented by Jerome P. Doctors, Eric D. Freed, Charles J. Jesuit Jr. and Stephen S. Kempa of Cozen O'Connor.

The case is Unicom International Inc. et al. v. Federal Insurance Co. et al., case number 2:25-cv-00664, in the U.S. District Court for the Central District of California.