Insurance Claims and Bad Faith Law Blog

UPDATE: California Arbitrator Awards Attorney's Fees Too.

    A previous post in this space addressed an Arbitration Award in a California Arbitration.  The Arbitration of the Insurance issues apparently including Good Faith and Fair Dealing or not, was demanded by the Health Insurance Company, Health Net Inc.  The agreed Arbitrator is a retired California Judge.  The California Arbitration resulted in an Award of over $9.4 Million, $8.4 Million of which was a Punitive Damages assessment against Health Net.  See the post here, on February 23, 2008.

    On February 28, 2008, a follow up newspaper report published in the Los Angeles Times Online seems to call into question what remedies or options, if any, Health Net and its Attorneys may have to appeal or even question the Arbitration Award:  Lisa Girion, "Penalty Cuts Insurer Profit/Health Net Lowers Its Earnings After a Judge Awards $9.4 Million to a Cancer Patient Whose Policy Was Canceled" (Los Angeles Times Online, Thursday, Feb. 28, 2008).

    As the linked newspaper report's headline reflects, Health Net is filing documents with the Securities and Exchange Commission reflecting that the Arbitration Award has lowered its reportable net income for 4Q 2007, from $123.4 Million to $116.9 Million.

    The newspaper also reports that the California Arbitrator has awarded the Policyholder her Attorney's Fees, in an amount to be determined.

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California Arbitrator Assesses $8.4 Million in Punitive Damages Against Health Insurer.

    The Health Insurance Company in question is Health Net Inc.  The entire Arbitration Award is reportedly over $9 Million.  $8.4 Million of the award is an assessment for Punitive Damages.  The Health Insurer insisted on resolving the dispute only by Arbitration.   Here is a brief but totally accurate outline of the case.

    The Health Insurance Company canceled a Policyholder while she was receiving expensive chemotherapy treatments.  The evidence reflected that the expense of chemotherapy was the motivation for cancellation.

    Documents generated by Health Net itself were made available to the Arbitrator.  The documents showed that Health Net paid bonuses to employees who met "a cancellation quota and for the amount of money saved."

    This practice did not sit well with the Arbitrator, a retired California State Court Judge, who wrote:  "'It's difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive.'"  Quoted in "Health Net Ordered to Pay $9 Million After Canceling Cancer Patient's Policy/The Punitive Damage Award is the First of its Kind and has Prompted the Giant Medical Insurer to Scrap Practices That Have Recently Come Under Fire" by Lisa Girion (Los Angeles Times Online, Saturday, February 23, 2008).

    The purpose of Punitive Damages assessments may be furthered by this award, for in the same newspaper article it is reported that other Health Insurers are about to change their own practices in this regard.

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Bad Faith and Punitive Damages.

     The most recent reported decision on the assessment of Punitive Damages in a case of Insurer Bad Faith was reported yesterday, as this is posted: 
Merrick v. Paul Revere Life Insurance Co. (9th Cir. Case Nos. 05-16380, 05-17059, Opinion Filed Friday, August 31, 2007).  There was a major assessment of Punitive Damages in that case, which the Ninth Circuit totally vacated, remanding "for a new trial on punitive liability."   Slipsheet Opinion above at 11129-30.

     The Merrick case involved a jury verdict and a judgment awarding $1,650,000.00 in compensatory damages, and assessing two separate amounts of punitive damages totaling $10,000,000.00 against Paul Revere ($2,000,000.00) and against Unum Provident ($8,000,000.00) which merged with Paul Revere.  Id. at 11113.   The Federal District Judge thereafter denied the Defendant Insurance Companies' post-Trial motions and awarded the Plaintiff attorney's fees in the amount of $500,000.00.  Id. at 11119.

     The Plaintiff was the Policyholder of a disability policy purchased from Paul Revere.  Paul Revere initially made disability payments under the  insurance policy.  After Unum Provident merged with Paul Revere, the disability payments ceased and the Policyholder's disability claim was denied.  The Policyholder filed suit in Nevada for breach of contract and of the duty of Good Faith and Fair Dealing.  Id.  at 11113-11116.

     The proof of Coverage Denial, Bad Faith, and Punitive Damages all rested on a theory of the case that the Insurance Company Defendants pursued a scheme to "scrub" themselves and their liability for expensive disability policies like the one at issue in this case.  "Merrick [the Policyholder] relied largely upon the testimony of ... an insurance industry expert, who testified regarding Unum Provident's allegedly aggressive and unethical claim-closing practices."   Id. at p. 11117.    Under Nevada law regarding Punitive Damages in particular, the standard of proof is clear and convincing evidence.  The burden of proof is to show that Punitive Damages should be assessed because the Defendant engaged in oppression, fraud, or malice.  Id. at 11120.  The Ninth Circuit wrote:  "Here, the jury could have concluded that by subjecting Merrick's claim to improper claim-scrubbing procedures, the insurers 'undertook an intentional course of conduct designed to ensure the denial' of the claim."  Id. at 11120.

     The Plaintiff's-Policyholder's proof in the Merrick case was based upon "a decade of allegedly improper claims handling practices at Provident."  Id. at 11123.  In essence, that was enough to prove Bad Faith and to sustain an award of compensatory damages in the District of Nevada and in the Ninth Circuit.  It was not enough in the eyes of the Ninth Circuit to sustain the assessment of Punitive Damages in the Merrick case, however.

     The assessment of Punitive Damages in the Merrick case ran afoul of the recent United States Supreme Court decision in Philip Morris USA v. Williams, 127 S. Ct. 1057 (2007).  One of the holdings in the Williams case was that Punitive Damages are unconstitutionally assessed if there is no proof and no limitation on jury consideration of harm to parties.  Williams, 127 S. Ct. at 1063.  The claim in Merrick was based upon the alleged bad conduct of bad people or at any rate of bad companies, and the Ninth Circuit was not able to hold that there was sufficient proof or a limitation on jury consideration of harm to Merrick, the Plaintiff and the Policyholder in that particular case.  "We therefore conclude that the district court erred in failing to instruct the jury that it could not punish the defendants for conduct that harmed only nonparties."  Id. at 11128.

     In sum, the Williams decision of the Supreme Court has the effect of separating the proof of Bad Faith from the proof that is required by the United States Constitution for the assessment of Punitive Damages.  They are governed by separate standards, and clear and convincing proof is not enough to support an assessment of Punitive Damages after Williams and Merrick, even where a violation of Good Faith and Fair Dealing may be proven.
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Katrina CatClaims Revisited: State Farm Settles, Is Sued Again.

    It appears that State Farm may have been sued again for Bad Faith as a result of Hurricane Katrina Catastrophe Claims -- indirectly, this time.

    There was once a settlement agreement, among many policyholders and State Farm, in Mississippi.  The proposed settlement agreement was subject to Federal Court approval.  The Federal Judge was confronted with more questions than answers when he was presented with the proposed settlement for his approval.  The Federal Judge refused to approve it, at least until the many questions were answered.

     State Farm then reportedly reached a settlement agreement of many of the same claims with the Mississippi Insurance Commissioner's Office.  This lengthy previous history was summarized in "Update to the Update:  New Settlement in Mississippi," posted on March 20, 2007 on "Insurance Claims And Issues".   

    It is now reported that the State of Mississippi, through the Mississippi Attorney General, filed a new Complaint on Monday, June 11, 2007 in Mississippi State Court.  The new Complaint contains allegations, it is reported, that State Farm breached the (first) settlement agreement and thus breached a contract.  The new Complaint contains demands for compensatory and punitive damages.  More will be posted as the Complaint becomes available.  As of the night of June 11, 2007, there was a momentary silence on the subject on the web sites of both the Mississippi Attorney General and the Mississippi Insurance Commissioner.

     Here is a link to State Farm's Press Release of June 11, 2007,which State Farm entitled "Mississippi Attorney General's Lawsuit Threatens to Disrupt Hurricane Katrina Settlement Process with MIssissippi Insurance Department". 

     Here is a link to the whole available story on "Insurance Claims And Issues".
   
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Partial Payment of Claims ... UPDATED!

     This post updates the post here on January 12, 2007 regarding:

Punitive Damages, Katrina and the Insurance Contract:  Lessons Revisited and a Tale Told in Pieces or in Parts.

   

     On January 31, 2007 Federal Judge L.T. Senter, Jr. entered an Order reducing the Punitive Damages Assessment in the Broussard case.  The Federal Judge reduced the Punitive Damages assessment in that case to 40% of what the Jury assessed, reducing the assessment from $2,500,000.00 to $1,000,000.00.  Here is a link to the Order:  Norman J. Broussard & Genevieve Broussard v. State Farm Fire & Cas. Co. (S.D. Miss. Case No. 1.06CV6, Order entered January 31, 2007) .  For another report on this same decision, go to the February 1, 2007 post on Insurance Claims And Issues.     

     The Federal Court's ruling on January 31, 2007 adds to the facts coming in about the bases for this lawsuit, about the Bad Faith allegations in it, and about the reasons behind the Jury's finding of entitlement to Punitive Damages under Mississippi law.

     The Homeowner's Policy involved in the Broussard case was "an 'all perils' policy in the case of the dwelling and a 'named peril' policy as to contents, i.e., windstorm."

     Second, the initial investigation by the Homeowner's Insurance Company showed clearly that the Policyholders' home "was reduced to a slab by Hurricane Katrina" and that the damage was caused more by flood than by wind, the Federal Judge wrote.

     The Insurance Company "did not obtain any expert opinion on this particular loss."

     Rather than obtaining any expert opinion, as the Federal Court noted, the Insurance Company instead established a procedure for homes reduced to nothing remaining except the slab, a procedure which it applied in the Broussard case.  The subject procedure was to use "the debris line" and declare that in the instance of only a slab remaining, all damage would be presumed to be caused by FLOOD which was NOT a covered loss, thereby leaving it to the Policyholders to bear the burden of proving damages caused by a covered loss such as WIND.

     Although not repeated at any length in the January 31, 2007 Order, the Federal Court had PREVIOUSLY RULED in that same case that the burden of proof was INSTEAD on the Insurance Company to prove at Trial in Court that all or part of the damages claimed by the Policyholders were EXCLUDED.

     The Homeowner's Insurance Company "relied on its flood exclusion to totally deny the claim."

     The Federal Judge held that there was clear and convincing evidence in the Broussard case supporting a finding by the Jury of entitlement to Punitive Damages.  There was in other words clear and convincing evidence, the Federal Judge wrote, "that Defendant acted in such a grossly negligent way as to evince willful, wanton, or reckless disregard for the rights of the Plaintiffs."

     That ruling affirmed the issue of Mr. and Mrs. Broussards' entitlement to Punitive Damages under the facts of this case.  As to the amount of Punitive Damages, to $1,000,000.00, the Mississippi Federal Court reduced them as noted, doing so both under Mississippi State law and under "due process considerations under the United States Constitution."

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Jury Pools in the Wake of Katrina in Mississippi.

    Bad Faith Cases receive careful attention.  Part of the focus in every Bad Faith Case is the potential Jury Pool, or the Venire.  They are the people deciding issues of fact and who they are is clearly important.

    Before Katrina struck Mississippi, most Mississippians were like most residents of the rest of the Gulf Coast.  Few people carried Flood Insurance.  However, the focus on Insurance Coverage for Katrina Damages Claims can divert attention from the fact that many people did not have Property Insurance Coverage or  Homeowner's Insurance  either.

     They are the people who make up the Venire for Mississippi Bad Faith Cases like the recent case reported in newspaper articles and in a post here on January 15, 2007.

    Briefly, the recent case in Mississippi involved First-Party Bad Faith Claims including Punitive Damages Claims.  A Federal Judge directed a verdict for the full Policy Limits available under a Homeowner's Policy.  The case went to the Jury on the question of Punitive Damages under Mississippi law, which is fully discussed in the January 15, 2007 post.  Without repeating all of that post here, in general terms Mississippi law allows the assessment of Punitive Damages for Bad Faith Breach of Contract and it can be Bad Faith not to pay any part of Damages which are covered.

    It is reported that the Homeowner's Insurance Company in that case never made an offer.

    The Jury assessed $2,500,000.00 in Punitive Damages.

     See the detailed discussion of the situation in which these potential Jury members live today, Peter Whoriskey, "As Aid Lags, Volunteers Shoulder Rebuilding on Gulf Coast/Local Gratitude Mixes With Frustration Over Government's Failures" (Washington Post, Sunday, January 28, 2007, p. A03), and the discussion generally of Venires available for Katrina Cases across the Gulf Coast, in Insurance Claims and Issues.

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Partial Payment of Claims ....

                Punitive Damages, Katrina and the Insurance Contract:                           Lessons Revisited and a Tale Told in Pieces or in Parts.   

    An Insurance Company has been assessed $2,500,000.00 in Punitive Damages by a Jury in Federal Court in Mississippi.  Here is the Punitive Damages Verdict that was filed on Thursday, January 11, 2007:  Download Broussard_v. State Farm Fire & Casualty Co. Verdict January 11, 2007 (S.D. Miss. Case No. 1.06.cv6).pdf.

    The Federal case involves Claims for Damages following Hurricane Katrina.  News outlets began broadcasting the report on the evening of the day this Punitive Damages Verdict was filed, and news outlets continued to report on this Verdict the next day, as expected.  An insightful article is published online at Bloomberg.com.  Here is a link to it:  Lawrence Viele Davidson & Erik Holm, "State Farm Must Pay Couple $2.7 Million for Katrina (Update4)" (www.bloomberg.com/apps/news, dateline Jan. 11, 2007 (Bloomberg)).  The Punitive Damages Verdict was also blogged.  See for example Insurance Claims and Issues Blog.  This post will suggest some missing information that may be needed in order to understand how this Verdict was rendered and to explain something of what it means.

    As was noted at the beginning,  the  Broussard case is one of many Hurricane Katrina-related lawsuits.  It involves Insurance Coverage Claims for Damages to a Home.  It clearly also involves a claim for Punitive Damages under Mississippi law since that Punitive Damages Claim went to a jury.  Although the Complaint does not appear to be accessible in the Federal Court's online docket as the case was removed to Federal Court from Mississippi State Court, piecing together various reports about this particular case with established Mississippi case law yields the following possible scenario.

    "At its core, Plaintiffs' cause of action is based on an alleged breach of contract.  The Complaint does not even contain separate counts."  Download Broussard_v. State Farm Fire & Casualty Co., Order on Motion for Partial Summary Judgment entered November 6, 2006 (S.D. Miss.  Case No. 1.06cv6).pdf.  The Federal Court's November 6, 2006 Order also provides the information that the Court itself did not have a lot of allegations and exhibits to go on.  Although the Complaint attached a specimen Homeowner's Policy, it was not the policy issued to Mr. and Mrs. Broussard.  "This attachment does not disclose the policy limits.  The Plaintiffs' residence apparently was reduced to a slab by the storm, although it takes a lot of reading to reach that conclusion.  The tension in the record is between the damages sustained by Plaintiffs and the manner in which their claim was handled by Defendant."  Id.

 In a later Order, the Federal Court repeated that "Plaintiffs' cause of action at its core is based on an alleged breach of contract."  The Federal Judge also acknowledged a very important Claim:  "Plaintiffs also assert that they are entitled to punitive damages and/or extra-contractual damages due to the Defendant's alleged bad faith conduct in handling and denying their claim."  Download Broussard_v. State Farm Fire & Casualty Order on Motions In Limine entered on December 28, 2006 (S.D. Miss. Case No. 1.06cv6).pdf.

    The Policyholders' Insurance Company never made an offer for any part of the  Claim.  A spokesperson for the Insurance Company is reported as stating that it was sued by the Policyholders after it had refused to pay anything on their Claim.  See the news report by Joseph B. Treaster, "State Farm Told to Pay Gulf Claim" (New York Times, Friday, January 12, 2007).

   However, according to the Federal Judge's Law Clerk and reported in the same article in The New York Times, Experts for the Insurance Company stated in unspecified documents filed in the Court File, that some damage to Mr. and Mrs. Broussard's home was caused by Wind, a Covered Peril.

    Further, before Trial of the Broussard case, the same Federal Judge ruled in other cases pending before him, that (1) presumably similar Flood or Water Exclusions will exclude Coverage for all damage caused by Flood or Water, in part here pertinent, but that (2) the Policy does not exclude all Coverage if part of the Damages are caused by Flood.  These rulings were certainly generally known, as previously noticed by a Federal Judge in the Eastern District of Louisiana, for example, and in a post on  December 5, 2006 here and in Insurance Claims and Issues Blog.

    Thereafter, the Insurance Company could defend against Punitive Damages only by (1) paying or perhaps at least making an offer to pay the clearly covered part of the Claim or (2) successfully arguing the total applicability of the Flood or Water Exclusion to exclude all damages.

    Mississippi standards for assessing Punitive Damages in First-Party Bad Faith cases have been pretty clear for a very long time.  Mississippi  requires more than proof of First-Party Bad Faith and certainly requires more than proof of carelessness, for example.  "Carelessness, however, does not rise to the level of bad faith required for plaintiff to prevail on her [Punitive Damages] claim."  Mixon v. Provident Life & Accident Insurance Co., 616 F. Supp. 139, 142 (S.D. Miss. 1985), aff'd mem., 783 F.2d 1061 (5th Cir. 1985).   Mississippi Punitive Damages law requires more than a finding that a credit life insurer, for example, in another First-Party Bad Faith case "lacked an arguable reasonable basis for denying the claim....  A further finding is required showing malice or gross negligence or disregard of the insured's rights."  Barber v. Balboa Life Insurance Co., 747 So. 2d 863, 868 (Miss. Ct. App. 1999).  These and similar rulings are further addressed at much greater length in, for example, Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (2nd Ed. 1994), published by West Publishing Company online and in print.

    Further, as early as 1979 the Mississippi Supreme  Court held that a  Punitive Damages instruction is properly given to a Jury, and a First-Party Insurance Company is properly assessed Punitive Damages, where the First-Party Insurance Company declines to pay all of its Policy Coverage where some of its Coverage applies.  See Travelers Indemnity Co. v. Wetherbee, 368 So. 2d 829, 833-35 (Miss. 1979) and the cases discussed by the Supreme Court of Mississippi in that decision.  These Mississippi rules of law were visited by the same Federal Judge assigned to the Broussard lawsuit, in an earlier case in which he also cited to Travelers Indemnity Co. v. Wetherbee (Miss. 1979), for example.

    The same Federal Judge who submitted a Punitive Damages Claim to a Jury in Broussard similarly submitted a Punitive Damages Claim to a Jury several months earlier in another First-Party Bad Faith case -- which also involved a similar Claim that "Hurricane Katrina completely destroyed Plaintiffs' home" and unresolved "issues related to claim handling", particularly handling the Claim after "a report in November, 2005, indicated that damage was due in part to something other than water."  In that earlier decision, the Homeowner's Insurance Company did tender payment "in August 2006" -- and the Policyholders' Punitive Damages Claim still went to a Jury:  Download Odom_v. Armed Forces Insurance Co. (S.D. Miss. Case No. 1.05cv669, Order entered on August 31, 2006 on Defendant's Motion for Partial Summary Judgment).pdf.

    The Policyholders' lawyers in the Odom case are also the Policyholders' lawyers in the Broussard case.

    Back to the Broussard case and January 11, 2007.  At Trial, there was reportedly evidence that, at the least, the Flood or Water Exclusion did not exclude all damages. 

    The Federal Trial Judge directed a verdict on Compensatory Damages, awarding Mr. and Mrs. Broussard $233,292 under their Insurance Policy, it is reported in both of the news articles linked above.  The Federal Judge also thereby directed a verdict on entitlement to Punitive Damages.  The Jury in that case then unanimously returned its Punitive Damages Verdict less than three hours later.

    Mississippi is not, of course, the only State that requires payment of clearly covered Claims in Good Faith under First-Party Insurance Policies.  Almost all do, and recent examples always seem to be at hand, such as in Florida.  See the post entitled,  "CatClaims, Coverage, Part Disclaimer With Part Payment .... And Florida Statutory Bad Faith" on November 17, 2006, for example, in Insurance Claims and Issues Blog.  The same lessons apply in one State as in another, and in one reported case as in another with the same result.  The law applied by the  Mississippi Federal Court in the  Broussard case is not new law, and neither is the result, it appears.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

New Cases, Old Lesson.

 Happy New Year! 

    New cases illustrate the differences in applying the "Reasonable Expectations Doctrine".  This important doctrine is not applied in all jurisdictions, and there is a split among the courts which apply it.   In a decision so new that it is not yet accessible (to me, anyway) and is not listed on the District Court's public web site, the Federal Court in the District of Arizona explained one view of this important doctrine:  "Under Arizona law, even unambiguous policy language will not be enforced against the insured if the insured had a reasonable expectation of coverage."   Madsen v. Fortis Benefits Ins. Co., 2006 WL 3771803 *8 (D. Ariz. Case No. CV 04-1959-PHX-JAT, Opinion Filed December 21, 2006)(subscription required to access Westlaw version).  [Emphasis added.]

    Before passing on to other recent cases involving a Reasonable Expectations Doctrine, several other rulings under Arizona law were made in this important new decision.  The Madsen case involved claims involving alleged First Party Bad Faith and Coverage.  The Plaintiff in that case, Ms. Jacqueline Madsen, "claims she was an additional insured under a nonrenewable Short Term Medical Policy" issued by Fortis.  (Id. at *1.)   The Federal Judge reiterated Arizona law (id. at *9), and entered Summary Judgment for the First Party Insurance Company in that case because of the Court's ruling that the Arizona Reasonable Expectations Doctrine required a jury determination of fact which, in the Federal Judge's view, clearly supported a determination that the Defendant acted reasonably and not in Bad Faith.  Further, something more was required to support Ms. Madsen's claim for Punitive Damages than even a showing of First Party Bad Faith.  "The something more that must be shown is evidence that Fortis was aware of and consciously disregarded a substantial and unjustified risk that significant harm would occur."  (Id. at *10.)  "Accordingly," said the Federal Judge, the ruling that the Plaintiff's First Party Bad Faith Claim in that case "fails as a matter of law" means that Summary Judgment is also granted in favor of Fortis in that case "on the punitive damages claim."

    In other jurisdictions that recognize a Reasonable Expectations of the Policyholder Doctrine, the doctrine is a rule of Insurance Contract Interpretation that applies only when there is an ambiguity.  The Supreme Court of Kentucky reviewed this doctrine in a famous Third Party or Liability Insurance Case involving a claim to Coverage under "a commercial automobile liability insurance policy, for example, in Brown v. Indiana Insurance Co., 184 S.W.3d 528, 531 (Supreme Court of Kentucky Case No. 2004-SC-0065-DG, et al., Opinion Filed December 22, 2005)(subscription required to access via Westlaw, Supreme Court of Kentucky public web site too difficult to access in time for this post).  The Doctrine of Reasonable Expectations, held the Supreme Court of Kentucky in that case, is a "principle [that] pertains to alleged ambiguities within the policy."   The Supreme Court held that there is no ambiguity in the Worker's Compensation Exclusions in the Commercial Auto Liability Insurance Policy before it  in that case.  "Accordingly, the opinion of the Court of Appeals [reversing the Trial Court with directions to enter Judgment in favor of the Insurance Company] is affirmed."  Id. at 540.  Recently, an alternative way of expressing the Reasonable Expectations Doctrine was addressed by a Federal Judge in another Liability Insurance Case in Download Travelers_Indem. Co. v. Bowling Green Professional Assoc's, PLC (W.D. Ky. Case No. 1.05CV171, Opinion Filed July 21, 2006).pdf.  This case is also reported at 440 F. Supp. 2d 652.  As applied in that case to "a Professional Liability Insurance for Specified Medical Professions Policy" (Slipsheet Opinion at 10), the Reasonable Expectations Doctrine will be defeated only where the Insurance Policy at issue unequivocally, conspicuously, plainly, and clearly manifests an Exclusion.  (Slipsheet at 12.)  In that Federal Case, "[t]he Court finds that there is no ambiguity in the ... Policy."  As a result, "the Court finds that [the Liability Insurance Company] owes no duty to defend or indemnify" its Policyholder in an underlying liability case and enters Summary Judgment in favor of the Liability Insurance Company which issued the Policy.  (Slipsheet Opinion at 13.)

    The clear lesson of these new decisions is an old lesson of caution:  Care must be taken to understand the Insurance Law of the place where the Insurance Policy is at issue and will be interpreted.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

Malice and Punitive Damages

    In most First Party Bad Faith cases in the United States, even though perhaps enough "malice" is shown to support a First Party Bad Faith Claim, that proof is not always enough to also support a Claim for Punitive Damages.  Generally, there must also be shown an even more egregious or worse kind of "malice" in order to assess Punitive Damages, even in most First Party Bad Faith Cases in America.  Under the law in some jurisdictions, however, proof of malice for a First Party Bad Faith Claim can also be, and is, the same proof that will legally entitle the Plaintiffs to Claim Punitive Damages in that case.

    This was the recent holding by the Federal Judge in Download Moss_v. American Alternative Insurance Corp. (E.D. Ark. Case No. 05.06cv00010, Opinion Filed November 1, 2006).pdf.  In  Moss, the Court denied a First Party Insurance Company's Motion for Summary Judgment as to both the Policyholders' alleged Claims of First Party Bad Faith under Arkansas law, and the Claims they also alleged for Punitive Damages under Arkansas law.  In Arkansas, the Federal Judge ruled,  First Party Bad Faith is a tort and one of the requirements of proving it is to prove "'dishonest, malicious, or oppressive conduct'" under a test established by the Arkansas Supreme Court.  (Slipsheet op. at page 9.)  In the opinion of the Federal Court in that case, the Policyholders' First Party Bad Faith Claims  should proceed.  (Id.  at 13.)

    The Federal Court reached the holding that the Insurance Company's Motion for Summary Judgment will be denied as against the First Party Bad Faith tort and also with respect to the Punitive Damages Claim in that case, even though Arkansas law requires "clear and convincing evidence" of malice in order to assess Punitive Damages.  The Court held in that case:  "Proof of the elements of the tort of bad faith supports a claim for punitive damages."  (Slipsheet op. at page 13.)  Since the Policyholders in that case prevail on alleging the First Party Bad Faith tort, their Claims for Punitive Damages will also proceed.

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR LEGAL ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.