A recent Federal Court Trial resulted in a Jury award of $48,414.97 on the Policyholders' Breach of Contract Claim, an award of $1,150,000.00 on their First-Party Bad Faith Claim, and an assessment of $1,150,000.00 in Punitive Damages on their Bad Faith Claim, in Download Moore v. American Family Mutual Insurance Co. (8th Cir. Opinion Filed August 14, 2009), attached Official Slipsheet Opinion at 1-2.
The Insurance Company Defendant in that case defended on the bases of Arson and Fairly Debatable Defenses, in pertinent part. (Actually, the Defendant in that case argued that the evidence on the First-Party Bad Faith Claim in that case reflected that it did not deny or disclaim all Coverage without a Fairly Debatable reason, under North Dakota law.) In affirming in all respects, the Eighth Circuit's Opinion is interesting in a couple of respects.
The Eighth Circuit held that although in that case an issue of potential error had not been preserved concerning a Jury Instruction based on the North Dakota Prohibited Practices in Insurance Business Act, nonetheless there apparently would not have been a good basis to find reversible error based on the Instruction anyway. Among other things, the Defendant Insurance Company asked its own Expert Witness at Trial about its supposed violations of that statute. The Appellate Court held: "At a minimum, we believe that evidence that an insurer's conduct violates a statute prohibiting unfair or settlement practices is relevant to whether the insurer acted in bad faith." Download Moore v. American Family Mutual Insurance Co. (8th Cir. Opinion Filed August 14, 2009), at 5.
The one-to-one ratio of Punitive Damages to Compensatory Damages on the Bad Faith Claim was held to be well within the parameters of the United States Constitution, the Eighth Circuit also held. Download Moore v. American Family Mutual Insurance Co. (8th Cir. Opinion Filed August 14, 2009), at 11-13. The Punitive Damages assessment was also simply not "excessive" under North Dakota law. Download Moore v. American Family Mutual Insurance Co. (8th Cir. Opinion Filed August 14, 2009), at 13-14.
On the Fairly or Reasonably Debatable element or Defense in First-Party Bad Faith Claims, see also Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 11:17 (Second Edition Shepard's/McGraw-Hill, 2009 Supplement in process West Publishing), and on its recent appearance in Third-Party Bad Faith Cases see § 5:51. Regarding Punitive Damages assessments in any Bad Faith Case, see § 13:15.
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