The insured Plaintiff established insurance bad faith and a right to punitive (punishing) damages when the defendant insurance company failed to reasonably investigate and pay at least an amount sufficient to repair the insured’s SUV and failed to notify the insured as to favorable language in the policy.
Plaintiff sued his automobile insurance company for insurance bad faith and the jury awarded him $155,000.00 in compensatory damages and $55 million in punitive damages. The trial court reduced the punitive damage award to $620,000.00 and sustained the compensatory award.
Less than a year after purchasing a new Ford Explorer the vehicle was stolen and Plaintiff made a theft claim on his auto policy with Metropolitan Group Property and Casualty Insurance Company. Subsequently the SUV was recovered in Mexico, severely damaged and inoperable. Despite the extensive damage to the Explorer the insurance company repeatedly refused to treat it as a total loss and instead tendered a check for repairs to the vehicle, in an amount less than what Earnhardt Ford indicated it would cost to repair the vehicle. Plaintiff allowed the Ford Explorer to be repossessed by the lender and forwarded the repair check to Earnhardt Ford. The trial court found “substantial” evidence of bad faith as a result of Defendant’s decision to repair rather than replace the vehicle, sending a check for an amount that did not even cover repair costs and failing to advise the Plaintiff of policy provisions important to their claim.
The Plaintiff presented evidence supporting the punitive damage award including the fact that the Defendant had instituted an aggressive company-wide profit goal the year this loss was addressed, assigned a significant role in obtaining this goal to the claims department and tide compensation and benefits paid claims personnel to the average amount they paid on the claims. The Court found it particularly important that at the same time the Defendant made no effort to insure that in seeking to achieve this goal insurers would be protected against unfair treatment. This evidence fairly supported a conclusion that the claims personnel Plaintiff’s claim were primarily motivated by financial self-interests and placed this interest ahead of the interests of their insured. The Appellate Court noted that Federal Due Process imposes a substantive limit on the amount of punitive damages awarded. Citing the case of State Farm Mutual Automobile Insurance Company v. Campbell, U.S. Supreme Court, has indicated that in assessing this limit the Court should consider (1) the degree of reprehensibility of the misconduct; (2) the disparity between the actual or potential harm suffered by the Plaintiff and the amount of the award; and (3) the difference between the award and any relevant civil penalties that may be applied to comparable cases.
Therefore, based upon the foregoing the Court further noted Plaintiffs were not particularly financially vulnerable and though allowing the SUV to be repossessed damaged their credit, it do not damage it sufficiently to impair family needs or the ability to buy a new car. There was no evidence that Defendant’s bad conduct was of long standing duration or part of a scheme or plan to cheat policy holders. Since Arizona Unfair claims practice act caps civil penalties at $50,000.00 per six (6) month period. A penalty of 55 million dollars would not give Defendant’s sufficient notice that would be required to pay such a large award. The Appellate Court this reduced the punitive damage award to $155,000.00.