An "evil mind", but not $55 million worth of evil

Before reading further, please note that this case arises out of the state of Arizona, so it may have little applicability to California.

 

An Arizona jury awarded a couple $55 million in punitive damages in an insurance bad faith case.   While the Court of Appeals found that the company was eligible for punitive damages, they (fortunately) found that $55 million was excessive.

 

This case started with a stolen auto.  The remains of the vehicle were found south of the border, its exterior trashed, its interior ruined.  Unfortunately for the insureds, MetLife did not find that the car was damaged beyond repair.  MetLife decided that they wanted to repair the auto, although the policy holders wanted it totaled.  (Based on a description of the damages, I would not feel comfortable with repairs either.) 

 

The insurance company held their position, eventually sending the couple a check in the amount of $11,000 to cover the cost of repairs and telling the insureds to do with the check and the car as they saw fit.  Because the loan balance on the vehicle apparently exceeded the funds received from the insurance company, the policy holders turned over the car and the check to the bank, agreeing to the repossession of the vehicle.  Then they sued their insurance company.

 

For the insurance company to play hardball with its policyholders and take the case before a jury was a bad strategy.  The only group that juries hate more than attorneys are insurance companies.  The jury awarded the plaintiffs a not-unreasonable sum of $155,000 in actual damages, but granted the plaintiffs an eye-popping $55 million in punitive damages.

 

What could have influenced the jury's calculations?  It may have been because evidence presented demonstrated that the insurance company had instructed its employees to "manage" its claims settlements aggressively (my words) in order to meet company profit goals. 

 

Fortunately for MetLife, the Court of Appeal examined the requirements for awarding and calculating punitive damages and adjusted the verdict.

 

First of all, in Arizona, before punitive damages can be awarded, the defendant has to have been determined to have an "evil mind".  Among the issues considered by the Court were whether the harm caused was physical versus merely economic, whether the company's conduct showed a reckless disregard of the health or safety of others, whether the plaintiff was especially vulnerable, whether the conduct was part of a regular practice or was an isolated incident and whether the harm was intentional or accidental.

 

In this case, the court found that, while the insurance company's treatment of the plaintiffs was "evil", it was only a little evil; more a case of failure to supervise its employees rather than a plan to oppress its policy holders.

 

The next issue to be considered is whether, even if punitive damages are warranted, the amount of damages is reasonable.

 

The jury award of punitives amount to about 355 times the amount of actual damages.  Even though the superior court had reduced the punitives to about 4 times the actual damages, the court of appeal found that this was still too high when the defendant was only a little "evil".  The Court of Appeals reduced punitives to the same amount as actual damages - $155,000.

 

So the plaintiffs will no longer be able to purchase their own county, but they will be able to replace their vehicle.

 

The lesson here:  unless you settle, you will eventually have to make your case to a jury, which may judge you based on your reputation rather than the facts of the case. 

  

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This site was established to provide information about the law, designed to educate users about issues in which they may have an interest. But legal information is not the same as legal advice -- the application of law to an individual's specific circumstances. Although I go to great lengths to make sure the information provided is accurate and useful, I recommend you consult a lawyer if you want professional assurance that the information, and your interpretation of it, is appropriate to your particular situation.