Juries Find Bad Faith by Insurers In Two Earthquake Claims
27 Jul 2007
In a span of a few weeks, two insurers were found guilty of bad faith in denying damage claims from the 1994 Northridge Earthquake in Southern California and were forced to pay multi-million-dollar punitive awards by two separate juries.
Even though these verdicts occurred in earthquake claims, not likely to be made in most states, the ability of a victim of any form of insurance bad faith to seek redress in the form of compensation and punitive damages exists in most states.
In July, a Superior Court jury found that 20th Century Insurance of Woodland Hills, Calif., had acted in bad faith by denying a homeowners claim that had been filed several months past the one-year filing deadline set in the California statutes. Though the judge in the case agreed that 20th Century gave the plaintiffs plenty of notice about the deadline, the jury disagreed and awarded James and Lorraine Meyer of Tarzana, Calif., a $6.75 million punitive damage award, plus $480,000 to cover repair costs, court costs and emotional distress.
The other case, decided in August, was brought by another Los Angeles couple who filed a $46,000 claim with Minnesota-based Farmers Home Group Insurance, which the insurer denied, saying the amount did not meet the deductible. In a Los Angeles County court, a jury found that the insurer deliberately ignored the full amount of the plaintiffs' damages and awarded Leon and Mittie Robbins a total of $7.45 million in punitive damages, plus the original $46,000 repair cost claim and $100,000 for emotional distress.
These cases are examples of the power of the jury system to punish a wrongdoer for its misconduct. In each instance the jury awarded compensatory and punitive damages. When an insurance company acts in bad faith to deny a claim it is often within the power of a jury to go beyond the compensation of the victim and to award additional damages, called punitive damages, to set an example or to punish. Punitive damages are generally determined by the magnitude of the wrong and the wealth of the wrongdoer. The amount is sometimes extremely large because the defendant has huge assets. This is particularly true in the case of insurance companies.
