Real-life Examples of High Bad Faith Insurance Settlement Amounts
Insurance companies are legally responsible for implying good faith and fair dealing towards their clients. However, not every insurance process works as smoothly, and insurance companies may fail to act in good faith. In this type of instance where an insurer acted wrongly and there is evidence of damages over and above the insurance policy limits, an individual may have grounds for a bad faith insurance lawsuit. Here are seven examples of high bad faith insurance settlement amounts.
Related: How to Sue an Insurance Company: What You Need to Know
1. Matson Terminals v. Home Insurance Co. – settlement: $33.65 million
The Home Insurance Company had denied coverage for a $10 million earthquake claim. A California jury concluded this refusal to provide support based on a policy exclusion, and stated that it was in bad faith. The jury awarded $11 million in punitive damages, followed by the appeals court affirming the award that included $23.5 million in compensatory damages. The appeals court also held that the insurer led the policyholder under the false pretense that there was coverage available.
2. Vann v. The Travelers Insurance Company – award: $26.5 million
This case involved Mr. Vann, a former owner of an auto repair shop who was asked to vacate the premises after his landlord passed away. After the fact, the shop owner was sued for environmental damage he had caused the property. He then asked his insurance company to provide him with defense. His insurance company, The Travelers Insurance Company, first denied that the shop owner had any policy at all, before then admitting a policy existed. Once a policy was retrieved, the insurance company hounded Mr. Vann with requests for personal information that could not be complied with. After the initial denial of the claim, he sued for bad faith, to which the jury agreed. Appeals by The Travelers made their way to the Supreme Court to no avail.
3. Pinto v. Farmers Ins. Exchange – award: $10 million
A California Appeals Court held that a bad faith failure to settle the claim was apparent in this case. Pinto was a passenger injured in a solo vehicle accident, leaving him paralyzed. The vehicle owner was also a passenger, as the vehicle was being driven by a permissive user who was later found to be intoxicated. Pinto’s counsel would go on to argue that Farmers conducted an inadequate investigation of the claim, and failed to provide Pinto with critical information in the form of a declaration from the driver. However, the jury verdicts proposed by the plaintiff did not require the jury to make any finding that the insurer had acted unreasonably, so the $10 million judgment against the insurer was reversed.
4. David Clayton v. United Services Automobile Association – award: $3.9 million
A California jury found that the insurance company’s, US Automobile Association, offer of $10,000 on policy limits of $300,000 was inadequate for the specific case at hand. In this case, the only child of two parents was killed in an auto accident, and thus the jury felt that the $10,000 offered was inadequate and in bad faith. An appellate panel later affirmed the award of $10 million, despite the California Supreme Court denying review of the case.
5. Boicourt v. Amex Assurance Co. – award: $2,006,000
This case concerned a vehicle accident that severely injured a young boy. The initial settlement of $2 million was pursuant to a policy that provided only $100,000 in coverage as a result of the insurance carrier, Amex Assurance Company, initially refusing in bad faith to disclose the policy limits.
6. Mazik v. GEICO General Insurance Co. – award: $1.3 million
An appellate court stated that GEICO had disregarded information that showed Michael Mazik, an automobile accident victim, suffered a permanent, painful injury after his vehicle collided with another. A panel of the California 2nd District Court of Appeal stated that the disregarding of those serious facts may constitute bad faith. The court later affirmed a decision by the LA County Supreme Court to award Mazik $1 million in punitive damages for the bad faith breach of its insurance contract, plus additional compensatory damages and legal costs on appeal.
7. Major v. Western Home Insurance Co. – award: $450,000 noneconomic damages & $220,359.55 in economic damages
The Majors, a married couple whose home was destroyed in the Cedar Fire in 2003, turned to their insurance provider for coverage. Western Home Insurance Co. agreed to repair or replace their home to the “policy’s limits of liability”. After Western initially failed to pay mortgage benefits or full pay the total amount of personal property benefits, the Majors sought legal counsel. Within this case, the Court of Appeal held that the bad-faith cause of action is primarily designed to remedy “financial loss”. This instance is an example of how courts currently hold that emotional distress damages for bad-faith breach of contract must bear a reasonable relationship to economic harm. The Court upheld a 2:1 ratio between non-economic and economic damages ($450,000 noneconomic damages & $220,359.55) and stated that this ratio was not excessive.
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