AZ APP 1: BAD FAITH DOES NOT REQUIRE AN EVIL MIND

A motorcyclist was injured in a collision with a car that he claimed stopped short in front of him. The driver of the car had no insurance, so the biker put the claim to his own carrier under his uninsured motorist coverage. The policy limit was $100K. The injuries included an open comminuted tib-fib fracture, a clavicle fracture, and a rotator cuff tear. Medical expenses were $115,667.

Claims staff denied the claim, viewing the motorcyclist as 100% at fault. This does not seem surprising in a rear-end collision case, but the biker’s attorney submitted witness statements indicating that the car was driven erratically and that some fault rested with the car’s driver. Claims staff never interviewed the driver of the car, nor did they interview the other witnesses.

The motorcyclist sued the carrier. An arbitrator found that the damages were $950K, that the car driver was 40% at fault, and that the motorcyclist was entitled to the policy limits.

A jury trial of the motorcyclist’s bad faith claim ensued. The jury awarded $500K as compensatory damages on the bad faith claim and an additional $1 million in punitive damages.

The Court of Appeals, Division One, upheld the bad faith claim but vacated the punitive damages award. The court held that bad faith is not enough to trigger punitive damages. The court noted precedents limiting punitive damages to the most egregious cases where there is proof that the defendant engaged in reprehensible conduct with an evil mind.

The court reviewed the practices of the of the motorcyclist’s insurer, which urged its claims staff “manage the gap” by “paying what we owe” through “quality file handling techniques” while emphasizing “customer satisfaction”. There was no clear and convincing evidence that that insurer had the requisite “evil mind”.

Sobieski v AM Standard (9/29/16)

To see what an evil mind is like, read  Nardelli v Metropolitan (5/1/2012).