Procedural Posture

Procedural Posture

Defendant insurer appealed from a judgment of the Superior Court of Orange County (California), which entered judgment in favor of plaintiff insured for compensatory and punitive damages in an action to recover for breach of the implied covenant of good faith and fair dealing and intentional infliction of emotional distress.

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Overview

Plaintiff entered into an insurance policy that provided for monthly mortgage payments should plaintiff become totally disabled. Plaintiff became ill and was declared incompetent. Grudgingly and intermittently, defendant paid most of the payments for two years and then stopped. As a result of defendant’s refusal to pay, plaintiff’s home was sold in foreclosure. Plaintiff went to the jury on two theories: breach of the implied covenant of good faith and fair dealing, and intentional infliction of emotional distress. The jury returned a verdict in favor of plaintiff for compensatory and punitive damages. Defendant’s motion for a new trial on the ground that the damages were excessive was denied and defendant appealed. On appeal, the court did not find the evidence sufficient to support the award for emotional distress. The punitive damage award was based on an erroneous instruction, and was disproportionate to defendant’s net worth.

Outcome

The court reversed the judgment for plaintiff for compensatory and punitive damages as to the amounts awarded. In all other respects, the judgment was affirmed. The case was remanded for new trial on the issues of the amount of compensatory damages, liability of defendant insurer for punitive damages, and if there was liability, the amount of such punitive damages.

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