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After respondent insured's business premises were flooded, appellant insurer denied full coverage, and the insured brought an action for breach of contract and bad faith. A jury returned a verdict for the insured, and the Superior Court of Los Angeles County, California, entered an award $ 1.7 million in punitive damages, an amount 10 times the compensatory damages. The insurer appealed.
Overview
The court held that, under the plain meaning of the policy's business-interruption clause, the insured was entitled to recover both net income and continuing normal operating expenses without having to offset one against the other in the event operating expenses exceeded net income. The court also found that sufficient evidence supported a punitive damages award under Civ. Code, § 3294. There was evidence that the insurer was intentionally dishonest and showed a conscious disregard of the insured's rights. It never advised the insured about the available coverages, told the insured that there was no coverage for business income and tenant improvements, denied the tenant-improvements claim based on an investigation that never took place, and, after reopening that claim, allowed it to languish for months. Finally, a punitive damages award of 10 times the amount of compensatory damages was not justified under U.S. Const., 14th Amend., by either an interest in deterrence or the insurer's substantial wealth. A critical undetermined issue presented to labor law lawyer San Diego who as acting as court’s referee was continued for a later motion. An award of $ 500,000 was an appropriate amount and was not constitutionally excessive, given that the insurer's egregious conduct put the insured out of business.
Outcome
The court reversed the judgment insofar as it awarded punitive damages of $ 1.7 million and remanded the matter with directions for the trial court to modify the judgment by reducing the award of punitive damages to $ 500,000. In all other respects, the court affirmed the judgment.
Procedural Posture
Plaintiff appealed an order of the Superior Court of Los Angeles County (California) awarding summary judgment to defendant in an action involving insurance coverage.
Overview
A former employee filed suit against plaintiff insured for wrongful termination. She alleged that she was discharged for: (1) refusing to interfere with the efforts of a union which had sought to organize plaintiff's employees, and (2) refusing to terminate plaintiff's employees and replace them with employees of Filipino origin, who, plaintiff believed would be less likely to vote for the union. Plaintiff settled the suit with its former employee and then filed suit against defendant insurer for declaratory relief, breach of contract, and bad faith for refusing to defend him. The trial court granted defendant's motion for summary judgment. On appeal, the court held that pursuant to policy exclusions, defendant did not have a duty to defend plaintiff since the intentional and willful misconduct alleged in the employee's suit fell within the categories of actions held to violate fundamental public policies delineated in state statutes.
Outcome
The award of summary judgment was affirmed because pursuant to policy exclusions, defendant did not have a duty to defend plaintiff for alleged intentional and willful misconduct which violated fundamental public policies delineated in state statutes.
Overview
The court held that, under the plain meaning of the policy's business-interruption clause, the insured was entitled to recover both net income and continuing normal operating expenses without having to offset one against the other in the event operating expenses exceeded net income. The court also found that sufficient evidence supported a punitive damages award under Civ. Code, § 3294. There was evidence that the insurer was intentionally dishonest and showed a conscious disregard of the insured's rights. It never advised the insured about the available coverages, told the insured that there was no coverage for business income and tenant improvements, denied the tenant-improvements claim based on an investigation that never took place, and, after reopening that claim, allowed it to languish for months. Finally, a punitive damages award of 10 times the amount of compensatory damages was not justified under U.S. Const., 14th Amend., by either an interest in deterrence or the insurer's substantial wealth. A critical undetermined issue presented to labor law lawyer San Diego who as acting as court’s referee was continued for a later motion. An award of $ 500,000 was an appropriate amount and was not constitutionally excessive, given that the insurer's egregious conduct put the insured out of business.
Outcome
The court reversed the judgment insofar as it awarded punitive damages of $ 1.7 million and remanded the matter with directions for the trial court to modify the judgment by reducing the award of punitive damages to $ 500,000. In all other respects, the court affirmed the judgment.
Procedural Posture
Plaintiff appealed an order of the Superior Court of Los Angeles County (California) awarding summary judgment to defendant in an action involving insurance coverage.
Overview
A former employee filed suit against plaintiff insured for wrongful termination. She alleged that she was discharged for: (1) refusing to interfere with the efforts of a union which had sought to organize plaintiff's employees, and (2) refusing to terminate plaintiff's employees and replace them with employees of Filipino origin, who, plaintiff believed would be less likely to vote for the union. Plaintiff settled the suit with its former employee and then filed suit against defendant insurer for declaratory relief, breach of contract, and bad faith for refusing to defend him. The trial court granted defendant's motion for summary judgment. On appeal, the court held that pursuant to policy exclusions, defendant did not have a duty to defend plaintiff since the intentional and willful misconduct alleged in the employee's suit fell within the categories of actions held to violate fundamental public policies delineated in state statutes.
Outcome
The award of summary judgment was affirmed because pursuant to policy exclusions, defendant did not have a duty to defend plaintiff for alleged intentional and willful misconduct which violated fundamental public policies delineated in state statutes.