Arizona Jury Awards Over $6 Million Against Insurer in Bad Faith Case
In McClure v. CC Services Inc. & Country Life Insurance Company dba Country Life Financial, an Arizona insurance bad faith case arising from a disability claim, a jury awarded $1.29 million in compensatory damages and $5 million in punitive damages.
Although Arizona has a reputation for conservative juries—particularly Phoenix juries in Maricopa County—the award of over $6 million in damages in the McClure case demonstrates an Arizona jury is willing to award significant damages in a bad faith case.
The Insurer issued a disability policy which paid, after a ninety day waiting period, $1,500 in monthly benefits for total disability. The Insured walked into a pole at a shopping center, was diagnosed with a concussion, and claimed he could no longer work as a supervisor of over 100 employees at a call center. The Insured also developed serious psychiatric issues after the incident. After a suicide attempt, he was hospitalized for six months. The Insurer paid total disability benefits for a year and terminated the claim based on an “inconclusive” neuropsychological evaluation. Seven weeks after termination, the Insured was hospitalized again for suicidal ideation. One year after suit began, the Insurer reinstated the disability claim to the date of post-termination hospitalization.
The Insured Claimed the Insurer Acted in Bad Faith by:
- failing to order medical records from the physicians that certified the Insured’s disability; and
- terminating the disability claim.
The Jury Awarded:
- $243,000 for unpaid policy benefits, future policy benefits, unrefunded premiums, and loss of enjoyment of life;
- $1.29 million in compensatory damages for emotional distress, humiliation, inconvenience, and anxiety;
- $2.5 million in punitive damages against the Insurer; and
- $2.5 million in punitive damages against an entity whose employees comprised the Insurer’s claims department.
It will be interesting to see if the punitive damages award in McClure stands because of recent Arizona case law reducing punitive damages awards that exceed a 1:1 or 1:4 ratio with compensatory damages. See Sobieski v. Am. Standard Ins. Co. of Wisconsin, 240 Ariz. 531, 382 P.3d 89 (App. 2016) (reversed an award of $1 million in punitive damages in a bad faith case); Arellano v. Primerica Life Insurance Company, 235 Ariz. 371, 332 P.3d 597 (App. 2014) (reduced a punitive damages award of $1.1 million in a bad faith case to only $328,000—a 4:1 ratio with compensatory damages); Nardelli v. Metropolitan Group Prop. & Cas. Ins., 230 Ariz. 592, 277 P.3d 789 (App. 2012) (upheld a trial court’s reduction of a $55 million punitive damages award to $620,000 in a bad faith case, and further reduced punitive damages to only $155,000—a 1:1 ratio with compensatory damages). If a court reduces the punitive damages award to a 1:1 ratio to compensatory damages, then the punitive damages could be reduced from $5 million to $1.5 million.
This and other posts can be found at my blawg: Arizona Bad Faith Blawg.
This post is based, in part, on a summary of the McClure trial inthe Trial Reporter of Central & Northern Arizona, a bi-monthly publication that summarizes Arizona jury trials and awards. You can reach the Trial Reporter at 800.266.7773 or www.trialreporter.com.
About the Author: Nathan D. Meyer is a Partner at the Phoenix law firm of Jaburg Wilk. His primary focus is insurance coverage and bad faith. Nate advises and represents insurance clients in coverage, bad faith, contribution and liability matters. He can be reached at 602.248.1000 or firstname.lastname@example.org.