March 18, 2011

L.A. jury awards $19 million in punitive damages and $35,000 in compensatory damages in insurance bad faith case

Bloomberg Businessweek is reporting that a jury in Los Angeles has awarded a former Marine $19 million in punitive damages and $35,000 in compensatory damages, in an insurance bad faith case against Stonebridge Life Insurance.  The plaintiff claimed that Stonebridge unreasonably refused to pay for a lengthy hospital stay, agreeing to pay only for 19 days out of a 109-day stay.

Stonebridge says it intends to appeal.  An appeal may not be necessary, however, if Stonebridge files post-trial motions asking the trial court to reduce or vacate the punitive damages.  Although there is some case law stating that a low compensatory damages award can support a higher punitive-to-compensatory ratio, nothing would support the extreme ratio here.  The trial court may conclude that the punitive is so high and so disproportionate to the actual harm that it raises a presumption that the jury acted out of passion and prejudice.