December 16, 2015

Court of Appeal affirms directed verdict on punitive damages in insurance dispute (Vardanyan v. AMCO Insurance)

This unpublished opinion by the California Court of Appeal concludes that the plaintiff presented some evidence that his insurer made mistakes, but the mistakes were not egregious enough to support punitive damages.

The plaintiff owned a rental home that had some serious problems.  Parts of the house were sinking, water damage and termite damage were popping up throughout, every room was moldy, and the front door would not open.  The plaintiff's insurer declined to provide coverage for the needed repairs, on the ground that the damage was caused in party by non-covered hazards. 

When the plaintiff sued for breach of contract and bad faith, the trial court granted a directed verdict for the defense.  The Court of Appeal (Fifth Appellate District) reversed and ordered a new trial, ruling that the plaintiff should have been allowed to argue to the jury that he was entitled to coverage if the damage was predominately caused by a covered hazard. 

The Court of Appeal also ruled, however, that the plaintiff could not seek punitive damages in the retrial.  The court concluded that the plaintiff failed to make a case for punitive damages during the first trial and was not entitled to a do-over on that issue.  According to the court, the plaintiff's evidence "may be consistent with some improprieties in claims handling, but it does not rise to the level of reprehensibility necessary to support an award of punitive damages."

Notably, the Court of Appeal stated it analyzed the plaintiff's evidence while keeping in mind the "clear and convincing" standard of proof.  Contrast that statement to this recent unpublished opinion, which said that the clear and convincing evidence standard does not apply on appeal.  So far, the docket in that case does not indicate that the defendant has asked the California Supreme Court to review that issue.