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Court Rules Punitive Damages Are Available Against Insurance Companies For Bad Faith Denials of Coverage

Published April 10, 2019 by Employment and Commerce Law Group
Court Rules Punitive Damages Are Available Against Insurance Companies For Bad Faith Denials of Coverage

Recently the Sixth Circuit Court of Appeals held an insurance company may be liable for punitive damages for denying a valid claim. The court also held the statutory caps on punitive damages in Tennessee were unconstitutional.

In Lindenberg v. Jackson National Life Insurance Company, a father had purchased a life insurance which listed his ex wife and mother of his children as beneficiary. The insurance company refused to pay when the father passed. The insurance company cited a variety of reasons they refused to pay. However, they spent no time trying to find out if these reasons were valid. They just refused to pay.

At trial, the jury determined the insurance company’s failure to pay was totally without merit.  They awarded the mother the proceeds from the insurance policy and an additional amount for the bad faith actions on the part of the insurance company. The jury also awarded $3,000,000 in punitive damages. The Defendant filed a Motion with the court afterwards to reduce the amount to $700,000.00- the cap on punitive damages set by the Tennessee Legislature in 2011.

The Plaintiff appealed the reduction to the Sixth Circuit who ordered the Defendant to pay the mother the full $3,000,000.00. The court held the caps on damages violated an individual’s right to trial by jury guaranteed by the Tennessee constitution. Damages are a matter set by a jury of one’s peers. The folks who drafted the Tennessee constitution said the power to mete out justice in the form of damages was a power reserved to the people; no matter how much money insurance companies may pay to legislatures to protect them when they unlawfully deny an otherwise valid insurance claim.

Mark this up a win for the people of the State of Tennessee.

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