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Recovering Punitive Damages Against Insurance Companies

California Insurance Bad Faith Lawyers Help Policyholders and Their Families Hold Insurance Companies Accountable

Insurance companies owe a duty to policyholders and beneficiaries to act in good faith and for the benefit of the insured. They must take an objective look at the policy, the facts, and other circumstances in order to determine whether coverage is appropriate and how much to pay out in benefits. When they lie to policyholders, cheat, deliberately ignore facts, or try to bully insured parties into undervaluing their claims, they are acting in bad faith and must be held accountable for their actions. If the insurer’s conduct is especially problematic, they could owe more than just the economic harm directly caused by their behavior. The seasoned bad faith insurance attorneys at Gianelli & Morris can help you recover not only the value of your insurance claim but also any additional damages that may be available in your case.

What Are Punitive Damages?

A typical civil legal claim focuses on the damages actually caused by the defendant’s conduct. Most claims focus on “compensatory” damages, which include things like medical bills, lost wages, lost profits, estimates of future losses caused by the defendant’s conduct, and other damages that arose as a result of the defendant’s behavior. Compensatory damages can also include harm like pain and suffering or emotional distress, as California courts view these as “actual” damages even though they are intangible and more difficult to calculate. Contracts may also provide for set damages in the event of a breach.

Punitive damages, on the other hand, are meant to punish a wrongdoer, rather than compensate the victim. Courts will permit, and juries will award, punitive damages only where a defendant’s conduct was especially reckless or malicious. Punitive damages are meant to deter future wrongdoing and are awarded on top of compensatory damages. Depending on the case and just how egregious the defendant’s conduct was, punitive damages can double or triple the compensatory damages award in a case.

Can You Recover Punitive Damages Against Insurance Companies?

California courts permit punitive damages awards against insurance companies when the insurer acted with malice, oppression, or fraud. Essentially, the insurer must have deliberately tried to either harm or defraud the policyholder. If the insurer was merely negligent, then the policyholder may recover the value of their denied claim and other consequential damages but they cannot seek punitive damages.

Punitive damages may be appropriate when the insurer does something intentionally wrong. For example, if the insurer deliberately conceals a material fact from the insured party (such as a provision in the policy or a fact they learned in their investigation), and uses the concealment of that fact to deny or limit payout on a claim, the insurer might be subject to punitive damages. If they deliberately delay a claim by repeatedly claiming they are conducting an investigation when they are actually just putting off a decision, and the insured party is harmed as a result, the insurer may be subject to punitive damages. Insurers may also face punitive damages if they demonstrate a willful and conscious disregard for the rights or safety of the insured.

Punitive Damage Caps in Insurance Cases

Many states limit the amount of punitive damages a judge or jury can award in a given case, often setting caps based on the nature of the claim and the type of defendant (for example, limits on punitive damages in medical malpractice). In California, courts are generally in favor of a 1:1 ratio of punitive damages to compensatory damages, meaning that the punitive damages should not typically more than double the compensatory award, especially if the compensatory award is already significant and the defendant’s conduct is at the low end of the reprehensibility scale.

However, the California Supreme Court has not set a hard limit on a 1:1 ratio. In some cases, where the defendant’s conduct is especially egregious, California courts have upheld punitive damages awards as much as four times the amount of compensatory damages. Based on guidance from the California Supreme Court, a 4:1 ratio is typically considered the constitutional limit for punitive damages awards so as not to violate the due process rights of the defendant. In rare cases, where compensatory damages were relatively low and the insurer’s conduct was particularly reprehensible, California courts have upheld larger awards (such as the 2016 case of Nickerson v. Stonebridge Life Insurance Co. in which the Court of Appeal affirmed a 10:1 punitive damages award).

The Savvy Insurance Bad Faith Lawyers at Gianelli & Morris Can Help Maximize Your Recovery After a Wrongful Insurance Claim Denial or Other Bad Faith Insurance Conduct

If you’ve been wrongfully denied coverage under your insurance policy, or if you have been subjected to bad faith insurance conduct, you have the right to fight back. The insurance denial lawyers at Gianelli & Morris will help you get the compensation you are owed and hold insidious insurance companies accountable for the harm they have caused you and your family. For help recovering all available damages, including punitive damages, from a bad faith insurance company, call the California wrongful insurance denial attorneys Gianelli & Morris for a complimentary, confidential consultation at 213-489-1600.

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