Examples of Punitive Damages in Bad Faith Health Insurance Cases
When you have been harmed by a bad faith insurance practice, such as an unreasonably long delay in processing a claim or a claim denial based on false grounds for an ulterior motive, you can typically recover money damages in a lawsuit against the insurer for the harm their bad faith conduct has caused. Another category of damages that might be available is known as punitive or exemplary damages. These damages are authorized by California law in specific circumstances “for the sake of example and by way of punishing the defendant.” California Civil Code 3294 allows punitive damages against a defendant who was “guilty of oppression, fraud, or malice.” Malice is defined as intending to cause injury or “despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” Oppression, meanwhile, means “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” Finally, fraud refers to “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.”
In numerous instances, courts in California and across the country have upheld punitive damages awards against health insurers who acted in bad faith. These incidents include an insurance company maximizing profits at the patient’s expense – conduct which was found to be malicious with no reasonable basis – by failing to review a request for services or denying a claim while knowing the decision was wrong. In other cases, insurers have wrongfully decided a requested service or treatment was experimental, investigational, or not medically necessary, and used these false reasons as the basis for denying a valid claim.
See below for a description of some leading cases involving punitive damage awards for insurance bad faith. If you find yourself in a similar situation, contact Gianelli & Morris to speak with a California insurance bad faith attorney dedicated to holding insurance companies accountable and helping policyholders get the medical care and benefits they need and deserve.
Fox v. Health Net (Cal. Sup. Ct. – Riverside County, 1993)
In this well‐publicized California case, 39‐year‐old Nelene Fox was diagnosed with aggressive breast cancer in June 1991. Her doctors recommended a bone marrow transplant to save her life, but Health Net (a California HMO) denied coverage as “experimental.” Fox’s family raised over $200,000 through donations so that she could undergo the $150,000 procedure in late 1992. By then the cancer had advanced and Fox died in April 1993. In December 1993 the Riverside County jury found Health Net acted in bad faith to maximize profits at Fox’s expense. It awarded the Fox estate $12.1 million in compensatory damages (for medical costs, pain and suffering, etc.) and $77 million in punitive damages – believed to be the largest verdict against an HMO at that time. The jury concluded that Health Net intentionally delayed/denied coverage despite Fox’s clear need, and this “delay lessened her chance of survival”. (Health Net later settled before appeal, reportedly for a confidential sum.) The verdict sent a strong message about insurers’ duty of good faith.
Dardinger v. Anthem Blue Cross & Blue Shield, 98 Ohio St.3d 77 (2002)
In Ohio’s Supreme Court, the estate of Esther Dardinger – a 49‐year‐old woman with terminal brain cancer – sued Anthem after she was denied coverage for repeated intra-arterial chemotherapy (IAC) treatments. Her treating physician testified that by late 1997 Esther’s tumors were shrinking on IAC and she was leading a “pretty full” life. Nevertheless, Anthem abruptly stopped approving IAC after three treatments, claiming the procedure was “experimental,” and would only pay for conventional chemotherapy. Esther received a fourth IAC by using personal funds but died later in 1997. A jury found Anthem breached its contract and acted in “malicious” bad faith by wrongfully cutting off Esther’s care. It awarded substantial damages, including $30 million in punitive damages. The Ohio Supreme Court upheld the verdict as a legitimate punishment, noting that Anthem had no reasonable basis to rescind pre‐approval once Esther’s good results were known. Because of the “unprecedented” size of the award, the Court ordered the punitive portion to be split: two-thirds to a cancer research fund (in Esther’s name) and one-third to the Dardinger family. The Court’s decision reinforced that insurers acting in “bad faith” by denying life‐saving treatment can face extreme punitive penalties.
Cunningham v. Aetna Health, No. CJ‑2015‑2826 (Oklahoma County Dist. Ct., Nov. 2018)
In a recent non-ERISA case, Ronald Cunningham – a retired Oklahoma City firefighter – sued his wife Orrana’s insurer, Aetna, after she was denied a recommended proton‐beam therapy for stage IV head and neck cancer. Orrana Cunningham was diagnosed in 2014 and her doctors at MD Anderson determined proton‐beam radiation (PBT) was necessary to target a tumor near her brainstem. Aetna denied coverage as “experimental/investigational” after three different Aetna nurses and three in-house medical directors reviewed the request. The evidence at trial showed these reviewers were underqualified and overworked: one had spent only 30–45 minutes on the case (claiming to have “read everything” in that time) despite extensive medical records and had never treated a patient with radiation. The insurers’ in-house physician even admitted in a “peer‐to‐peer” call that he knew the MD Anderson oncologist was correct but denied coverage anyway.
A jury found Aetna’s conduct “egregious,” showing “reckless disregard” for Cunningham’s rights. It awarded $15.5 million in actual (compensatory) damages (for funeral costs, mental anguish, medical expenses, etc.) and $10 million in punitive damages. The jury noted that Aetna’s denial forced the Cunninghams to mortgage their home to obtain treatment and then grieved Orrana’s death (from unrelated causes) after she finally got care. Oklahoma law required proof of “actual malice” beyond a reasonable doubt for this Level‐3 punitive award, and the jury believed Aetna’s conduct met that standard (e.g. by overloading doctors to cut costs). Aetna did not immediately appeal the verdict; as of late 2018, the case was being discussed as a cautionary tale for health insurers.
Sierra Health & Life Ins. Co. v. Eskew, 140 Nev. Adv. Op. 57 (Nev. Sup. Ct. Aug. 5, 2024)
In this Nevada Supreme Court decision, the widow of William Eskew sued his HMO, Sierra Health & Life, after Eskew’s doctor recommended proton‐beam therapy for his stage IV lung cancer. Sierra denied coverage, deeming PBT “not medically necessary,” and instead approved conventional radiation that damaged Eskew’s esophagus. Eskew subsequently suffered constant pain and a choking cough during the last 18 months of his life. A Clark County jury found Sierra had no reasonable basis to deny the treatment and “recklessly disregarded” Eskew’s need.
The jury awarded the estate $40 million in compensatory damages (medical bills, pain/suffering, etc.) and $160 million in punitive damages– a combined $200 million verdict, one of the largest for health‐plan bad faith in U.S. history. Sierra urged that such a massive punitive award was unconstitutionally excessive, but the Nevada Supreme Court affirmed it in full. The Court reiterated Nevada’s rule that punitive damages may be imposed where an insurer knew or recklessly disregarded that its denial had no reasonable basis. Even on appeal, Sierra failed to show any genuine dispute about coverage; the insurers’ systemic “managed‐care” defenses were rejected, and the verdict stood.
Contact Gianelli & Morris to Fight Back Against Insurance Bad Faith
The highlighted cases demonstrate the stakes. In each case, courts emphasized that the insurer’s decision was unsupported by facts or was made in conscious disregard for the insured’s health, warranting punitive sanctions.
In California, section 3294 requires that punitive damages must be proven by “clear and convincing evidence,” which is higher than the “preponderance of the evidence” standard required to prove insurance bad faith. Once proven, it’s up to the jury to decide an appropriate amount of punitive damages, although plaintiffs can introduce evidence such as the profits the insurance company gained and its overall financial condition.
At Gianelli & Morris, we always pursue punitive damages in appropriate cases to maximize the compensation for our clients while holding insurance companies maximally accountable for their conduct and obtaining the fullest measure of justice possible. If you have been the victim of insurance bad faith in California, contact Gianelli & Morris in Los Angeles for a free consultation.
