U.S. insurers winning battles, if not war, on litigation

Two recent U.S. decisions have provided small victories to insurers in the litigation war.
The California Supreme Court last week tossed out a lower court ruling that had resulted in a multi-million dollar bad faith damage award against an insurer. In Jonathon Neil & Assoc. Inc. v. Jones, the case centered around US$51,000 in premiums which the insurer said were owed to its by the Joneses, who owned a trucking company. In a bad faith case launched by the Joneses, a jury awarded more than US$11 million in punitive damages, but this was reduced to US$4 million by the original judge.
The Supreme Court now says the courts should never have heard the case to begin with and should have referred the dispute to the state Insurance Department. The court also found that the facts of the case did not justify a bad faith action. “The legal analysis in the Court’s opinion supports the argument that bad faith actions against insurers should be limited to cases where there are allegations of claims mishandling and should not be extended to disputes over premiums,” notes a statement by the Association of California Insurance Companies (ACIC).
In Tennessee, insurers are welcoming an end to a 15-year ban on exclusions for punitive damages. The state’s Insurance Department had said exclusions on punitive damages would only be allowed in pollution liability and uninsured motorist coverage, but a new bulletin from the department says it will not disapprove a policy form containing such exclusions. The Property Casualty Insurers Association of America (PCI) says the decision may actually result in more coverage availability because insurers will be able to offer coverage with the exclusions in place.