Articles & Cases

Corporate Bad Faith and Punitive Damages by Jury

A jury stung a large insurance company with $200,000 in punitive damages
because of its “outrageous” treatment of a $10,000 auto-theft claim.

In January 1995, Mike Barker bought and restored a pickup truck which was
subsequently stolen for his lot. He reported the loss to the police and
claimed $10,000 under his Zurich Life insurance policy. The adjuster
questioned the loss and alerted the insurance Crime Prevention Bureau who,
in turn, alerted police.

Several months later, the car was found partly submerged in water.
Reasoning that the claim had not been paid and that urgent restoration was
needed to prevent permanent damage, Barker towed the pickup and had it
dismantled and drained.

Zurich Life denied the claim, arguing Barker had violated the policy not
only by denying them the ability to inspect the vehicle but also for making
unauthorized repairs. Barker sued the insured for the $10,000 purchase
price and cost of restoration. At trial, Zurich Life’s statement of defence
made explicit for the first time that the initial adjuster, after
developing personal hostility to Mr. Barker during a previous claim,
suspected that the auto sell ran a ‘chop-shop’ which dismantled vehicles,
sold the parts and claimed they were stolen.

Mr. Barker’s lawyer then amended the statement of claim to include damages
for “reprehensible, scandalous, and outrageous treatment,” noting that their
report to police and other insurers about alleged criminal acts
substantially increased Mr. Barker’s insurance rates and would affect his
future insurability.

“My summation to the jury,” the lawyer explained, “was if you want to send a
message to an insurance company, you have to send it in an amount they will
understand.”