$8M Punitive Damages Award against State Farm Upheld
In 1997, a Missouri woman reported to State Farm that her 1990 Toyota 4Runner was stolen and filed a claim. The vehicle was found abandoned and burned in Kansas four days later. State Farm denied her $10,000 claim and reported her, and her boyfriends brother, to local authorities who charged them with insurance fraud. State Farm alleged that the couple abandoned and burned the vehicle intentionally to collect the insurance proceeds. However, a Missouri jury found them both not guilty.
The couple then sued State Farm for breaching their insurance contract (not paying for valid damages) and malicious prosecution (intentionally bringing a legal action without probable cause). Each was initially awarded $400,000 although the judge had to reduce that amount to $250,000 because of Missouris cap on damage awards. However, the judge also imposed an $8 million fine against State Farm $4 million each for malicious prosecution.
State Farm appealed the punitive damages award, but an appellate court upheld that decision in a recent opinion. The court said that State Farm had acted maliciously by providing the National Insurance Crime Bureau with incomplete files, omitting evidence and police reports and for allegedly lying to the plaintiffs attorney about having evidence that never existed. State Farm has indicated that they may appeal the ruling yet again.
Another $2.5M penalty
Punitive damages awards are frequently imposed on insurance companies and this is not State Farms first. A Mississippi jury awarded a family whose home was destroyed in Hurricane Katrina a whopping $2.5 million punitive damages award in 2007 for State Farms shady claims practices. Although the judge later reduced that amount to $1 million, it shows that insurance companies that act in bad faith towards their policyholders can be held accountable.
If your insurance company has denied a valid claim, find out your options by contacting an attorney whose practice focuses on insurance law. To contact a qualified attorney for a free, no obligation consultation, please click here.