Procedural Posture

Defendant insurer appealed from the order of the Superior Court of Santa Clara County (California), that awarded plaintiff wife and executrix of decedent’s estate compensatory and punitive damages and attorney fees in her action for breach of contract, bad faith, breach of fiduciary duty, fraud, and violation of Cal. Ins. Code § 790.03 in denial of decedent’s disability benefits. Plaintiff cross-appealed the denial of pre-judgment interest.

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Overview

Defendant insurer appealed the trial court’s judgment that awarded plaintiff wife and executrix of decedent’s estate compensatory and punitive damages and attorney fees in her action for breach of contract, bad faith, breach of fiduciary duty, fraud, and violation if Cal. Ins. Code § 790.03m based on the denial by defendant of decedent’s disability benefits. Plaintiff cross-appealed from the denial of pre-judgment interest. On review, the court affirmed the judgment insofar as it awarded attorney fees to plaintiff and found her entitled to punitive damages in her representative capacity only. However, the award of compensatory and punitive damages was reversed and the matter remanded for further proceedings. The court held that where no compensatory damages were available to plaintiff, then defendant was entitled to an instruction that punitive damages were required to bear a reasonable relation to the injury, harm, or damage actually suffered by plaintiff and proved at trial. Consequently, the trial court erred in failing to so instruct the jury, and gave the jury unlimited discretion to punish defendant.

Outcome

The court affirmed the judgment awarding attorney fees to plaintiff wife and executrix of decedent’s estate, and found her entitled to punitive damages in her representative capacity. However, the award of compensatory and punitive damages to plaintiff individually was reversed and remanded because defendant insurer was entitled to an instruction that punitive damages had to bear a reasonable relation to the injury actually suffered by plaintiff.