In a recent insurance policy case, Lance. v. Owner’s Insurance Company, the Court of Appeals of Tennessee set aside a jury’s award of punitive damages in the amount of $267,500 against Owner’s Insurance Company (a subsidiary of Auto-Owner’s Insurance Company). The case involved the complete destruction of the Plaintiff business-owner’s building and inventory.
The Plaintiff owned a retail business which was operated out of a 14,000 square foot building in Polk County, Tennessee. The building and inventory within it were completely destroyed by fire in April of 2011. The insurance company’s investigators, as well as the fire department and state officials, determined that the fire was intentionally set. The Plaintiff did not challenge that the fire was intentionally set, but denied any involvement with it.
After the fire, the Plaintiff submitted a claim to the insurance company. The insurance company requested additional information. The Plaintiff submitted the additional information requested by the insurance company along with a bad faith notice under Tennessee’s bad faith failure to pay statute. (That statute allows an insured to recover damages beyond the insured’s actual out-of-pocket loss in an amount up to 25% of the insured’s actual loss).