In a lengthy and biting opinion chock full of vituperation, the California Court of Appeal, Third District, reversed a remittitur of punitive damages and reinstated a $13 million bad faith jury verdict against Coregis Insurance Co. The verdict arose out of Coregis’ sale of a special employment discrimination endorsement to a school district, which the insurer then refused to honor, citing a California insurance statute disallowing coverage for an insured’s willful acts. The case is Fresno Unified School District v. Coregis Ins. Co., 2006 WL 1633683 (June 14, 2006).
I first saw this case on Monday and have been trying to find time to blog about it for the last few days. Now the moment is here. Seldom does one see an appellate court, especially in an insurance coverage case, beat the stuffing out of one of the parties like the court did in this case. The insurer walked into court, but had to crawl back out. As I said, the case is long, but I encourage you to read selected portions like this one:
"Coregis asserts that even if its routine denial of discrimination claims was in bad faith, and even if its coverage position was untenable, punitive damages were unwarranted as a matter of law. From an insurer’s perspective, selling illusory coverage simply is not contemptible, let alone despicable. A jury’s sensibilities can be at odds with those of the insurer. . . ."
The key to the court’s ruling: an act can be wrongful without being willful and intentional from the standpoint of the insured. That and other factors led the court to conclude the insurer sold illusory insurance and tried to hide behind the statute to avoid paying. The jury’s punitive damages award had been reduced to $5 million by the trial court, but the appellate court bumped it back to the original amount. I got the sense the court would have liked to increase it a couple million more if it had the authority.