Recently, the United States Court of Appeals for the Sixth Circuit, in Lindenberg v. Jackson Nat’l Life Ins. Co., 912 F.3d 348 (6th Cir. 2018), ruled that a plaintiff may recover both bad faith damages and punitive damages against an insurer for bad faith refusal to pay on a policy. The District Court held that the statutory remedy for bad faith was not the exclusive remedy for an insurer’s bad faith refusal to pay on a policy. The Sixth Circuit upheld the District Court ruling.
While it is too early to tell if the Sixth Circuit decision will be permanent or adopted by the Tennessee Supreme Court, the case is important because it is currently binding in the Sixth Circuit and the district courts within the circuit.
The case involved a dispute regarding a $350,000 life insurance policy. Plaintiff was designated as the primary beneficiary of a life insurance policy provided by the defendant, Jackson National Life Insurance Company, and the decedent’s surviving children were the contingent beneficiaries. After Plaintiff submitted a claim for the benefit, Defendant sent a list of requirements to Plaintiff that had to be met before it would pay out. Defendant wanted Plaintiff to sign waivers and obtain court-appointed guardians for the descendant’s surviving minor children or Defendant said Plaintiff could “waive her rights to the claim so that Defendant could disburse the proceeds to the minor children.” As a result of communications with Defendant, Plaintiff filed suit. Eventually, the life insurance policy was paid out, and a jury proceeded to hear Plaintiff’s “claims for common law breach of contract, statutory bad faith, and common law punitive damages predicated on breach of contract.” The jury found for Plaintiff and awarded $350,000 in compensatory damages plus $87,500 for the claim of bad faith and $3,000,000 in punitive damages. Defendant moved the court to apply the Tennessee punitive damages cap, and the court granted the motion, reducing the punitive damages award to $700,000. Plaintiff appealed the application of the punitive damages recovery.
On appeal, Defendant argued that the district court erred in failing to dismiss Plaintiff’s claim for punitive damages in its entirety rather than allowing the claim to proceed to the extent it was based on breach of contract. Defendant argued that existing Tennessee case law held that the statutory remedy for bad faith was the exclusive extra contractual remedy for an insurer’s bad faith...
