In a bad faith case involving wrongful denial of coverage of a wrongful death suit, a Pennsylvania Court awarded the policyholder’s assignee $8,490,666 in damages, despite the fact that the policyholder had pled guilty to voluntary manslaughter. Penn Nat’l Mut. Cas. Ins. Co. v. Johnson, et al., No. 05-2045 (Pa. Super. Ct. Jan., 2007).
The action involved a homeowner’s insurance policy with a limit of just $100,000 and arose after the insurance company denied coverage for a wrongful death action brought by the ex-girlfriend and minor child of a man killed by the policyholder. The decedent died following a fight in which the policyholder had wrestled a gun away from the decedent and, in the process, shot him four times.
The policyholder was charged with first degree murder, among other charges, and pled guilty to the reduced charge of voluntary manslaughter. The ex-girlfriend of the decedent then brought a civil action against the policyholder alleging that he “unintentionally and negligently” shot and killed the decedent. The insurer was notified of the action and invited to attend an arbitration that took place between the parties. It declined, denying coverage because the shooting was, in its view, intentional.
The arbitrator, however, ruled that the policyholder had been only negligent and that the shooting was unintentional. The arbitrator then awarded the decedent’s estate roughly $3.7 million, which was subsequently reduced based on issues of comparative negligence. The insurer, however, continued to deny coverage for the claims against the policyholder.
The policyholder then assigned his rights under the homeowner’s insurance policy to the plaintiff in the wrongful death action. She brought a breach of contract claim against the insurer and the insurer filed a declaratory judgment action. At a bench trial, the court ruled that the killing was unintentional and that the insurer had acted in bad faith when it denied coverage. The Court then awarded damages totaling $8,490,666, including $6,000,000 in punitive damages.
In awarding such large punitive damages, the Court pointed out that coverage was denied even after the arbitrator made a finding that the shooting was the result of negligence and not intentional. The Court was also critical of the fact that the insurer did not attend the arbitration and, instead, waited until after the arbitration was concluded to bring its declaratory judgment action. Finally, the Court criticized the insurer for not conducting any investigation into the underlying claim before denying coverage, even choosing not to interview any witnesses, including the policyholder.