Procedural Posture

Defendant appealed a judgment of the Superior Court, Los Angeles County (California), which held in favor of plaintiff in an action in tort alleging tortious breach of the implied covenant of good faith and fair dealing, and unfair, unlawful, or fraudulent business practices in violation of Cal. Bus. & Prof. Code, § 17200.

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Plaintiff insured brought an action against defendant, his workers’ compensation insurer, to recover for unfair business practices, based on allegations relating to defendant’s case reserve and claims handling policies. Defendant appealed a judgment in favor of plaintiff, awarding damages and issuing an injunction against defendant, arguing an insured employer was prohibited from recovering tort damages where the only damage claimed was the impact on future premiums, its reserving practices could not support a bad faith judgment, and the punitive damages award must be reversed. The court ruled that an insurer could be liable if it processed claims and set reserves without good faith regard for their impact on the insured’s premiums and potential dividends. Further, the court held that there was substantial evidence which supported the finding of bad faith in defendant’s implementation of Cal. Ins. Code § 923.5. The court affirmed the judgment, and reversed the punitive damage award, concluding that the goal of punitive damages was to award an amount that was sufficient to deter the conduct but was not excessive and that the amount awarded by the trial jury was excessive.


Judgment in favor of plaintiff was affirmed, and the judgment with regard to punitive damages was reversed and the matter was remanded for a new trial only on the issue of punitive damages, where defendant’s actions constituted substantial evidence in support of a finding of bad faith, defendant was treated as a private enterprise, and the amount of punitive damages awarded was excessive.