Federal Jury Finds Insurance Company Acted Maliciously in Regards to Personal Injury Case

12/09/2008 | Unfair Insurance Practices/Bad Faith

A federal jury found that Atlantic Mutual "acted despicably and with malice and oppression in wrongfully refusing to settle" a personal injury case involving Harold Leon Bostick in 2002.

Bostick, who served in the Marine Corps from 1991 to 1994, was an amateur weightlifter and bodybuilder prior to his accident. He had earned a master's degree in business administration from Rice University in Texas and was attending law school at Pepperdine University at the time of the injury.

Bostick was doing squat presses when the weights fell on him and broke his neck.  The weight machine Bostick was using didn't have a safety harness that would have prevented the injury.  Bostick sued Flex, the manufacturer of the machine, and Gold's Gym.  Gold's settled for $7.2 million.  Bostick learned that Flex only had a $1 million insurance policy through Atlantic Mutual.  Bostick offered to settle for that amount; however, Atlantic never even responded to the demand.  A jury trial followed, and the award was $16.2 million.  Because Atlantic exposed Flex to a verdict in excess of its insurance policy, Flex assigned its bad faith cause of action to Bostick.

Assignements such as this are not uncommon in cases where the damages are extremely high and the insurance coverages are limited.  The defendant's insurance company has three duties in this situation: (1) provide a defense, (2) evaluate the case and, if possible, resolve the case within the policy limits, (3) advise the insured of the risks of proceeding to trial and the personal exposure that may arise if the verdict exceeds the policy limits, known as an excess verdict.  If the insurance company fails to do any of these things, and a verdict exceeds the policy limits, the insured can sue its carrier for unfair claims handling, also known as bad faith. Following an excess verdict, the insured will usually try to get the inured person to agree to accepting the insured's potential bad faith claim in exchange for an agreement that the injured person will not attempt to collect the judgment from the insured but will instead seek to recover the money from the insurance company.  The original injured party then stands in the shoes of the insured and brings the first party bad faith claim against the insurance company.  Not many of these cases ever reach a jury verdict as most are resolved prior to trial.

To learn more about bad faith, be sure to watch our Bad Faith Video

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