Ohio Appeals Court Upholds $10 Million Bad-Faith Verdict Against Auto Insurer That Abandoned Its Driver (Bigler)

Published April 29, 2014 · Verdicts & Settlements · Ohio Appeals Courts

Two years ago we reported on a Belmont County jury that hit an auto insurer with $10 million for turning its back on its own policyholder after a fatal crash. That post, Ohio Jury Hits Insurer With $10 Million for Bad Faith After Fatal Crash, ended with the obvious question: would the verdict survive appeal? On March 31, 2014, the Seventh District Court of Appeals answered it. In Bigler v. Personal Serv. Ins. Co., 2014-Ohio-1467, the court rejected all twelve of the insurer's assignments of error and affirmed the judgment in full.

The decision is long and much of it concerns trial procedure. But the story it tells, drawn entirely from the court's opinion, is one every Ohio driver and every crash victim should know, because it shows what insurance bad faith actually looks like and how far the law will go to punish it.

A policy, a certificate, and a change of mind

In February 2003, Donald and Kathryn Cox went to an insurance agency in eastern Ohio to buy car insurance. Mr. Cox had lost his license under a twelve-point suspension and could get it back only by filing an SR-22, a certificate from an insurer telling the Bureau of Motor Vehicles that he was covered. The agent sold the Coxes a policy through Personal Service Insurance Company with the state-minimum liability limits of the time, $25,000 per person and $50,000 per crash, and handed Mr. Cox an SR-22 to take to the BMV. He did, and his license was reinstated.

The company's underwriters then decided Mr. Cox was an "ineligible risk." On March 4 the insurer mailed a notice that the policy would cancel on March 19. The same day, the Coxes paid the increased premium the company had billed them. On March 24 the BMV sent the SR-22 back to the insurer asking it to fill in Mr. Cox's name and address, which the agent had left blank. The insurer never did.

Ohio law has a special rule for certified policies. Under R.C. 4509.57, once an insurer has certified a policy to the BMV, the insurance "shall not be canceled or terminated until at least ten days after a notice of cancellation or termination is filed" with the registrar. That notice is called an SR-26. Personal Service Insurance never filed one.

The crash and the denial

On April 10, 2003, Mr. Cox drove left of center on State Route 9 in Belmont County and struck the Bigler family's vehicle. Brian Bigler, who was driving, was killed. His father, Howard Bigler, was seriously injured. The Coxes asked their insurer for coverage. The company told them the policy had been cancelled three weeks earlier. The Biglers' lawyer asked the insurer to pay its full $50,000 limits to settle the death and injury claims. The company said there was no coverage on the date of the loss. Four days after the crash it mailed the Coxes a refund check for their overpaid premium.

The Biglers sued Mr. Cox. Left without a defense by his own insurer, he brought the insurer into the case. After a bench trial, the court entered judgment against Mr. Cox of $1 million to each of the three Bigler plaintiffs, $3 million in all, a judgment he had no way to pay.

How the victims ended up suing the insurer

Here is the step that makes this case useful to injured people. The Coxes and the Biglers entered an assignment and forbearance agreement: the Coxes assigned to the Biglers a share of whatever they recovered from the insurer, and the Biglers agreed not to pursue the Coxes personally in the meantime. The Biglers then stood in the Coxes' shoes and pursued the insurer for bad faith.

This is a well-established path in Ohio. A crash victim generally cannot sue the at-fault driver's insurer directly. But when an insurer wrongfully abandons its policyholder and a large judgment follows, the policyholder has a claim against the insurer for the harm the abandonment caused, and that claim can be assigned to the victim. The insurer that refused a $50,000 demand can find itself facing the entire judgment, plus damages for bad faith.

Coverage as a matter of law, then a jury on bad faith

In May 2011 the trial court held that because the SR-22 had been delivered to and accepted by the BMV and no SR-26 was ever filed, the policy was never validly cancelled and was in force on the day of the crash. The appeals court agreed. It also rejected the insurer's late argument that the policy was void from the start because the application failed to disclose Mr. Cox's old criminal record; under the statute governing certified policies, the court explained, the insurer's liability becomes conclusive once a crash occurs, and no statement in the application can defeat it.

The bad-faith claim went to a jury in January 2012. Ohio's standard, which the Supreme Court set in Zoppo v. Homestead Ins. Co. in 1994 and which the jury was instructed on here, is that an insurer acts in bad faith when its refusal to pay a claim is not based on circumstances that furnish reasonable justification. The insurer does not have to intend harm. It is enough that it had no lawful basis for the denial or never bothered to find out whether it had one.

The jury awarded $8 million in compensatory damages and $2 million in punitive damages. The trial court then awarded attorney fees of $860,742.50 to one firm and $407,600 to a second attorney, plus expenses, roughly $1.27 million in fees, applying a multiplier of 2.0 to reflect the risk and the result. The Seventh District upheld every piece of it, including the fee award, finding that a judge who had presided over the case for years was in the best position to judge what the work was worth.

What this verdict shows about case value

This was a fatal crash with a minimum-limits policy. In most such cases the family collects $25,000 and moves on. What turned it into a $10 million judgment was the insurer's conduct: a denial without a lawful basis, a refusal to defend its own customer, and a rejected policy-limits demand that would have resolved everything for $50,000. Ohio law exposes an insurer that behaves that way to the full judgment against its insured, to punitive damages, and to the victim's attorney fees.

Two practical points follow. First, a policy-limits demand should be made early, in writing, and with full documentation, because it is the insurer's refusal of a reasonable demand that creates the exposure. Second, the minimum limits that applied in 2003 were raised only this past December, as we explained in our post on Ohio's new minimum auto-insurance limits; even the new limits will not come close to covering a death or a serious injury, which is why uninsured and underinsured motorist coverage on your own policy remains the most important protection you can buy.

What this means for you

If an at-fault driver's insurer has denied coverage, claimed the policy was cancelled, or refused a reasonable demand within the policy limits, do not assume the limits are all that is available. The insurer's own conduct may be the most valuable asset in the case. Our car accident and wrongful death practices look for that exposure in every serious claim, starting with the BMV records that decided this one.