Ohio Jury Hits Insurer With $10 Million for Bad Faith After Fatal Crash

Published February 8, 2012 · Verdicts & Settlements

An insurance company's first job after a crash is to deal honestly with the claim. When it does the opposite, abandoning its own driver and stonewalling the family he hurt, Ohio law lets a jury make it pay. A Belmont County jury did exactly that in January 2012, returning a $10 million verdict against an auto insurer in a case that began with a fatal crash nearly nine years earlier. The result is one of the largest bad-faith verdicts I have seen in this state, and it carries lessons for every family dealing with a reluctant insurer.

The crash and the cancelled policy

According to published reports of the case, the crash happened in April 2003. Donald Cox was adjusting his sun visor when his vehicle crossed the center line and hit the Bigler family's car. Brian Bigler was killed. His father, Howard Bigler, was seriously injured.

Mr. Cox and his wife had auto coverage through Personal Service Insurance Company. Four days after the crash, after being notified by its agent, the insurer refunded the Coxes' premiums and took the position that the policy had been cancelled more than a month before the collision.

The Biglers made a demand for $50,000, the policy's liability limit. That demand would have fully released the Coxes from any further liability. The insurer refused. According to the reports, it also refused to provide the Coxes with a lawyer to defend the lawsuit the Biglers filed.

From a $3 million judgment to a $10 million verdict

With no insurer at the table, the Biglers sued Mr. Cox directly and won a judgment of $3 million. A judgment is only worth what can be collected, and an individual driver rarely has that kind of money. So Mr. Cox assigned his own claims against his insurer to the Biglers. In plain terms, he handed them his right to sue the insurance company for mistreating him, so that the judgment could be paid out of whatever they recovered.

The Biglers then took the insurer to trial in Belmont County. In January 2012, the jury found that the company's denial of coverage and its refusal to defend the Coxes were in bad faith. It awarded $8 million in compensatory damages and $2 million in punitive damages, finding that the insurer had consciously disregarded the Coxes' rights.

Think about those numbers for a moment. The insurer could have resolved the whole matter for $50,000. By refusing, it ended up facing a verdict two hundred times larger.

What "bad faith" means in Ohio

Every insurance policy carries an unwritten promise: the insurer will handle claims honestly and fairly. When an insurer denies a claim or refuses to settle without a reasonable justification, it breaks that promise, and Ohio law treats that breach as a tort, a civil wrong that can be sued on separately from the policy itself. That is the "bad faith" claim.

Bad faith shows up in a few recurring ways:

• Refusing a reasonable policy-limits demand. When the injured person's damages clearly exceed the policy limits and the insurer refuses to pay those limits to settle, it exposes its own insured to a judgment far larger than the policy. That is what happened here.
• Denying coverage without a reasonable basis. Declaring a policy cancelled days after a fatal crash, and then refusing to defend the driver, is the kind of conduct juries punish.
• Abandoning the insured. The duty to defend is one of the most valuable parts of an auto policy. Leaving a driver to face a wrongful-death lawsuit alone is a breach of that duty.

When bad faith is proven, the insurer is no longer protected by its policy limits. It can be held responsible for the full judgment against its insured, for the harm the bad faith caused, and, when its conduct shows malice or conscious disregard for the rights of others, for punitive damages. Under R.C. 2315.21, punitive damages require proof of that kind of conduct by clear and convincing evidence, and they are generally capped at two times the compensatory award. The $2 million punitive award here fits comfortably inside that cap.

I wrote about a related rule two years ago, when the Ohio Supreme Court held that an insurer must pay attorney fees tied to a punitive verdict against a drunk driver. The Belmont County verdict shows the other side of the same principle: an insurer that games the system is not insulated from the consequences.

How a family ends up holding the insurer's own claim

The procedural path in this case is one that most people have never heard of, and it is worth understanding because it comes up more often than you would think.

When an insurer refuses to settle within limits and its insured gets hit with a judgment he cannot pay, the insured has a claim against his own insurer for putting him in that position. The injured family, meanwhile, has a judgment it cannot collect. The solution is an assignment: the insured transfers his bad-faith claim to the family, often in exchange for an agreement not to pursue his personal assets. The family then steps into his shoes and sues the insurer.

That is the route the Biglers took, and it turned an uncollectible $3 million judgment into a $10 million verdict against a company that can actually pay. It requires a lawyer who understands both the underlying injury case and insurance law, and who is willing to try the case when the insurer will not do the right thing.

What this means for you

The verdict does not mean every claim ends in millions of dollars. It does show how Ohio juries react when an insurer treats a grieving family and its own customer with contempt. If you are dealing with an insurer after a serious crash:

• Make a clear, documented demand. A written policy-limits demand with the medical records and proof of damages attached puts the insurer on notice. If it refuses without a good reason, that refusal becomes evidence.
• Keep every letter and log every call. Bad faith is proven with paper: denial letters, unexplained delays, shifting reasons, and unanswered correspondence.
• Do not accept a cancellation story at face value. When an insurer claims a policy lapsed, the timing, the notices it sent, and what its own agent did all matter. Those records can be obtained and tested.
• Understand that a wrongful-death claim does not end at the policy limits. Our wrongful death practice looks for every source of recovery, including the insurer's own exposure when it has mishandled the claim.
• If you are the insured who was abandoned, you have rights too. An insurer that refuses to defend you or to settle within your limits can be held responsible for the judgment entered against you. You do not have to carry that alone.

One caution: before suing your own insurer for bad faith in Ohio, the claim generally has to be presented to the company first. I explained that rule in my post on the claim-first rule from Kincaid v. Erie. Getting the sequence right is one more reason to involve a lawyer early.