Hawaii Supreme Court says insured needn’t prove tangible losses in bad faith suit [Lawyers USA]

An insured suing for bad faith is not required to prove economic or physical injury in order to recover damages for emotional distress allegedly caused by the termination of her long-term care benefits, the Hawaii Supreme Court has ruled in answering a certified question from a U.S. District Court.

The plaintiff purchased a Hartford long-term care insurance policy. She began receiving benefits after suffering a grand mal seizure and being diagnosed with cancer.

A year after approving the plaintiff's claim, Hartford terminated her benefits. Five months later, in an apparent effort to avoid a lawsuit, the insurance company reinstated the benefits retroactively.

The plaintiff nonetheless sued Hartford for bad faith, seeking damages for emotional distress caused by the temporary termination of her benefits.

Hartford argued that the plaintiff could not recover damages for emotional distress because she could not show physical or economic injury. According to the insurer, applicable Hawaii law requires proof of physical or economic losses in order for an insured to recover for emotional distress caused by alleged bad faith.

But the state supreme court decided that there is no such requirement, observing that the "basis for an insured's first-party bad faith claim is the insurer's conduct in breaching its duty to deal with its insured in good faith, not the insured's ultimate financial liability."

Accordingly, the court held that "if a first-party insurer commits bad faith, an insured need not prove the insured suffered economic or physical loss caused by the bad faith in order to recover emotional distress damages caused by the bad faith."

The court noted a similar decision from the Colorado Supreme Court, as well as a contrary ruling from the California Supreme Court.

Hawaii Supreme Court. Miller v. Hartford Life Insurance Co., No. SCCQ-11-0000329. Dec. 28, 2011. Lawyers USA No. 993-3500.