Punitive and "Mental Anguish" Damage Awards in "Ballard" Reversed
January, 2003
In late December, 2002, a Texas appeals court reversed the $32 million in punitive damages awarded to Mary Melinda Ballard and her husband, Ronald Allison, holding that Fire Insurance Exchange did not “knowingly” breach its duty of good faith and fair dealing toward Ballard and Allison during the claims handling process. Allison v. Fire Ins. Exchange, 98 S.W.3d 227 (Tex. App.).
Facts
In 1990, the Ballard family purchased a 7,400 square foot home. In late 1992, Ballard and Allison purchased an insurance policy from Fire Insurance Exchange (“FIE”). In the mid-90’s the house experienced various plumbing leaks for which FIE provided coverage. From 1997-1999, FIE paid Ballard and Allison over $200,000 for water damage at their home. However, the problems persisted, and claims adjustment continued.
In April 1999, Ballard met an indoor air quality consultant on a plane. The I.A.Q. consultant suggested that she have her home tested for mold contamination based on the problems that she described. Meanwhile, Ballard continued to make claim for various leaks throughout her home.
Eventually, Ballard filed suit against FIE for breach of contract, deceptive trade practices, breach of the duty of good faith and fair dealing in the claims handling process, and negligence. The case proceeded to trial where the jury awarded Ballard and Allison approximately $32 million in damages. Of that award, approximately $17 million constituted payment for Ballard’s mental anguish and punitive damages. FIE appealed this landmark decision contending that the evidence was legally and factually insufficient to support the jury’s findings that FIE engaged in deceptive trade practices and unconscionable and fraudulent conduct.
Analysis
The appeals court agreed with FIE, concluding that “there is no evidence to support the jury’s finding that FIE ‘knowingly’ breached its duty of good faith and fair dealing toward Ballard. Because a finding of a knowing violation is required to uphold punitive and mental anguish damages, we reverse the jury’s awards for these damages and render judgment that Ballard take nothing for punitive and mental anguish damages.”
Learning Point:
The Texas appellate court’s decision indicates that what was postured as a landmark mold claim is actually more of a standard breach of contract lawsuit and that there must be evidence of an insurer’s subjective awareness of false, deceptive or unfair conduct to support a finding of “knowing misconduct” necessary to sustain an award of punitive and/or mental anguish damages against an insurer. Ballard will likely be appealed to the Texas Supreme Court. Clausen Miller will continue to monitor and report on developments in this case.
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