Question: The Plummers owned a commercial building in which they operated
The Plummers owned a commercial building in which they operated two businesses. The building and its contents were insured by Indiana Insurance Company (IIC). After an explosion and fire destroyed the building, the Plummers filed a claim and proof of loss with IIC. After an investigation, IIC denied the claim due to its conclusion that the Plummers had intentionally set the fire. IIC then filed a declaratory judgment action in which it asked for a determination that it had no obligation to cover losses stemming from the fire. The Plummers counterclaimed, seeking damages for breach of contract as well as punitive damages. The jury returned a verdict in favor of the Plummers on all issues. The jury awarded the Plummers approximately $700,000 in compensatory damages (an amount that exceeded the policy limits set forth in the insurance policy at issue), plus $3.5 million in punitive damages. The $700,000 compensatory damages award included not only the value of the destroyed building and its contents (what would have been due under the policy) but also $200,000 in consequential damages allegedly incurred by the Plummers as a result of IIC's lengthy investigation of the fire and ultimate denial of the Plummers' claim. For the most part, the consequential damages represented interest costs and similar expenses incurred by the Plummers-costs and expenses they would not have incurred if IIC had paid their claim. Although the evidence IIC adduced at trial included experts' testimony that the fire had been intentionally set, the jury rejected that testimony and accepted the Plummers' contrary evidence. IIC appealed, arguing that its denial of the Plummers' claim was in good faith, that it therefore should have no liability for consequential damages and punitive damages, and that the damages awarded for breach of an insurance contract cannot exceed the policy limits set forth in the contract. Was IIC correct in these arguments?
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