On March 22, 2024 an Indiana Federal Judge affirmed an historic $112 million punitive damages jury verdict – the largest punitive damages award ever handed down in a property damage insurance case. Indiana GRQ, LLC v. American Guarantee and Liability Insurance Company, Case No. 3:21-CV227 DLR (N.D. Indiana 2024). Miller Friel tried the case on behalf of Indiana GRQ, a commercial policyholder who had plans to bring an historic Studebaker manufacturing plant in South Bend Indiana back to its former days of glory. A vision that was abruptly cut short in 2016 when a 100-year flood took out the “crown jewel” of the facility – an underground electrical system capable of delivering enough electrical capacity to power a small city.
The case started out like any other commercial property insurance case. The insurers, led by Zurich, assembled a team to evaluate the loss and paid roughly $2.7 million to repair portions of the facility. Easy portions of the claim were paid. The insurers took an abrupt turn, however, when their attempts to settle the entirety of the claim for mere pennies on the dollar were rebuffed by Indiana GRQ. From that point forward, the insurers orchestrated an assault on their insured to minimize their losses under the policy.
The insurance claim had two main components: replacement of the damaged electrical system, and remediation of PCBs released from the transformers during the flood. The trial focused on the insurer’s bad faith conduct. With respect to electrical damages, the insurers hired experts to value the damaged electrical system but then withheld these numbers from their insured because they were inconsistent with their desire to minimize their losses. Their conduct with respect to environmental damage, though, was much worse. The insurers turned Indiana GRQ’s environmental remediation consultant against them, soliciting from him reasons not to pay. This culminated in meetings with the Insurers’ attorneys in their offices to formalize reasons to deny coverage for the claim.
After hearing the evidence, the jury awarded $87.5 million dollars in punitive damages to Indiana GRQ. The Court affirmed the jury’s award punitive damages noting that the insurers’ conduct “was disturbing, and the jury reasonably viewed it just so in awarding punitive damages against each insurer.” The Court concluded that Indiana GRQ “presented more than enough evidence for a reasonable jury to find bad faith.” Unfortunately, the practice of minimizing coverage for corporate policyholders is something that insurance carriers do every single day. We are pleased to have had this opportunity to expose this practice and hope that this punitive damages award will cause insurers to think twice before engaging in bad faith conduct.