When a tree fell on Nazila and Bijan Neman’s home and pool in July 2019, they had no idea that they would end up in trial with their homeowners insurance carrier State Farm two years later. They were shocked in August 2021 when a federal jury awarded them not only damages for the full amount to fix their home for $446,950.46 and their attorney’s fees, but also that the jury found State Farm acted with malice, oppression, and fraud during the investigation and adjustment of the claim. For this conduct, the jury awarded the Nemans $5,000,000.00 in punitive damages.
In a bad faith insurance case, punitive or exemplary damages can be awarded under California’s Civil Code section 3294 if a jury finds that the Defendant acted with oppression, fraud, or malice shown by clear and convincing evidence. Naturally, the Nemans were elated by the jury’s finding, which awarded them a financial judgment for the two years of agony and litigation caused by State Farm.
But that elation lasted just a few months. In December 2021, Judge R. Gary Klausner granted State Farm’s Motion to Alter or Amend the Judgment, striking the entire punitive damage award.1 Similar to the post by Chip Merlin on this blog days ago, clients (and potential clients) rarely recognize how difficult it is to win a “bad faith” insurance case and be awarded damages. Similarly, the trial court in the Shannen Doherty case focused on the lack of evidence presented to the jury demonstrating bad faith.
In the Neman case, the court focused on the point that “[a]t trial, the jury saw no evidence at all of Defendant’s financial condition.” The Neman’s attorney attempted to introduce a financial statement of State Farm, but the court excluded the document as hearsay, and no witnesses testified regarding State Farm’s financial condition. Specifically, the court found that without this evidence, a jury would be encouraged to speculate as to a defendant’s net worth in seeking to return a verdict that will appropriately punish the defendant.
Late last month, the Neman’s attorney filed an appeal of the judge’s order. While the exact dollar amount State Farm made in 2021 might never make it in front of the trial judge again, it is possible the Neman jury knew that State Farm is the largest homeowners’ insurance company in the United States, holding a 17.9 % market share.2 It is also possible they knew State Farm spends millions of dollars in advertisements, including many that will play on the upcoming Super Bowl broadcast, for which they paid over $5 million last year.3
Should this case go back before a jury, State Farm’s net worth – which reportedly rose by 8.6 % from $116.2 billion in 2019 to $126.1 billion in 20204 – might come to light. Should this happen, a $5 million verdict may seem small as a slap on the wrist for State Farm. But until then, this case serves as a cautionary tale to policyholders who think getting a punitive damages verdict is a sure thing when they have a dispute with their insurance company.
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1 Neman v. State Farm Gen. Ins. Co., No. 2:19-cv-10104 (C.D. Cal. Dec. 13, 2021).
2 https://www.google.com/search?q=state+farm+market+share&rlz=1C1GCEA_enUS829US831&oq=state+farm+market+share&aqs=chrome..69i57j35i39l2j69i65l3j69i60l2.2456j0j7&sourceid=chrome&ie=UTF-8
3 https://www.wglt.org/news/2021-02-06/state-farm-debuts-1st-super-bowl-ad-with-nfl-stars
4 https://pantagraph.com/business/local/amid-pandemic-year-state-farm-made-3-7-billion-in-2020/article_7b386d6f-6a32-57c9-b2be-6d1581212e21.html#:~:text=State%20Farm’s%20net%20worth%2C%20however,gains%20in%20the%20stock%20market
