Preciado v. Young America
1 CA-CV 16-0082
| Ariz. Ct. App. | Jun 29, 2017Background
- Preciado insured a 2000 Ford F-350 with Young America; truck was stolen and later found in Mexico and unrecoverable. Young America’s policy required payment of the vehicle’s “actual cash value.”
- Young America’s claims handling involved a Special Investigations Unit, multiple document requests, an examination under oath, and offers based on a NADA valuation (Young America offered roughly $11,597). Disputes arose over valuation methodology and document handling.
- Young America was acquired by Fred Loya; the claim file was transferred and briefly closed for “lack of cooperation,” then reopened. The insurer sent checks and settlement offers that Preciado rejected.
- Arizona DOI later entered a consent order with Young America (admitting regulatory noncompliance and imposing a penalty); Preciado produced that consent order shortly before trial and the trial court admitted a redacted version over Young America’s motion in limine.
- Jury verdict: found breach of contract and bad faith; awarded $34,500 (breach), $100,000 (bad faith compensatory), and $750,000 (punitive). Trial court awarded ~ $302,170 in attorney fees and $4,477.91 in costs.
- On appeal the court affirmed many rulings, vacated punitive damages and reduced the contract award to the damages supported by evidence, and remanded to modify the costs award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of “actual cash value” | Preciado argued it means retail market/replacement value | Young America argued it means fair market value allowing depreciation (not retail) | Court accepted parties’ pretrial concession that actual cash value = retail market value for this case and declined to rewrite contract; no error in jury instruction |
| Use of DOI consent order at trial | Preciado: order shows pattern of poor claims handling and state of mind relevant to bad faith/punitive damages | Young America: untimely disclosure under Rule 37(c)(4); prejudicial | Court admitted redacted consent order; denied Young America’s motion in limine; affirmed on appeal (no reversible prejudice shown as to compensatory bad faith) |
| Punitive damages sufficiency | Preciado: company practice and specific conduct showed an ‘evil mind’ or conscious risk — warranting punitive damages | Young America: evidence at most shows missteps, not the clear-and-convincing proof of an evil motive or company-wide profit-driven policy | Court: evidence supported bad faith liability but was insufficient by clear-and-convincing standard for punitive damages; vacated punitive award and granted JMOL on punitive claim |
| Breach of contract damages amount | Preciado sought compensatory + consequential (loss-of-use) damages totaling higher figure | Young America: evidence supports only the monetary difference between insured’s valuation and insurer’s payment; consequential damages not pleaded/disclosed | Court: breach liability sustained but jury award unsupported by evidence; vacated $34,500 and remanded to enter contract damages of $2,838.52 plus interest (the proven contractual shortfall) |
Key Cases Cited
- Rawlings v. Apodaca, 151 Ariz. 149 (holding punitive damages in insurance bad faith require proof of defendant’s evil hand guided by an evil mind)
- Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326 (clarifies clear-and-convincing standard for punitive damages in insurer bad faith)
- Hawkins v. Allstate Ins. Co., 152 Ariz. 490 (upheld punitive award where company practice of routine deductions supported an evil-mind inference)
- Nardelli v. Metro. Group Prop. & Cas. Ins. Co., 230 Ariz. 592 (company-wide profit-driven policies can support punitive damages in bad faith cases)
- Sobieski v. American Standard Ins. Co., 240 Ariz. 531 (reversed punitive award where record lacked evidence of company directives favoring profits over insureds)
- Mendota Ins. Co. v. Gallegos, 232 Ariz. 126 (addresses de novo review of insurance contract interpretation)
- Pasco Industries, Inc. v. Talco Recycling, Inc., 195 Ariz. 50 (if contract ambiguous, extrinsic evidence and jury may resolve meaning)