The Heil Co. v. Evanston Insurance Company
690 F.3d 722
6th Cir.2012Background
- Evanston insured Heil for a wrongful death suit arising from a truck accident; Heil paid its SIR and part of the settlement but sought indemnity for defense fees and costs in excess of SIR.
- Evanston assumed Heil’s defense after initially resisting and replaced Heil’s lead counsel; Pelini remained involved, with fees counting toward the SIR.
- The Ronske verdict awarded $6 million to the widow; the case settled for $5,711,000 with Heil paying the remaining $4.711 million plus fees.
- Heil sued for breach of contract, statutory damages under Tenn. Code Ann. § 56-7-105, and bad faith failure to settle; the jury found breach and bad faith denial, but not bad faith failure to settle, and awarded punitive damages.
- The district court denied post-trial relief; the Sixth Circuit vacated the punitive damages and remanded for a new trial on bad faith-to-settle issues, affirming liability under § 56-7-105.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether punitive damages were properly awarded without a predicate compensatory award. | Heil sought punitive damages for the failure to settle. | Punitive damages require a compensatory predicate; §56-7-105 precludes extracontractual punitive remedy. | Remand for new trial on punitive damages; predicate liability uncertain due to instructive error. |
| Whether the punitive damages award violated due process due to notice or instruction issues. | Notice was provided by the complaint; not reasserted later, but sufficient. | Notice was deficient; due process requires clear notice of punitive exposure. | Vacated for new trial; due process issue resolved by remand. |
| Whether the district court erred in denying judgment as a matter of law on the § 56-7-105 claim. | Evidence supported a statutory penalty; demand and damages proven. | Insufficient proof of formal demand or resulting additional expenses. | Affirmed liability under § 56-7-105; remanded for new trial on punitive damages and bad faith to settle. |
| Whether the district court properly interpreted the demand requirement under § 56-7-105(a). | April 23, 2007 letter constituted a formal demand. | Demand must be explicit or reasserted; argued insufficiency. | Letter satisfied the statutory demand; upheld liability for § 56-7-105 damages. |
Key Cases Cited
- K&T Enters., Inc. v. Zurich Ins. Co., 97 F.3d 171 (6th Cir. 1996) (strongest view of evidence under state-law standard of review)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S. 2003) (due process/punitive damages guideposts for reasonableness)
- Holmes v. Wilson, 551 S.W.2d 682 (Tenn. 1977) (statutory damages standard and evidence review in Tennessee law)
- Whittington v. Grand Valley Lakes, Inc., 547 S.W.2d 241 (Tenn. 1977) (general rule: compensatory damages predicate punitive damages in Tennessee)
- Parks v. Tennessee Mun. League Risk Mgmt. Pool, 974 S.W.2d 677 (Tenn. 1998) (statutory interpretation; plain meaning governs when unambiguous)
- Solomon v. Hager, 2001 WL 1657214 (Tenn. Ct. App. 2001) (repeated demands can satisfy demand requirement (state case))