A Clay County jury has awarded an Excelsior Springs man $11 million in his bad-faith suit against American Family Insurance Co.
The jury returned the verdict Nov. 8 following a four-day trial. The jury unanimously awarded Paul Skow $1 million in actual damages. Nine of the twelve approved $10 million in punitive damages.
Skow was insured by American Family in August 2012 when he failed to yield and struck a Kansas City Area Transit Authority bus in Platte County. Seventeen people were aboard the bus at the time. Fourteen were injured, with some passengers suffering serious injuries.
Skow had an insurance policy with limits of $50,000 per person and $100,000 per occurrence, his attorney, Kirk Presley of Presley & Presley in Kansas City, said.
Presley said the insurer undertook the claim, and there was no dispute about coverage. The parties attempted a global mediation, which was unsuccessful.
American Family had to decide how to disburse the limits of Skow’s policy, Presley said.
“They consulted with outside counsel and their in-house legal department and determined that they were going to pay the claims in the order that they received any dated demand – first come, first served,” he said.
Presley said two of the most injured bus passengers, Michael Puckett and Brhan Berhe, were unable to collect any of the limits because the insurance company disbursed the funds on a first-come, first-served basis.
Skow later entered a 537.065 agreement with the men in which they each received $500,000. American Family sought a declaratory judgment against Skow, prompting Skow’s bad-faith counter claim.
The insurer dismissed its declaratory judgment prior to trial.
Jeffrey E. Thomas, a professor from the University of Missouri-Kansas City School of Law, testified that there are two competing rules for insurers to disburse policy limits – first come, first served or release of greatest liability, Presley said.
“He said American Family acted in bad faith no matter which they used,” he said.
In cases involving a serious crash like Skow’s, where there are multiple claimants, the insured is most likely to be underinsured, Presley said.
“The better rule is to get rid of the biggest cases if you have that opportunity and American Family didn’t do that,” he said.
Presley said he was pleased “that the jurors sent a firm message to American Family and for that matter, to other insurers, that the insured’s financial interest is not to be discounted.”
He said the insurer’s case was that they had acted in good faith throughout the pendency of the claim and they had tried to get a global release, but were stymied by time.
Cases like Skow’s prompted Missouri lawmakers to pass House Bill 1531 in the 2018 legislative session to help insurers.
The bill, which took effect Aug. 28, creates a “safe harbor” for insurance companies from bad-faith claims in cases in which there are multiple claimants with damages likely to exceed available policy limits.
Insurers who file an interpleader action can deposit their coverage limits into an account maintained by the court, which would then decide how to split the proceeds.
“On its face, it would appear to insulate insurance companies in a similar situation and provide them with a safe harbor for dealing with multiple claimants,” Presley said. “The problem is that it would excuse the kind of claims handlings, and protect the kinds of claims handlings, that the jury found so objectionable in this case.”
Chris Carpenter of the Carpenter Law Firm in Independence represented American Family. He could not be reached for comment.
The case is American Family Mutual Insurance Co. v. Skow, 13CY-CV10308.
$11,000,000 plaintiff’s verdict
Breakdown: $1 million in actual damages, $10 million in punitive damages
Venue: Clay County Circuit Court
Case Number/Date: 13CY-CV10308/Nov. 8, 2018
Judge: K. Elizabeth Davis
Plaintiff’s Experts: Jeffrey E. Thomas, Kansas City (Insurance)
Defendant’s Experts: Jack T. Bangart, Kansas City (Insurance)
Last Pretrial Demand: $825,000
Last Pretrial Offer: None
Caption: American Family Mutual Insurance Co. v. Paul Skow
Plaintiff’s Attorneys: Kirk Presley, Presley & Presley, Kansas City
Defendant’s Attorneys: Chris Carpenter, Carpenter Law Firm, Independence