Insured May Seek Punitive Damages in Tennessee against Property Insurer

Last year I blogged about the requirements for asserting a successful bad faith claim in Tennessee under Tenn. Code Ann. § 56-7-105.

I did not specifically address a policyholder’s ability to pursue punitive damages against the insurance company.

A Tennessee federal court discussed this issue in a recent case where the insureds alleged in their complaint that their insurance company, Nationwide “wrongfully failed and/or refused to fully and promptly pay [ ] the claim for insurance proceeds.”1 The insureds submitted a proof of loss to Nationwide, however, because Nationwide refused to pay the loss within 60 days under the statute, the insureds alleged that Nationwide breached its obligation to pay. Therefore, they commenced a lawsuit and sought not only the bad faith penalty under the statute, but also punitive damages not to exceed $5,000,000. Nationwide moved to dismiss the punitive damages claims alleging that the claim was precluded under Sections 56-7-105 and 56-8-113:

Notwithstanding any other law, title 50 and this title shall provide the sole and exclusive statutory remedies and sanctions applicable to an insurer, person, or entity licensed, permitted, or authorized to do business under this title for alleged breach of, or for alleged unfair or deceptive acts or practices in connection with, a contract of insurance as such term is defined in § 56–7–101(a). Nothing in this section shall be construed to eliminate or otherwise affect any:

(1) Remedy, cause of action, right to relief or sanction available under common law;

(2) Right to declaratory, injunctive or equitable relief, whether provided under title 29 or the Tennessee Rules of Civil Procedure; or

(3) Statutory remedy, cause of action, right to relief or sanction referenced in title 50 of this title.

The district court disagreed with Nationwide and denied the motion to dismiss. The court looked at the relationship between the two statutes. Specifically, the court explained that the enactment of section 56-8-113 eliminated the availability of treble damages under the Tennessee Consumer Protection Act in a breach of insurance contract action after April 29, 2011. Because Tennessee law allowed claims for punitive damages in breach of insurance contract cases, the Court found that Section 56-7-105 did not preclude damages in such cases and the plaintiffs could seek punitive damages against Nationwide:

Nationwide’s nebulous argument that the General Assembly intended the 2011 amendments to “undo any broadening of remedies available to insureds that had been created judicially” fails to take into account the text of the statute, which protects common-law remedies then-available under the common law. If punitive damages were available under the common law prior to section 56–8–113’s enactment, then the statute’s plain language keeps the remedy intact. Furthermore, if the General Assembly understood the state of the law at the time it amended the insurance statutes—a fact the Court presumes—and it intended to eliminate the availability of punitive damages in breach-of-insurance-contract cases, then it would not have included an express provision retaining then-existing common-law remedies.


1 Carroll v. Nationwide Property & Cas. Co., No. 2:14–cv–02902, 2015 WL 3607654 (W.D. Tenn. June 8, 2015).


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