The Sixth Circuit Court of Appeals in Tennessee recently ruled and reaffirmed that a Tennessee policyholder is not limited to the statutory extracontractual remedy for an insurer’s bad faith refusal to pay on a policy. She may also be awarded punitive damages under common law. And, further, the Tennessee legislative cap on punitive damages is an “unconstitutional invasion of the right to trial by jury under the Tennessee Constitution.”

In Lindenberg v. Jackson National Life Insurance Company,1 on appeal from the United States District Court for the Western District of Tennessee, the Sixth Circuit Court of Appeals upheld the trial court ruling that statutory penalties were not the exclusive remedy for an insurer’s bad faith refusal to pay an insurance claim. In dispute was a $350,000 life insurance policy issued by Jackson National Life Insurance Company (“Jackson National”) designating the Plaintiff the primary beneficiary and the decedent’s surviving children as the contingent beneficiaries.

Plaintiff submitted a claim and Jackson National sent a list of requirements to be met before it would tender the proceeds. One requirement was that Plaintiff sign waivers and obtain court-appointed guardians for the descendant’s surviving minor children, or just waive her rights to the proceeds and allow Jackson National to disburse the proceeds to the minor children.

Plaintiff filed suit for claims for common law breach of contract, statutory bad faith, and common law punitive damages predicated on breach of contract. After a trial, the jury found for Plaintiff and awarded $350,000 in compensatory damages;2 $87,500 for the claim of bad faith (25% of amount owed); and $3,000,000 in punitive damages. Jackson National moved the court to apply the Tennessee punitive damages cap, the court granted the motion and reduced the punitive damages award to $700,000.

Jackson National appealed the bad faith and punitive damages award. On appeal, Jackson National argued that the district court erred in failing to dismiss Plaintiff’s claim for punitive damages in its entirety since it was based on breach of contract and Tennessee case law held that the statutory remedy for bad faith was the exclusive extracontractual remedy for an insurer’s bad faith refusal to pay on a policy. In finding for the Plaintiff, the Sixth Circuit declared:

Our review of Tennessee caselaw reveals that the Tennessee Court of Appeals has abrogated Heil’s pronouncement that the statutory remedy for bad faith is the “exclusive extracontractual remedy for an insurer’s bad faith refusal to pay on a policy.” 690 F.3d at 728. In Riad v. Erie Insurance Exchange, the defendant relied on Heil to argue that the plaintiff “was not entitled to damages beyond those contemplated in” the bad faith statute and so could not recover punitive damages. 436 S.W.3d 256, 275 (Tenn. Ct. App. 2013), perm. app. Denied (Tenn. 2014).

The appellate court rejected this contention, stating:

we reaffirm our conclusion that Plaintiff was entitled to recover any damages applicable in breach of contract actions and was not statutorily limited to the recovery of the insured loss and the bad faith penalty. Punitive damages, while generally not available in a breach of contract case, may be awarded in a breach of contract action under certain circumstances. To recover punitive damages, the trier of fact must find that a defendant acted either intentionally, fraudulently, maliciously, or recklessly. Erie does not argue that the jury was improperly instructed or that the jury failed to consider the applicable factors. Accordingly, we further conclude that the issue of punitive damages was properly submitted to the jury.

Further, the Sixth Circuit was guided by and acknowledged that in Myint v. Allstate Insurance Company,3 the Tennessee Supreme Court held exactly the opposite of Jackson National’s argument, concluding that “nothing in . . . the bad faith statute . . . limits an insured’s remedies to those provided therein.”

Next, the appellate court addressed Jackson National’s claims that the trial court should have granted its motion for judgment as a matter of law regarding Plaintiff’s claims for statutory bad faith penalties and for punitive damages predicated on breach of contract. Finding for the Plaintiff, the Sixth Circuit stated:

Punitive damages may be awarded in “egregious” cases involving breach of contract where, in addition to showing that the defendant breached a contract, the plaintiff provides “clear and convincing proof that the defendant has acted either ‘intentionally, fraudulently, maliciously, or recklessly.’” Rogers v. Louisville Land Co., 367 S.W.3d 196, 211 n.14 (Tenn. 2012) (quoting Goff v. Elmo Greer & Sons Constr. Co., 297 S.W.3d 175, 187 (Tenn. 2009)). For proof to be clear and convincing, there must be “no serious or substantial doubt about the correctness of the conclusions drawn from the evidence.” Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901 n.3. (Tenn. 1992).

In this case, the jury faced the question of whether Defendant’s breach of contract involved egregious conduct. As previously discussed, reasonable minds could find that Defendant’s uncertainty defense was merely a post hoc explanation for its refusal to pay on the Policy. Based on the following evidence, reasonable minds could go further, finding that clear and convincing evidence demonstrated that Defendant’s refusal to pay was at least reckless.

On cross-appeal, Plaintiff argued that the statutory punitive damages cap, T.C.A. § 29-39-104,4 which the district court applied, violates two provisions of the Tennessee Constitution: the individual right to a jury trial and the doctrine of separation of powers.5 The Sixth Circuit found:

Upon our assessment of Tennessee law, we find that the punitive damages bar set forth in § 29-39-104 violates the individual right to a trial by jury set forth in the Tennessee Constitution. The Declaration of Rights in the Tennessee Constitution provides that “the right of trial by jury shall remain inviolate . . . .” Tenn. Const. art. I, § 6.


“Among the essentials of the right to trial by jury is the right guaranteed to every litigant in jury cases to have the facts involved tried and determined by twelve jurors.” State v. Bobo, 814 S.W.2d 353, 356 (Tenn. 1991). Our review of historical evidence from Tennessee and North Carolina demonstrates that punitive damages awards were part of the right to trial by jury at the time the Tennessee Constitution was adopted.

It is not unusual to find that the same improper or unlawful conduct violates multiple statutes or common laws. In addition to common law remedies for breach of contract and state statutory laws pertaining to insurance contracts and claims handling, most jurisdictions also have consumer protection laws, including various unfair trade practices acts, which also apply to the business of insurance. As the Linderberger case shows, it is important to know and pursue all available remedies for breach of contract and the improper conduct instituted in the breach.


1 Lindenberg v. Jackson Nat’l Life Ins. Co., 912 F.3d 348 (6th Cir. 2018).
2 Jackson National did tender the $350,000 policy proceeds prior to trial.
3 Myint v. Allstate Ins. Co., 970 S.W.2d 920, 925 (Tenn. 1998).
4 T.C.A. § 29-39-104, Tennessee statute that caps punitive damages at two times the amount of compensatory damages awarded or $500,000, whichever is greater.
5 Having found the statute unconstitutional under the right to a jury trial, the Court did not address the doctrine of separation of powers argument.