A federal district court in Virginia recently ruled that under Virginia law, an insured may not recover punitive damages in connection with a bad faith claim against its insurer. TIG Insurance Co. v. Alfa Laval, Inc., Civil Action No. 3:07CV683 (E.D.Va., March 5, 2008). The court explained that under Virginia law, a bad faith action against an insurer is a contract action, not an independent, willful tort for which punitive damages might be appropriate. In addition, the court noted that the function of punitive damages is to punish and deter, which is achieved without punitive damages since a bad faith action exposes the insurer to the statutory remedy of attorneys fees and costs and, potentially, an award that exceeds the policy limits.
Although the court held that punitive damages are not available to the insured, it allowed the insured to proceed with a bad faith contract action to seek general and consequential damages.
Click here for the full text of the court’s March 5, 2008 decision.
