Paying for Outrage

To guard against unfair treatment of insurance claimants, an "outrage" law has evolved out of cases that have come up in California courts. Under it, an insurance company may be sued for additional damages when emotional distress is suffered by persons whose legitimate claims are sidetracked or turned down for "false or frivolous" reasons. Insurance companies naturally do not like the law, and now their worst fears have been confirmed. Last week a jury in Orange County awarded an outraged policyholder $710,000 in damages. It was by far the largest sum ever handed down under the law.

The policyholder, U. L. Fletcher, injured his back three years ago on the job lifting a 361-lb. bale of scrap rubber. He had a $15,000 disability policy with Western National Life Insurance Co. of Texas, and at first the company agreed to pay him $150 a month for at least two years. Then it reversed itself and stopped payments on grounds that his injury was really an illness. Wearing a brace, Korean War Veteran Fletcher went to court to ask for $50,000 as compensation and $1,000,000 in punitive damages under the outrage law. The jury, no doubt impressed by the fact that he is the sole support of eight children, three foster children, two grandchildren and a wife, gave him the full $50,000 request, plus $660,000 as the insurance company's punishment. Itself outraged, Western Life quickly announced plans to appeal. But there is at least one way in which the company seems to have been lucky. The jury decided by a 9-to-3 vote, but the holdouts only voted no because they wanted to give Fletcher his entire $1,000,000 punitive request.

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