Downey Savings & Loan Ass'n v. Ohio Casualty Insurance

—Plaintiff Downey Savings and Loan Association (hereafter Downey) brought a bad faith action against defendant Ohio Casualty Insurance Company (hereafter Ohio) for denial of benefits under a fidelity bond issued by Ohio. A jury awarded Downey $152,983.43 in compensatory damages and $5 million in punitive damages. Downey appeals from that portion of the judgment denying it attorney’s fees, while Ohio cross-appeals from the judgment against it. Reversed as to Downey’s appeal.

Facts

Viewing the evidence in the light most favorable to Downey, as we must (Leffv. Gunter (1983) 33 Cal.3d 508, 511 [ 189 Cal.Rptr. 377 , 658 P.2d 740 ]; Moore v. American United Life Ins. Co. (1984) 150 Cal.App.3d 610, 618, fn. 2 [ 197 Cal.Rptr. 878 ]), the facts are as follows:

A. Facts Relating to Downey’s Claim Based on Employee Dishonesty

On February 1, 1973, Ohio issued a “Savings and Loan Blanket Bond” to Downey. The bond provided coverage for losses caused by the dishonest act of any of Downey’s employees, up to a maximum of $3 million. The bond also promised to indemnify Downey for court costs and attorney’s fees incurred by Downey in defending any lawsuit brought by a third party…