Notrica

Introduction

Joe Notrica, doing business as Notrica’s 32nd Street Market (Notrica), sued his workers’ compensation insurer, State Compensation Insurance Fund (SCIF, sometimes State Fund or Fund), to recover in tort and for unfair business practices, based on allegations relating to SCIF’s case reserve and claims handling policies and practices. In a bifurcated proceeding, the jury awarded Notrica $478,606 in compensatory damages and $20 million in punitive damages; the trial court enjoined SCIF from various business practices and awarded $333,319.65 in attorney fees. SCIF appeals from the judgment. We conclude that the punitive damages award must be reduced to $5 million and otherwise affirm.

Procedural Background

In its complaint against SCIF, Notrica asserted two causes of action here pertinent: tortious breach of the implied covenant of good faith and fair dealing, to be determined by the jury; and unfair, unlawful, or fraudulent business practices (Bus. & Prof. Code, § 17200), to be determined by the trial court.

The implied covenant cause of action alleged the following pertinent facts.

SCIF is the state’s largest workers’ compensation carrier, created in 1914…