Amerigraphics, Inc. v. Mercury Casualty Co.

In this insurance bad faith case, respondent Amerigraphics, Inc. (Amerigraphics), sued its insurer, appellant Mercury Casualty Company (Mercury), after Amerigraphics’s business premises were flooded, and Mercury denied full coverage under the policy. There are two primary issues on appeal.

First, what is the meaning of the “Business Income” coverage in the policy which states that Mercury will pay an insured during its period of suspended business operation the “(i) Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred if no physical loss or damage had occurred . . . ; and [f] (ii) Continuing normal operating expenses incurred, including payroll”? We agree with the trial court that under the plain meaning of this policy, an insured is entitled to be paid under both subparts without having to offset the two amounts in the event operating expenses exceed net income.

Second, we consider whether an award of punitive damages that is 10 times the amount of compensatory damages and prejudgment interest was correctly calculated and comports with due process. We are satisfied that substantial evidence supports an award of punitive damages,…