Lorenzo Biundo v. Old Equity Life Insurance Co.

Old Equity Life Insurance Company (Equity) appeals a jury verdict rendered in this diversity action, holding it liable on a disability insurance contract and for damages in tort for breach of the insurer’s duty to deal in good faith with its insured. The jury awarded Lorenzo Biundo compensatory damages of $26,500 on his contract claim, $6,622.50 on his tort claim (the amount of attorney’s fees incurred by Biundo in the prosecution of this suit), and in addition awarded $70,000 in punitive damages. For reasons stated below, we affirm the findings of liability on both the tort and contract claims, and affirm the compensatory damage award on the contract claim. However, we reverse and remand for new trial as to damages on the tort claim, and as to Equity’s liability for punitive damages.

FACTS

Appellee Biundo was owner of an incorporated masonry business of which he was president and in which he worked as a mason. He collected hourly, union-scale wages from the corporation for his mason work, but received no salary or other remuneration for his services as president. In 1973 he purchased a disability insurance policy from Equity, the appellant. The policy listed Biundo’s primary…