Southeast Texas Record Jan. 12, 2015, 1:29pm


One can applaud the decision of 136th District Court Judge Milton Shuffield to set aside a ridiculous million-dollar exemplary damages award against National Security Fire & Casualty and still wonder why he didn't do so sooner.

Last October, a Beaumont jury found in favor of two Mostyn Law Firm clients who had filed suit against the insurance company after their claim for Ike-related damage to their home was denied. The jury returned a $400,000 verdict against National Security Fire & Casualty (more than half of which consisted of attorney's fees), plus a separate award of exemplary damages.

Judge Shuffield sealed the amount of the $1.2 million exemplary damages award at that time, later explaining that he had done so “to facilitate mediation” – which subsequently failed – and not “to hide from the public or to shield the verdict.”

Jurors awarded the extra million dollars because they believed that National Security had engaged in fraud by knowingly failing to honor the terms of its policy.

Of course, all policy holders want to maximize the amount they receive for claims and all policy providers want to minimize payouts, and it's standard practice for insurance companies to review claims carefully, sometimes paying less than the policy holders ask for and sometimes rejecting the claims outright – which is why some claims wind up in court.

One wonders if the jurors understood the nature of the insurance business or the concept of fraud. In any case, if adjusters at National Security thought it had reason to reduce or reject the claim made against the company, there would be nothing fraudulent about the decision, right or wrong.

Judge Sheffield admits that he thought the jury had not been properly instructed regarding the burden of proof required to support an award of exemplary damages. When he set the award aside last week, he did so “based on the lack of factual and legal evidence.”

And so we wonder, why not do it sooner?

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