The opinion of the court was delivered by: Honorable Ronald E. Bush U. S. Magistrate Judge
MEMORANDUM DECISION AND ORDER RE: PLAINTIFF'S § 6-1604 MOTION FOR (Docket No. 44)
Currently pending before the Court is Plaintiff's § 6-1604 Motion for Hearing on Punitive Damages (Docket No. 44). Having carefully reviewed the record, participated in oral argument, and otherwise being fully advised, the Court enters the following Memorandum Decision and Order:
Plaintiff brings this lawsuit as the "legal assignee of claims" for CatRisk.us, LLC ("CatRisk"), an Idaho limited liability company providing electronic medical billing services to small physician practices in several states. CatRisk performed these services entirely over the internet, using computer network technologies to communicate with its medical, insurance, and governmental clients/subscribers. To insure the risk of a computer system failure, CatRisk purchased a "Special Multi-Flex Spectrum Policy" (the "Policy") from Defendant Hartford Casualty Insurance Company ("Hartford Casualty"), effective on May 1, 2008.
Plaintiff alleges that, on May 21, 2009, CatRisk suffered a sudden and catastrophic mechanical breakdown, resulting in the total loss of computer functions. Functionality was restored eight days later and CatRisk was able to resume business operations. Plaintiff reported the incident to CatRisk's insurer, Hartford Casualty, and, on June 3, 2009, Hartford Casualty denied Plaintiff's claim.
Arguing now that Hartford Casualty investigation into the May 21, 2009 incident was both delayed and incomplete, Plaintiff seeks to amend his complaint to assert a claim for punitive damages against Hartford Casualty.*fn1
A. Amending a Complaint to Add a Claim for Punitive Damages
"A prayer for punitive damages is not a stand-alone cause of action, but flows from an underlying cause of action, such as a breach of contract or a tort, when the conduct of a party meets the threshold level of being oppressive and outrageous." See Boise Tower Associates LLC v. Washington Capital Joint Master Trust, 2006 WL 1749656 at *12 (D. Idaho 2006). Conduct justifying punitive damages requires "an intersection of two factors: a bad act and a bad state of mind." See Linscott v. Rainier Nat. Life Ins. Co., 606 P.2d 958, 962 (Idaho 1980). The defendant must (1) act in a manner that was an extreme deviation from reasonable standards of conduct with an understanding of -- or disregard for -- its likely consequences, and must (2) act with an extremely harmful state of mind, described variously as with malice, oppression, fraud, gross negligence, wantonness, deliberately, or willfully. See Myers v. Workmen's Auto Ins. Co., 95 P.3d 977, 983 (Idaho 2004). For plaintiffs to be entitled to amend their complaint to add a claim for punitive damages, they need to show "a reasonable likelihood of proving facts at trial sufficient to support an award of punitive damages." See I.C. § 6-1604(2).
Plaintiff's argument in favor of adding a claim for punitive damages against Hartford Casualty relates, generally, to the manner in which Hartford Casualty responded to Plaintiff's loss claim. Specifically, Plaintiff argues that Hartford Casualty (1) did not investigate Plaintiff's claim with reasonable diligence, and (2) did not conduct a thorough, impartial investigation into the May 21, 2009 incident before denying Plaintiff's claim. These arguments, while persuasive to an extent, do not rise to the level needed in order to add a claim for punitive damages under Idaho law.
1. No Reasonable Likelihood of Showing of Hartford Casualty's "Extremely Harmful State of Mind"
Plaintiff has not demonstrated a reasonable likelihood that he could make a showing at trial -- through clear and convincing evidence -- that Hartford Casualty engaged in the requisite bad act, indicative of an extremely harmful state of mind (beyond, allegedly, denying Plaintiff's claim in bad faith), needed to sustain a claim for punitive damages.
The record demonstrates amply that Plaintiff is beyond frustrated, believing that his claim was handled poorly from the outset and that its ultimate denial was manifestly improper. However, this alone cannot justify a claim for punitive damages; otherwise, punitive damages claims would "piggy-back" without more upon each and every bad faith claim. However, more is needed. To that end, Plaintiff, through his expert William A. Walker, contends that a punitive damages claim is warranted here given Hartford Casualty's delinquent and incomplete ...