McCoy v. Progressive West Insurance Co.
Filed February 4, 2009 ordered published February 26, 2009
Second District, Division One
Cite as B199978

Insurer’s Liability in Unpaid Claims Upheld

Cedric McCoy worked as an air traffic controller and tower supervisor with the United States Navy. On March 2004, he went to a casino in Las Vegas where his Ford Mustang was reportedly stolen.

Finally, when it was recovered, the Mustang was burned, damaged, and declared “essentially of no value”. McCoy reported the loss to his insurer, Progressive West Insurance Co., knowing that the theft was a covered loss in his policy.

Progressive never paid his claim; instead it answered with a general denial and asserted various affirmative defenses, saying that its investigation was “reasonable” and “within the standards for good claims handling.”

As a result, McCoy filed a complaint against his insurer, charging that Progressive “breached the insurance contract and violated the covenant of good faith and fair dealing” based on the following acts:

• Failing “to promptly, fairly and fully investigate the claim”


• By withholding benefits, “unreasonably and without proper cause”, which was owed him under the policy

On the other hand, Progressive suspected a fraudulent claim and believed McCoy might be involved in the theft of his own car. The company therefore sent an investigator. The insurer presented two witnesses who said McCoy once told them that he is interested in disposing the car and getting a new one.

However, a Progressive fire and theft representative testified on the following:

• That McCoy provided him with a recorded statement on April 2004 and other documents requested by the company


• That McCoy’s claim was not denied until March 2005 or nine months after the affidavit of theft was received

That the company has the duty to affirm or deny a coverage claim within 40 days or if fraud were suspected, within 80 days

Further, the representative also admitted that if doubts arose during the investigation, it would be resolved in favor of coverage for the insured.

McCoy present an expert who testified on the following:

• That Progressive’s claim handling was “below the standard in the industry and it did not meet DOI regulations”


• That the company failed to “give the insured the benefit of the doubt” and the investigations were conducted to prove “what they had already concluded in mind”


• That there was no investigation conducted to show that McCoy’s claim might be valid

During the first phase of the trial, the jury favored McCoy on all the special verdict questions, which included whether the company acted in “bad faith, malice or oppression”. In the second phase, the jury agreed to an award of $ 100,000 in punitive damages.

The trial court also denied Progressive’s motion for new trial and for judgment notwithstanding the verdict, holding that there was enough evidence to support the jury’s verdict that McCoy “got a raw deal”.

The court also found that the insurance company had the opportunity to explain its handling of the claim and rejected its claim that it was “shortchanged of admissible evidence”.

The court disagreed with the company’s argument on its rulings excluding evidence and entered an amended judgment on special verdict.

The insurance company filed for an appeal.

After review, the Second District court of appeal affirmed the trial court’s decision that it must first be determined if insurer’s denial of coverage was reasonable or not based on “genuine dispute” doctrine that there can be no bad faith denial of a claim if there was a genuine issue regarding the insurer’s liability.