In McClure v. Country Life Ins. Co., 795 Fed. Appx. 548 (9th Cir. 2020), the Ninth Circuit affirmed a $6.5 million bad faith verdict against a disability insurer that included a $1.29 million award for emotional distress damages even though the plaintiff had provided no medical evidence demonstrating emotional trauma.

In this case, plaintiff Benjamin McClure ("McClure") sought benefits under an individual disability income policy issued by County Life Insurance Company ("Country Life") after suffering a head injury. McClure claimed that post-concussive syndrome prevented him from performing the material duties of his profession as the manager of an insurance company call center. In addition, McClure claimed that he suffered from a history of depression, which rendered him vulnerable to emotional injury.

Country Life initially accepted McClure's claim and paid benefits for approximately 13 months, but then terminated benefits upon finding that McClure was no longer totally disabled under the subject policy. McClure sued Country Life and its affiliate CC Services, Inc., ("CCS") (collectively "Defendants") in Arizona District Court, alleging causes of action for breach of contract and bad faith. McClure claimed at trial that Defendants denied his claim without reviewing his most recent medical records, including records from the physicians who had attested to his disability.

A federal jury returned a verdict in favor of McClure on both causes of action. On the bad faith allegations, the jury found that CCS employees were compensated, in part, based on the profitability of CCS, which in turn depended on the decisions those employees made concerning disability benefits.

The jury ultimately awarded McClure approximately $200,000 in past and future disability benefits and $2,500,000 in punitive damages against each defendant. In addition, the jury awarded $1,290,000 in damages for emotional distress—even though McClure provided no medical records or medical testimony establishing that the denial of benefits caused his allegedly worsening mental health condition.

The district court, in denying Defendants' motion for a new trial, held that proof of causation did not require such evidence. In addition, the court held that the award was appropriate in light of a jury instruction stating that McClure was entitled to emotional distress damages if the adverse benefits decision exacerbated a pre-existing mental condition. In sum, the evidence at trial "painted a picture of emotional pain brought on by the uncertainties of the family finances and of their future, resulting from the termination and the coverage battle with Defendants, all of which came at a time when McClure was vulnerable and experiencing severe depression."

The Ninth Circuit affirmed every aspect of the ruling, finding there was sufficient evidence to support the jury's conclusions. The McClure case is a cautionary tale for insurers, as it indicates Ninth Circuit courts may allow a jury to infer significant emotional distress damages where there is scant evidentiary support.