Opinion ID: 871065
Heading Depth: 3
Heading Rank: 1

Heading: Position of Defendants Hartford and MedAmerica

Text: Defendants rely primarily on California law indicating that economic or financial loss is required before an insured may recover emotional distress damages for bad faith, citing, inter alia, Waters v. United Services Automobile Ass'n, 41 Cal.App.4th 1063, 1074, 48 Cal.Rptr.2d 910, 916 (Cal.App.1996) (Under Gruenberg, emotional distress damages are recoverable in a first party bad faith case only when the insured establishes financial loss.... Then, and only then, may the insured recover for emotional distress damages as well as the pecuniary loss.). Defendants' rationale for applying California law is summarized in the following points: 1. since the California case of Gruenberg is the source of Hawaii's bad faith law, Hawai`i should follow California's law on the issue presented in this case; 2. five other jurisdictions (Arizona, Wyoming, Wisconsin, South Dakota and Nebraska) addressing the question in this case have followed California law, while only one jurisdiction (Colorado) has accepted the Plaintiff's position, and that jurisdiction has safeguards in place to guard against unlimited liability, which Hawai`i does not have; 3. since first-party insurance contracts are primarily designed to protect the insured from financial loss, unless there is a measurable economic loss, the insured should not be able to recover emotional distress damages in the absence of financial loss; 4. the requirement for economic or physical loss addresses concerns over trivial, fraudulent, fictitious, or subjective and easily feigned emotional distress claims; and 5. allowing a bad faith claim to go forward on a claim for emotional distress damages alone would open the proverbial floodgates to unnecessary litigation.