St. Paul Guardian Insurance Co. v. Luker
Paul and Teri Luker sued St. Paul Guardian Insurance Company after their claim for lost household goods in a fire was denied under a homeowner's policy issued to Kim's father, Emmett Luker. St. Paul denied the claim, alleging arson by the Lukers and misrepresentation, despite a prior stipulation agreeing to coverage for the Lukers' personal effects. A jury awarded the Lukers contractual damages for property loss and tort damages for bad faith and mental anguish. On appeal, the court affirmed the contractual damages, finding St. Paul owed a duty of good faith and fair dealing to the Lukers as third-party beneficiaries due to the stipulation. However, the court reversed the awards for exemplary damages and bad faith tort damages, remanding the bad faith claim for a new trial, citing insufficient evidence that St. Paul acted in bad faith or with conscious indifference in denying the claim.