The insurer appealed a jury verdict awarding the insureds compensatory and punitive damages following a fire that destroyed a commercial building.
The insurer had denied the claims based on arson, misrepresentation, and fraud.
The Court of Appeal allowed the appeal and ordered a new trial, finding that the trial judge misdirected the jury on the law of misrepresentation and the interpretation of a 'shut down' exclusion clause.
The Court also set aside the jury's $1.2 million award for loss of profits as unsupported by evidence, and found the $2.5 million punitive damages award to be grossly excessive.
