Question

Read the summary of the case Mitchell v. Fortis Insurance Company on page 291 of your textbook. In a 500+ word paper, explain why this is a breach of contract case. What kind of contract is this and who is the breaching party? What kinds of damages are normally awarded for breach of contract? Are punitive damages normally awarded in a case of this type? Why did the court award punitive damages in this case? Do you agree with this decision? Did the insurance company behave ethically in this situation? Would you have suggested that they do anything differently? Why or why not?

Answer 1

Ans:-

The Mitchell v. Fortis Insurance Company case is a breach of contract case because the Mitchell’s policy was rescinded by Fortis due to the misrepresentation of the facts. The doctor’s attender had made a handwritten note on the HIV test done by Mitchell in which the note had a mention of incorrect date. Though this was later proved by the Fortis investigator, the Fortis Senior Underwriter Kate Stephens suggested therescission committee and recommended that Mitchell's policy be rescinded on the grounds that he had misrepresented his HIV positive status.Stephens's summary referenced the handwritten notation on the intake form as the sole foundation for her recommendation. 

This is a breach of the policy and Fortis is the breaching party because the policy was rescinded to avoid providing any claims to the policyholder Mitchell. For a breach of contract, the following types of damages are awarded for the breach of contract:

1. Compensatory damages: A compensation amount need to be provided for the person who has the loss.
2. Liquidation Damages: Damages that are specifically stated in the contract. These are available when damages may be hard to foresee and must be a fair estimate of what damages might be if there is a breach.
3. Punitive Damages: These are damages that is intended to punish the breaching party and to deter him or her from committing any future breaches
4. Nominal damages: These are damages when the injured plaintiff does not actually incur any loss, but the judge wants to show that the winning party was right.

The court awarded punitive damages to Fortis because it falsely misrepresented Mitchell’s answer to the question whether he was diagnosed with any disease. Yes, the judge’s decision was correct in providing the punitive damages of $10 million to Fortis because the company will in future would deter from committing any such breaches. The insurance company did not behave ethically in this situation because when Mitchell proved that the date was incorrectly handwritten by the doctor’s attender, the company failed to consider this fact and went by Kate Stephen’s recommendation to rescind the contract which is against the policy holder’s interest.