Indiana Court Reinstates $3 Million Judgment Against Erie Insurance for Bad Faith
An Indiana appellate court has reinstated a significant $3 million judgment against Erie Insurance for bad faith, emphasizing that policy limits do not restrict damages for an insurer's breach. On May 14, 2026, the Court of Appeals of Indiana supported a jury's finding that Erie Insurance acted in bad faith by denying an uninsured-motorist claim. The court restored the $3 million breach-of-contract damages, which were previously reduced by a trial judge, and sent the matter back to assess if the full award was excessive.
The dispute began in August 2016 when Christine and Roy Cosme purchased an auto policy from Erie Insurance, including their son Broyce. In February 2017, Broyce was wrongly implicated as a driver in a marijuana possession incident, leading to a license suspension. Despite police assurances of rectifying the mistake, it remained unresolved. Erie continued the policy but later flagged the issue, prompting an underwriter to notify the Cosmes that Broyce needed to be excluded from the policy or provide proof of insurance to avoid cancellation.
Although Broyce reinstated his license, a request for an extension went unnoticed, and the policy was canceled by November 1, 2017. Subsequently, Christine Cosme faced an accident with an uninsured driver, and Erie denied the claim on November 30. This sparked litigation by the Cosmes in March 2018, with the initial ruling in favor of Erie later overturned by the Indiana Supreme Court. In a subsequent jury trial in February 2025, the Cosmes received a substantial award, although trial courts reduced accident-related damages to align with policy limits.
Documents revealed that the policy remained active from August 27, 2017, to August 27, 2018, with Erie attributing errors to clerical mistakes. The trial included testimony from insurance expert Elliot Flood, who accused Erie of opportunistic fraud—a claim consistent with prior statements. The appellate decision acknowledged that while uninsured-motorist limits cap wreck-related damages, they do not apply to damages arising from breach of contract.
Judge Felix emphasized that damages from failing to meet contractual obligations are not bound by policy limits. The appellate court dismissed Erie's argument that bad-faith claims need to conform to certain categories, affirming the Cosmes' claim of an unfounded refusal to pay and misleading conduct. The case will return to the Lake Superior Court to review the excessiveness of the damages awarded, although the ruling has not reached finality.