AND KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY v. TINA RODGERS (now JOHNSON)
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RENDERED: September 13, 2002; 10:00 a.m.
TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2001-CA-000152-MR
AND
2001-CA-000206-MR
NO.
KENTUCKY FARM BUREAU MUTUAL
INSURANCE COMPANY
v.
APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM LINCOLN CIRCUIT COURT
HONORABLE WILLIAM T. CAIN, JUDGE
ACTION NO. 98-CI-00274
TINA RODGERS (now JOHNSON)
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, McANULTY, and SCHRODER, Judges.
COMBS, JUDGE:
Kentucky Farm Bureau Mutual Insurance Company
(Farm Bureau) appeals from a judgment of the Lincoln Circuit
Court based upon a jury verdict in favor of Tina Johnson.
We
affirm.
Tina Johnson injured her neck, shoulder, and thumb when
her car was hit from the rear by a drunk driver.
vehicle was a total loss.
Johnson’s
The tortfeasor had a minimum liability
policy with Omni Insurance; Johnson had a policy with Farm Bureau
which included $50,000.00 in underinsured motorist benefits.
She
submitted an application (including a medical authorization form)
for her no-fault coverage including personal injury protection
(PIP) benefits at once, and Farm Bureau began paying Johnson's
medical bills resulting from the accident.
Johnson was advised
by a physician's receptionist that she was also entitled to
collect PIP wage loss benefits.
She accordingly made inquiry of
the company, and only then did Farm Bureau also begin to remit
those payments.
Medical records were steadily forwarded to Farm Bureau
by Johnson's medical care providers.
These records tracked
Johnson's extensive treatment, her several surgeries, her time
off from work for pain and/or recovery; the reports indicated as
early as March 30, 1998, that she had sustained a permanent
injury as a result of the motor vehicle collision.
All of this
information was submitted to Farm Bureau as a courtesy and not as
a result of any effort undertaken by the insurer to investigate
and evaluate Johnson’s claim.
On
March 31, 1998, Johnson became aware that an
upcoming shoulder surgery would exhaust her PIP benefits.
On
April 6, 1998, Johnson's counsel put Farm Bureau on written
notice of her underinsured motorist claim.
Counsel recounted
that Johnson had been severely injured and that her damages would
"far exceed" the tortfeasor's $25,000.00 coverage limits.
Additionally, counsel advised Farm Bureau as follows:
To date, [Johnson] has undergone a surgery
to remove a bone from her thumb and a second
surgical procedure to repair a torn rotator
cuff shoulder injury. She has been
undergoing manipulations by a chiropractor in
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Stanford without great success for back
injuries.
In correspondence addressed to Gary Montgomery, Farm
Bureau's claim adjuster, dated June 22, 1998, Johnson's counsel
advised Farm Bureau that Omni Insurance had tendered its
$25,000.00 liability limits.
The letter formally demanded
Johnson’s underinsured coverage limits and served to confirm an
earlier telephone conversation in which Johnson's counsel had
demanded payment of the underinsured motorist coverage.
On July
2, 1998, Farm Bureau set up a reserve account of $15,000.00.
Since Farm Bureau had made no attempt to settle
Johnson's UIM claim, her counsel telephoned the company on August
3, 1998, to ask whether the company intended to pay those or any
benefits under the policy.
The telephone call was not answered
by Gary Montgomery, the adjuster, but instead by Terry Lester,
Farm Bureau's claim supervisor.
taking over Johnson's file.
Lester advised that he was
Although he was unfamiliar with her
file, Lester denied that her claim against the UIM coverage
warranted any payment whatsoever.
Before the telephone call
ended, Johnson’s counsel had threatened the company with
litigation.
Lester then relented somewhat and stated, "[w]ell if
it will help you any, I can probably get you $10,000."
In mid-September 1998, Johnson filed suit against Farm
Bureau to recover her policy benefits.
As the action proceeded
through discovery and ultimately on to trial, Farm Bureau never
increased its settlement offer.
Farm Bureau called no witnesses
at trial, and it sent no representatives to hear the proof.
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A
jury awarded Johnson more than $98,000.00, an amount well in
excess of the policy limits.
In the bad faith portion of her action against Farm
Bureau, Johnson alleged that Farm Bureau had breached its
agreement to provide her with UIM benefits and had engaged in
unfair claims settlement practices.
Johnson testified that while
she initially trusted Farm Bureau to honor its obligations, she
eventually suffered mental anguish and stress regarding her
strained financial situation due to Farm Bureau’s mishandling of
her claim.
Johnson’s counsel testified regarding his interaction
with Farm Bureau.
He testified that the telephone conversation
with Terry Lester indicated that Lester was completely unfamiliar
with Johnson’s claim and that he seemed oblivious to the fact
that Johnson had suffered a severe injury as a result of the car
accident.
In addition, the jury was allowed to consider the
training manual utilized to train Farm Bureau's claim adjusters.
The training manual proposes many techniques that are not only
categorically violative of dealing in good faith but are
otherwise utterly repugnant as a matter of public policy.
Farm Bureau defended its position by contending that
Johnson's counsel had “deviated from the normal practice [of his
profession] as far as negotiating or attempting to negotiate
toward a settlement of the underinsured motorist part of the
case,” presumably by failing to prepare and deliver a settlement
package.
witness).
(Deposition of Paul Hibberd, Farm Bureau’s expert
The company contended that this alleged failure on the
part of Johnson’s attorney resulted in Farm Bureau’s inability to
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adjust the claim fairly.
However, Terry Lester conceded that his
duties to investigate Johnson’s claim would have remained the
same regardless of when or whether she had retained counsel.
After hearing the evidence, the jury found that Farm
Bureau had been obligated to pay the claim; that the insurer had
lacked a reasonable basis in law and in fact for denying the
claim; and the company either knew that there was not a
reasonable basis for denying the claim or acted with reckless
disregard for whether such a basis existed.
See Wittmer v. State
Farm Mut. Auto. Ins. Co., Ky., 864 S.W.2d 885 (1993).
In
addition, the jury made specific factual findings to support six
violations of Kentucky’s Unfair Claims Settlement Practices Act.
The jury found that Farm Bureau:
had failed to acknowledge and
to act reasonably or promptly upon communication with respect to
claims; had summarily refused to pay Johnson's UIM claim without
first conducting a reasonable investigation; had failed to
attempt in good faith to effectuate a settlement; had compelled
Johnson to institute litigation by offering substantially less
than her policy limits; had attempted to settle for far less than
what its contract provisions set forth; and had failed to provide
an explanation for its offer of $10,000.00 in settlement.
As a
result, the jury awarded Johnson $30,000.00 in compensatory
damages; $1,000,000.00 in punitive damages; $16,666.00 in
attorney's fees; and $2,704.00 in costs.
Farm Bureau's post-
judgment motions were denied, and this appeal followed.
On appeal, Farm Bureau presents four issues for our
review.
The company argues that the trial court permitted
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Johnson’s expert witnesses to testify without first having laid a
proper evidentiary foundation; that it erroneously admitted
testimony regarding an unrelated claim against Farm Bureau; that
it gave an instruction that essentially directed the jury to find
that it had refused to pay Johnson’s claim; and finally, that the
trial court failed to conduct a proper due-process review of the
jury’s verdict.
We disagree with each of these assertions.
In
light of our resolution of the appeal, the issue regarding the
avowal testimony of Carol Becknell raised on Johnson's crossappeal need not be addressed by this opinion.
First, Farm Bureau contends that the trial court erred
by permitting the expert testimony of David Dunham.
Dunham
worked as an insurance adjuster for 15 years in Bowling Green,
Kentucky.
As a supervisor, he was responsible for 22 adjusters
in four states — including Kentucky.
Dunham testified that while
he had not adjusted claims in Lincoln County, he may have
supervised claims adjusted in adjoining Casey County.
When asked
to apply the claims-handling procedures outlined in Farm Bureau’s
training manual, Dunham indicated that Johnson’s claim was
clearly worth more than her underinsured motorists coverage
limits of $50,000.00, and that Farm Bureau had no reason to
refuse to pay the claim in full.
Citing Motorists Mut. Ins. Co. v. Glass, Ky., 996
S.W.2d 437 (1997), Farm Bureau contends that this expert
testimony lacked a sufficient foundation to support its
admissibility.
In Motorists Mut., the Kentucky Supreme Court
criticized the trial court’s admission of expert testimony
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presented by an insurance consultant from San Jose, California.
That consultant testified that Motorists Mutual and Farm Bureau
had acted in bad faith by failing to pay their policy limits
immediately.
However, the consultant admitted that he had no
knowledge concerning jury verdicts in the community where the
case was tried.
Instead, he derived his opinion from a computer
program that incorporated jury verdicts from all over the
country.
The court held that the admission of the consultant’s
testimony was in direct contravention of its holding in
Manchester Ins. & Indem. Co v. Grundy, Ky., 531 S.W.2d 493
(1975), cert. denied, 429 U.S. 821, 97 S.Ct. 70, 50 L.Ed.2d 82
(1976).
Grundy, 531 S.W.2d at 501, provided as follows:
We note that in the trial of this case the
two expert witnesses introduced by Grundy
testified as to what amount they would
consider the case worth for settlement
purposes. This is irrelevant. The test of
this factor is what in the opinion of the
expert a jury in the same community probably
would have awarded at the time of the trial
on liability.
(Emphasis added).
The application of KRE1 702, governing the admission of
expert testimony, is addressed to the sound discretion of the
trial court.
“A trial court’s ruling on the qualifications of an
expert should not be overturned unless the ruling is clearly
erroneous.”
Farmland Mut. Ins. Co. v. Johnson, Ky., 36 S.W.3d
368, 378 (2000).
Unlike the consultant described in Motorists
Mut., supra, David Dunham did not admit that he lacked a
familiarity with jury verdicts in the community where this case
1
Kentucky Rules of Evidence.
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was tried.
Moreover, Dunham did not base his expert opinion on
statistics gathered from around the country.
Instead, he relied
on his education, training, and experience and on Farm Bureau’s
own training manual to evaluate the claim.
He cited at least ten
factors from the company’s manual that would have required a
reasonable adjuster to place a high value on the claim.
The
trial court properly considered Dunham’s knowledge and
experience.
testimony.
There was no abuse of discretion in allowing his
Nevertheless, if even the testimony had been
erroneously admitted, such an arguable error could not have
formed a basis for reversal.
No objection was raised when
essentially the same expert testimony was introduced by Michael
McDonald2.
Therefore, any error with regard to the admission of
Dunham’s testimony was harmless.
Next, Farm Bureau contends that the trial court erred
by permitting Johnson to introduce testimony from Mable Raines
regarding her unrelated third-party claim against a Farm Bureau
insured.
Raines testified that Farm Bureau initially offered her
$14,000.00 to settle her personal injury claim against their
insured.
She indicated that Farm Bureau offered to settle the
claim for its $100,000.00 policy limits only after the case had
been presented to the jury.
Finally, she testified that the jury
awarded her more than $200,000.00.
Relying on Kentucky Farm
Bureau Mut. Ins. Co. v. Troxell, Ky., 959 S.W.2d 82 (1997), and
2
Michael McDonald (Judge Michael McDonald) had been a claims
adjuster for State Farm Insurance. He later served for many
years on the Kentucky Court of Appeals. Thus, he had great
familiarity with jury verdicts throughout Kentucky from his
unique experience.
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KRE 404(b), Farm Bureau contends that this testimony was
inadmissible.
KRE 404(b) prohibits the admission of evidence of other
crimes, wrongs, or acts for the purpose of proving the character
of a person (or a corporation in this case) in order to show
action in conformity therewith on particular occasion.
However,
the rule provides that such evidence may be admissible if offered
for some other purpose — such as proof of intent, knowledge, or
the absence of mistake or accident.
KRE 404(b)(1).
It is proper and permissible for a jury to consider
other insurance claims in a bad faith case.
In Troxell, the
Kentucky Supreme Court held that evidence introduced by the
plaintiff pertaining to similar litigation and involving a
particular adjuster was relevant and admissible in the trial of
the bad faith action.
The Court observed that the plaintiff’s
evidence had been offered to prove that Farm Bureau was aware
that the adjuster had previously used methods contrary to goodfaith claim handling practices and that Farm Bureau had knowledge
of and had acquiesced to a pattern of conduct practiced by its
agent.
The evidence offered by Raines involved the same
adjusters as those who were involved in Johnson’s claim; Terry
Lester also supervised the adjustment of Raines's claim.
Raines’s UIM case was tried in the same county, and Farm Bureau
was represented by the same defense counsel.
The evidence was
not introduced to show the Farm Bureau’s character in order to
prove action in “conformity therewith.”
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KRE 404(b).
Instead,
the evidence was relevant and admissible to show that Farm Bureau
was aware of the pattern and practice of its adjusters to fail to
evaluate claims fairly.
The evidence was also relevant and
admissible to show the absence of a mistake.
Farm Bureau
attempted to defend its position and to explain its conduct by
admitting that hindsight revealed that it had innocently misevaluated Johnson’s claim.
The disputed evidence of an all too
similar “mis-evaluation” was offered to discredit Farm Bureau’s
theory of hindsight and to support Johnson’s contention that the
failure to adjust her claim properly as its own insured was
rather an intentional ruse to swindle her.
The disputed evidence was also relevant and admissible
to establish the necessary factors to be considered by the jury
in considering whether to award punitive damages.
A plaintiff
must have evidence to warrant submitting a claim for punitive
damages.
KRS3 411.186(2)(c)(d) provides
Wittmer supra at 885.
that a jury may consider both the “profitability” and the
“duration” of the misconduct.
Additionally, KRS 411.186 allows a
jury to consider what actions — if any — that the defendant took
to remedy the misconduct.
Presenting evidence of other instances
of similar types of conduct demonstrated that Farm Bureau did not
merely inadvertently fail to settle Johnson’s claim fairly but
that it had done so intentionally, conduct resulting in a highly
profitable business incentive.
The evidence also evinced the
duration of the ongoing unfair claims settlement practices.
3
Kentucky Revised Statutes.
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Moreover, in order to award punitive damages, the jury
is entitled to consider whether the wrongful conduct was part of
a larger pattern of trickery, fraud, and deceit.
Jansen v.
American Nat'l Bank and Trust Co., Ky., 865 S.W.2d 302 (1993).
Johnson offered substantial evidence to show that Farm Bureau's
adjusters had been trained to disregard good-faith claims
handling practices.
Raines's testimony ably supported Johnson's
contention that the unreasonable handling of her claim was part
and parcel of Farm Bureau's systematic failure to abide by its
duty of good faith and fair dealing.
We are also persuaded that Raines's testimony was
admissible to refute Farm Bureau's contention that the claim
would have been handled differently if Johnson's counsel had
submitted a properly supported settlement package.
Farm Bureau's
expert witness, Paul Hibberd, testified that he prepared and
submitted settlement packages as a matter of routine.
However,
in an ironic twist, Hibberd also happened to have represented
Raines in her action against Farm Bureau.
As her testimony
indicated, Hibberd's preparation and submission of a settlement
package to Farm Bureau had done nothing to inspire good-faith
negotiations in that case.
The disputed evidence supported
Johnson's contention that her claim was improperly handled
because of the company’s deliberate refusal to conduct a proper
investigation in order to defraud her of the settlement to which
she was entitled.
Next, Farm Bureau contends that an interrogatory
included in the trial court's instructions improperly amounted to
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directing the jury to find that Farm Bureau had refused to pay
Johnson's claim, a contention that the insurer disputed.
first interrogatory submitted to the jury asked:
The
"Did Kentucky
Farm Bureau have a reasonable basis to refuse payment of Tina
Johnson's claim?"
While it was stipulated that Johnson had made a claim
under her policy, Farm Bureau argued to the jury that Johnson had
failed to put the claim in such a posture that would have
required it to pay or refuse to pay a claim.
It contended that
by failing to offer "reasonable proof of the fact and amount of
loss realized" pursuant to requirements of Kentucky's Motor
Vehicle Reparations Act (KRS 304.39-201(1)), Johnson had not
triggered Farm Bureau's duty to respond to her.
According to
Farm Bureau, the disputed instruction unfairly eliminated that
theory of its case.
We disagree.
We are not persuaded that the language of the disputed
interrogatory foreclosed a finding that Farm Bureau's obligation
to its insured had not been effectively triggered.
While Farm
Bureau contends otherwise, the language of the interrogatory
required the jury to consider and to evaluate its position evenhandedly and fairly.
It did not encourage the jury to dismiss
Farm Bureau's contention that Johnson had failed to document her
claim properly.
If the jury had been persuaded by Farm Bureau's
contention that its obligation to Johnson had never arisen, it
could have found that the insurer indeed had a reasonable basis
to refuse payment of her claim.
The interrogatory was broadly
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enough worded to allow for an appropriate response either way.
There was no reversible error.
Finally, Farm Bureau maintains that the jury's punitive
damage award did not comply with due process standards.
We
disagree.
Punitive damages may properly be imposed to further a
state’s legitimate interest in punishing unlawful conduct in
deterring its repetition.
BMW of North America, Inc. v. Gore,
517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809
(1996).
However,
a decision to punish a tortfeasor by the imposition of exemplary
damages is an exercise of power under color of state law that
must comply with the Due Process Clause of the Fourteenth
Amendment.
TXO Production Corp. v. Alliance Resources Corp., 509
U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993).
“The Due
Process Clause of its own force prohibits the states from
imposing “grossly excessive” punishment on tortfeasors.”
Cooper
Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424,
121 S.Ct. 1678, 1684, 149 L.Ed.2d 674
(2001).
Moreover,
appellate courts may not defer to trial courts on questions
regarding punitive damages.
Id.
We must review the amount and
nature of a punitive damages award de novo.
Inc., v. Ford Motor Co., Ky.
S.W.3d
Sand Hill Energy,
(May 16, 2002).
In BMW, supra, the United State Supreme Court held that
“[e]lementary notions of fairness . . . dictate that a person
receive fair notice not only of the conduct that will subject him
to punishment, but also of the severity of the penalty that a
State may impose.”
517 U.S. 559 at 574.
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Farm Bureau concedes
that Kentucky’s Unfair Claims Settlement Practices Act gave it
notice of the misconduct that might subject it to punishment.
However, it contends that it was not given sufficient notice of
the severity of the potential penalty.
We disagree.
In Leatherman, supra, the United State Supreme Court
reiterated its reliance on the three factors set forth in BMW,
supra, to be considered by appellate courts in undertaking de
novo review.
consider:
Leatherman at 1687.
In our analysis, we must
1) the degree of reprehensibility of the defendant’s
misconduct, 2) the disparity between the harm (or potential harm)
suffered by the plaintiff and the punitive damages awarded, and
3) the difference between the punitive damages awarded by the
jury and the civil penalties authorized or imposed in comparable
cases.
BMW at 574-575.
The BMW Court described the degree of reprehensibility
of the defendant’s conduct as “perhaps the most important
indicium of the reasonableness of a punitive damages award.”
U.S. 59 at 575.
517
As to the degree of reprehensibility of Farm
Bureau’s misconduct, we conclude that it was substantial indeed.
As the Kentucky Supreme Court observed in Curry v. Fireman’s Fund
Ins. Co., Ky., 784 S.W.2d 176, 178 (1989):
From cradle to grave individuals
willingly pay premiums to insurance companies
to obtain financial protection against
property and personal loss. Without a
reasonable means to assure prompt and
bargained-for compensation when disaster
strikes, the peace of mind bought and paid
for is illusory.
In light of the jury’s specific findings, there is no
doubt that Farm Bureau was motivated by self-interest, greed, or
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ill-will in the handling of Johnson’s UIM claim.
Farm Bureau
wholly ignored and outrageously undermined the well-being of its
insured in clear derogation of its contractual and statutory
duties.
Johnson’s peace of mind was illusory or even non-
existent.
Johnson had been a Farm Bureau policyholder for 17
years.
By sending advertisements to her, Farm Bureau endeavored
to assure that UIM coverage would prevent her from suffering
financially if she were ever injured by an irresponsible driver
and that Farm Bureau would help her to recover from any loss as
quickly as possible since “[h]elping you is what we do best.”
In stark contrast to these reassurances were the
devious realities of the adjusters’ training manual, which was
simultaneously inculcating and encouraging Farm Bureau’s
adjusters to plant uncertainty in the minds of claimants; to
“seize upon” any fear, anxiety, and money needs for settlement
purposes; to overreach and to take advantage of the delays
occasioned by litigation; and to cause intimidation by the fact
that Farm Bureau had a stronger base of power in any claims
situation because it controlled the money.
Because it was
obligated to remit Johnson’s PIP benefits, Farm Bureau was in a
position to evaluate its insured’s dwindling financial resources
and her mounting financial hardship.
Farm Bureau knew that she
was vulnerable — and to what an alarming degree.
Nevertheless,
according to the jury, it failed and refused to communicate with
her properly; to investigate and evaluate her claim reasonably;
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and to attempt in good faith to reach a fair settlement of her
claim.
Farm Bureau caused Johnson to suffer the very fate that
it promised she would avoid by purchasing its policy.
When her
physician advised her not to return to work, Johnson responded:
“Well it’s like this, I’ve got to go back to work [or] starve to
death. . . .”
Farm Bureau’s conduct was a text-book example of
the despicable behavior defined as the basis for an award of
punitive damages.
And, according to BMW, supra, “[i]nfliction of
economic injury, especially when done intentionally through
affirmative acts of misconduct . . . or when the target is
financially vulnerable, can warrant a substantial penalty.”
571
U.S. at 576.
In addition, multiple violations are considered even
more reprehensible.
Certainly, evidence that a defendant has
repeatedly engaged in prohibited conduct
while knowing or suspecting that it was
unlawful would provide relevant support for
an argument that strong medicine is required
to cure the defendant’s disrespect for the
law.
BMW, supra at 576-577.
At least four other juries have examined
Farm Bureau’s claims settlement practices and have concluded that
they were illegal.
supra.
See Motorists Mut. Ins. Co. supra ; Troxell,
Based upon our independent review of this case, we are
convinced that there is more than sufficient evidence in the
record with respect to the egregiousness of Farm Bureau’s
misconduct to support the punitive damages awarded under the
first BMW criterion.
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Nevertheless, the BMW Court provided the least amount
of guidance on the application of its second criterion, which
requires us to balance the size of the award against the degree
of the injury suffered.
We must consider the ratio between the
size of the punitive damage award and the harm “or potential
harm” that was or could have been caused by Farm Bureau’s
misconduct.
The Court has clearly indicated that there is no
bright-line test or mathematical formula to be applied in
upholding any particular ratio.
Higher ratios will be upheld
where the aggravating factors considered above are present.
The harm to Johnson arising from Farm Bureau’s conduct
was considerable.
She also urges us to consider the harm she
might have suffered if Farm Bureau had succeeded in its wrongful
conduct.
Johnson argues that if she had failed to resist or to
challenge Farm Bureau’s bad faith effort to settle her claim,4
she would have suffered an additional loss of more than
$40,000.00.
The jury found that Johnson suffered nearly
$50,000.00 in actual damages, coupled with Johnson’s calculations
of the potential harm that she was facing.
The ratio between the
award of punitive damages to her actual damages was eleven to
one.
While the United States Supreme Court has expressly
declined to set a fixed maximum ratio of punitive to actual
damages, it is helpful to note that a majority of the Kentucky
Supreme Court recently upheld an award of punitive damages
arguably more than fifteen times greater than the actual damages
4
To reiterate, the final offer of Farm Bureau was phrased as
follows: “[I]f it will help you any, I can probably get you
$10,000.00"
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as being consistent with due process standards.
supra.
See Sand Hill,
Based upon our independent review, we are satisfied and
convinced that there is sufficient evidence in the record with
respect to the actual harm and the potential harm caused by Farm
Bureau’s misconduct to support the punitive damages awarded.
The third factor to be considered is the difference
between the punitive damages awarded and the civil penalties
authorized or imposed in similar cases.
Farm Bureau argues that
Kentucky statutory penalties for misconduct of the type at issue
here do not authorize the award returned by the jury in this
case.
It also contends that previous jury verdicts failed to
provide it with adequate warning that it might be subjected to a
million-dollar penalty.
Farm Bureau is aware that Kentucky has a great interest
in its claims-handling practices.
Kentucky has enacted the
Unfair Claims Settlement Practices Act, it has designated a
Commissioner of Insurance to enforce the Act’s provisions, and it
has adopted numerous administrative regulations regarding unfair
claims settlement practices.
The Kentucky Supreme Court has
recognized a private cause of action for damages arising from a
violation of these provisions.
State Farm Mut. Auto. Ins. Co. v.
Reeder, Ky., 763 S.W.2d 116 (1988).
Farm Bureau is keenly aware that it risks substantial
civil penalties and fines when it engages in unfair claims
settlement practices.
Its license to sell insurance may even be
jeopardized by suspension or revocation for engaging in this sort
of misconduct.
It is also aware that Kentucky has not enacted
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statutory limits on the imposition of punitive damages and that
its courts have shown no particular reluctance or squeamishness
in upholding substantial punitive damage awards where the
evidence justified them.
See Sand Hill, supra.
In light of
these factors, Farm Bureau’s argument that it lacked adequate
notice of the potentially severe consequences of its misconduct
is simply lacking in credibility.
We hold that there was more
than sufficient evidence to support the jury’s punitive damage
award under the final criterion of the BMW factors.
The judgment of the Lincoln Circuit Court is affirmed.
ALL CONCUR.
BRIEF AND ORAL ARGUMENT FOR
APPELLANT/CROSS-APPELLEE:
BRIEF AND ORAL ARGUMENT FOR
APPELLEE/CROSS-APPELLANT:
Barry Miller
Lexington, Kentucky
M. Austin Mehr
Lexington, Kentucky
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