MARCH 2009 BAD FAITH CASE THIRD CIRCUIT REDUCES PUNITIVE DAMAGES AWARD TO 1:1 RATIO(Third Circuit)
In a non-precedential Third Circuit Opinion, Jurinko v. The Medical Protective Company, the case involved the assignment of a bad faith claims to the patients of the insured doctor. The case had gone to trial, and the insureds had obtained an excess verdict against the doctor for medical malpractice, and he assigned his claims against the carrier in lieu of making the excess payment. On the assigned claims against the insurer, the patients received a jury verdict of $1,658, 345 and punitive damages of $6,250,000. The trial court upheld the jury award, and then molded the verdict concerning attorney’s fees, costs and interest.
The case’s factual history reveals a story of settlement recommendations by judges, and the doctor’s own defense counsel (appointed by the carrier), that far exceeded anything the carrier was willing to pay toward settlement; and in fact, throughout the course of settlement discussions and recommendations, the carrier’s offer to contribute toward a settlement never rose above $50,000 (on a $200,000 policy), and where the insured’s potential exposure was evaluated by the judges and/or defense counsel at numbers between $750,000 and $2,000,000. The doctor himself had wanted to settle.
Astonishingly, the carrier’s own adjuster testified that he acted unreasonably and irresponsibly in settlement negotiations” and that he denied the doctor an effective defense by appointing the same lawyer to represent that doctor, and a co-defendant doctor (against whom plaintiffs asserted crossclaims should have been asserted, but could not be because of a conflict). Counsel denied that the purported conflict had any real effect, as there eventually was separate counsel and he could argue reliance on the other doctor at trial.
The bad faith aspect of the claim is discussed elsewhere on this site.
On the issue of punitive damages, the court first found that the insurer’s conduct was sufficiently outrageous to support the jury’s conclusion of outrageous conduct warranting punitive damages. Next, the Court conducted a constitutional analysis of the punitive damage award, following the U.S. Supreme Court’s three guideposts in State Farm v. Campbell of the “(1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the [factfinder] and the civil penalties authorized or imposed in comparable cases.”
Reprehensibility is measured “by considering whether the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident.” There was no issue of physical harm or health issues. There was evidence of the insured doctor’s financial vulnerability, and recidivist behavior solely by reference to repeated bad conduct in the case at hand, which has less force than if the recidivism involves other parties, and only amounted to minimal evidence of reprehensibility. The conduct was intentional.
In evaluating the punitive damages ratio compared to compensatory damages, the Court measured it as 3.13:1 and not over 6:1, because it included attorneys’ fees and costs into the compensatory damage number. It looked to the U.S. Supreme Court principles that the ratio should seldom be more than single digits, that an award beyond 4:1 may push the limit and a substantial compensatory damage award reduces the need for a higher punitive damage award, where a matching sum may reach the constitutional limit. The Court then cited a series of cases with substantial compensatory damage awards where the 1:1 ratio was found most appropriate, and found that the guideposts favored a reduced award. Finally, the relevant civil penalties under the Unfair Insurance Practices Act also militated against the size of the award. It reduced the punitives award to a 1:1 ratio.