A case about the allowable extent of punitive damages.

Metropolitan, Nardelli’s auto insurer, refused to total his damaged car, instead paying him for repairs. He sued for bad faith; the jury awarded $155,000 compensatory damage and $55 million in punitives. The trial court reduced the punitive award to 4:1, viz., $620,000. Metropolitan appealed liability and damages.

About two-thirds of this 61-page opinion rehashes the facts to conclude that there was enough evidence to send bad-faith and punitive damages to the jury. Punitives were apparently based on a company policy of being hard on claims to boost profits and adjuster’s incomes.

But the Court of Appeals reduces the punitive award to 1:1 – $155,000.  It analyzes the factors (“guideposts” is the current euphemism; even the courts are beginning to feel guilty about factors) from the U.S. Supreme Court case of State Farm v. Campbell.

“Reprehensibility” is the first one; the court feels that Metropolitans’ conduct on that score was “low to . . . middle range.” 

The ratio is the second factor (oops, sorry; “guidepost”). This court had said in Pope (2008) that 4:1 was close to the constitutional line. But this opinion says that this evidence doesn’t support even that, for reasons the court does not really explain. The fact that compensatory damages were “substantial” ($155,000 for the repair/replacement of a $35,000 Ford Explorer) had something to do with it. 

The third guidepost is the difference between the punitive award and analogous civil penalties. Unfair claims settlement practice penalties are capped at $50,000 every six months. The court then says that other cases that awarded big punitives aren’t like this one. What that has to do with this factor guidepost isn’t clear.

The dissent argues that punitives shouldn’t have gone to the jury since Metropolitan’s actions, though not good, were not malicious or outrageous. Judge Swann basically makes the points that profit motive is not evil and that you shouldn’t turn every repair-or-replace argument into a punitive case.

The majority sheds some crocodile tears over the stress of being a “gatekeeper.” But why don’t we tell the truth? On punitives an appellate court is not just the gatekeeper but the judge, jury, and executioner. Normal judges, juries, and even executioners can live with themselves because they act under the dictates and constraints of a system of law. The stress, if these folks really feel any, comes from knowing that you’re doing these things based on nothing but “factors” some court has pulled out of thin air and that you’re using to justify your emotions about the case.

(link to opinion)