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September 2017 Archives

California Court of Appeals Fixes Punitive Damage Ratio and Bad Faith Cases

Historically the United States Supreme Court has admonished trial courts with the high court's observation that "few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." State Farm Mut Automobile Ins. Co. v. Campbell, 538 U.S. 408, 424 (2003). The California Supreme Court has taken a different view of what the proper ratio of punitive to compensatory damages should be. In Simon v. Sao Paolo U.S. Holding, Inc.. 35 Cal. 4th 1159 (2005) the California Supreme Court upheld a ten-to-one ratio. The California Supreme Court observed that the one-to-one ratio of the Campbell decision would not be applied, with the court suggesting that a ratio of nine or ten-to-one would be the point in California where a punitive damage award became constitutionally suspect and required special justification. Simon, 35 Cal. 4th at 1182.

MISSOURI HIGH COURT CALCULATES UIM ATTACHMENT POINT

The Missouri Supreme Court in Swadley v. Shelter Mutual Insurance Co., 513 S.W.3d 355 (Mo. 2017) held that UIM coverage did not apply when the underinsured motorist had liability coverage limits greater than the insured's underinsured motorist limits. Previously, the Missouri Court of Appeals had explained the purpose of UIM coverage. "The purpose of underinsured motorist coverage is to provide insurance coverage for insureds who have been bodily injured by a negligent motorist whose own automobile liability insurance coverage is insufficient to pay for the injured person's actual damages." Wasson v. Shelter Mutual Insurance Co., 358 S.W. 3d 113, 117 (Mo. App. 2011).

MISSISSIPPI SUPREME COURT FINDS THAT LOSS OF CONSORTIUM CLAIMS ARE PART OF THE PER PERSON LIMITS FOR UIM COVERAGE

The Mississippi Supreme Court in Rylee v. Progressive Gulf Insurance Co., 2017 WL 949545 (Miss. Mar. 9, 2017) found that a UIM policy's "each person" limit applied not only to a husband's bodily injury claim, but also to the wife's loss of consortium claim, i.e., loss of consortium claims are part of the "each person" limit and are not afforded a separate "each person" limit. The court noted that on two separate prior occasions, the court had interpreted similar policy language and reached the same conclusion that to recover more than the "each person" limit for one person, there must be more than one person who sustained bodily injury during the accident. Citing State Farm Mutual Auto Insurance Co. v. Acosta, 479 S.2d 1089, 1090‑91 (1985) and Old Sec. Cas. Insurance v. Clemmer, 455 S.2d 781, 782 (Miss. 1984). Because the wife in the case at bar was not with her husband during the crash, her husband was the only person who sustained bodily injury in the accident. Therefore, the wife's loss of consortium claim fell under the "each person" policy limit available to the husband. The court also noted that the 5th Circuit Court of Appeals relied upon the Acosta decision when it rejected a similar claim. See, Reed v. State Farm Mutual Insurance, 784 F.2d 577, 578-79 (5th Cir. 1986).

CALIFORNIA COURT OF APPEALS DECIDES WHAT "FINAL ADJUDICATION" MEANS IN THE D&O INSURANCE CONTEXT

The California Court of Appeals (2nd District) in Stein v. Axis Insurance Co., 10 Cal. App. 5th, 673, 216 Cal.Rptr.3d 804 (2nd Dist. 2017) held that a provision in a D&O policy requiring the insured to repay defense expenses unless there was a "final adjudication" determining that the insured committed willful misconduct did not eliminate coverage for defense expenses incurred during the insured's appeal of the criminal fraud conviction.

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