Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Posts tagged "punitive damages"

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.

A 10-to-1 RATIO OF COMPENSATORY DAMAGES TO PUNITIVE DAMAGES WAS RECENTLY PERMITTED BY THE CALIFORNIA COURT OF APPEALS IN AN INSURANCE BAD FAITH CASE

The California court of appeals in Nickerson v. Stonebridge Insurance Co. 5 Cal App, 5th 1,209 Cal Rptr. 3d 690 (2d Dist., November 3, 2016) recently found that the Court was constrained by case law in California and the California constitution from allowing a punitive damage award to be more than 10 times greater than the compensatory damage award. In calculating the compensatory damage award within the ratios denominator, the trail court properly excluded and the court of appeals held that it was proper to excluded contract damages and potential damages to others from the equation. However, the court found that the award of attorney fees in favor of the insured and compelling the insurer to pay contract benefits (so called Brandt fees) should be included in the ratios denominator.

THE CALIFORNIA COURT OF APPEALS FINDS THAT A 10:1 RATIO OF COMPENSATORY DAMAGES TO PUNITIVE DAMAGES IS APPROPRIATE IN AN INSURANCE BAD FAITH CASE AND THAT THE RATIO SHOULD BE NO HIGHER

In Nickerson v. Stonebridge Life Ins. Co., 5 Cal.App.5th 1, 209 Cal.Rptr.3d 690 (2nd Dist. 2016), the California Court of Appeals recently reduced a $19M punitive damages award in an insurance bad faith case to $475,000 applying a 10:1 ratio of compensatory damages to punitive damages.

The California Supreme Court Finds That In Determining Whether A Punitive Damage Award Is Unconstitutionally Excessive, The Court Could Take Into Consideration As The Compensatory Damage Component In An Insurance Bad Faith Case The Award Of Attorney's Fee

In a well-reasoned decision, the California Supreme Court held in Nickerson v. Stonebridge Life Ins. Co., 63 Cal.4th 363, 203 Cal.Rptr.3d 23, 371 P.3d 242, (2016), that a trial court could give consideration to an award of attorney's fees in favor of the insured, in a bad faith action, in calculating the constitutionally permissible ratio of compensatory damages to punitive damages in insurance bad faith cases. In question was the award of attorney's fees in favor of the insured under Brandt v. Superior Court, 37 Cal.3d 813, 210 Cal.Rptr. 211, 693 P.2d 796 (1985).

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