November 6, 2016

Court of Appeal issues slightly modified opinion in long-running insurance bad faith case (Nickerson v. Stonebridge)

A few days ago the California Court of Appeal published what may be the final chapter in the lengthy saga involving a $19 million punitive damages award in an insurance bad faith case.

We have discussed this case at length in prior posts (see the links below).  I don't want to rehash all of that, but here's a brief recap:

  • A jury awarded $19 million in punitive damages and $35,000 in compensatory damages against an insurer.  After the verdict, the trial court tacked on an additional $12,500 in damages to compensate the insured for the legal fees he incurred to obtain his wrongfully withheld policy benefits (Brandt fees). 
  • The trial court decided the punitive damages were excessive and ordered a new trial unless the plaintiff accepted a reduction of the punitive damages to $350,000, ten times the compensatory damages awarded by the jury.
  • The Court of Appeal (Second Appellate District, Division Three) affirmed.  In the process, it said the trial court properly excluded the $12,500 in Brandt fees from the ratio calculations.  The Court of Appeal reasoned that punitive damages award could not be based on a multiplier of the Brandt fees because the jury did not know about the Brandt fees when it made the initial punitive damages award.
  • The Supreme Court disagreed, and held that the Brandt fees should have been included as part of the compensatory damages for ratio purposes.  Instead of modifying the judgment itself, the Supreme Court sent the case back to the Court of Appeal for further proceedings.
That brings us to this week.  The Court of Appeal's new published opinion is nearly identical to its prior decision.  The court simply deleted the prior discussion of the Brandt fee issue, and inserted a summary of the Supreme Court's decision.  The court then added the Brandt fees onto the jury's compensatory damages award, for a total of $47,500 in compensatory damages.  Keeping the same 10-to-1 ratio as in the previous decision, the Court of Appeal concluded that the final punitive damages award should be $475,000.

That's a lot of litigation over $175,000.

P.S.  Two of the justices involved in the original decision were not part of the panel for new opinion.  Justice Croskey died while the case was pending before the Supreme Court, and Justice Klein retired.  Justice Croskey had dissented from the original opinion, taking the view that punitive damages should never have been awarded in this case.  But there is no dissent this time around.  The new decision is unanimous.

Related posts:

California Supreme Court rules for plaintiff in dispute over ratio calculations in insurance bad faith cases (Nickerson v. Stonebridge)

California Supreme Court limits issues for review in Nickerson v. Stonebridge

California Supreme Court grants review in Nickerson v. Stonebridge

Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) - PART II

 Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) - PART I

L.A. trial court reduces punitive damages award against Stonebridge insurance from $19 million to $350,000

L.A. jury awards $19 million in punitive damages and $35,000 in compensatory damages in insurance bad faith case