Case Title: Farmers Ins. Exchange v. Shirley

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1998-05-08T00:00:00Z

Document:
Farmers Ins. Exchange v. Shirley1998 WY 63958 P.2d 1040Case Number: 94-166Decided: 05/08/1998Supreme Court of Wyoming

FARMERS 
INSURANCE EXCHANGE, Appellant (Defendant),

v.

Barbara SHIRLEY and Darol Shirley, 
Appellees (Plaintiffs).

 

Appeal from the District Court, Ninth 
Judicial District, County of Teton, Terry Rogers, 
J.

 

 * Justice Lehman would have granted the 
rehearing.

 

John A. Sundahl and George 
E. Powers, Jr.(argued), of Sundahl, Powers, Kapp & Martin, Cheyenne, for 
Appellant.

P. Richard Meyer (argued) 
and Robert N. Williams of Meyer & Williams, P.C., Jackson, for 
Appellees.

 

Before TAYLOR, C.J., and THOMAS, MACY, GOLDEN,** and 
LEHMAN, JJ.

 

** Chief Justice at the time 
of oral argument.

 

THOMAS, 
Justice.

 [¶1] In this case we analyze our jurisprudential 
rules relating to punitive damages in light of the due process requirements set 
forth in BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S. Ct. 1589, 134 L. Ed. 2d 809 (1996). The jury awarded compensatory damages to Barbara Shirley and 
Darol Shirley (the Shirleys) in the aggregate amount of $6,400 for the tort of 
breach of the duty of good faith and fair dealing by Farmers Insurance Exchange 
(Farmers). The dispositive issue under the law of our state is whether the 
Shirleys proved they suffered substantial other economic damages in addition to 
emotional distress to satisfy the damage element of their cause of action for 
first-party bad faith. State Farm Mut. Auto. Ins. Co. v. Shrader, 882 P.2d 813 
(Wyo. 1994). Other issues encompass instructional error on the part of the 
district court in permitting the jury to consider a standard other than 
intentional misconduct; the failure to grant a judgment as a matter of law 
because of insufficiency of evidence to justify a finding of bad faith; the 
disparate amount of punitive damages as compared to compensatory damages; the 
insufficiency of the evidence to justify punitive damages; and a claim of abuse 
of discretion in excluding the testimony of a rebuttal witness offered by 
Farmers. We hold the evidence of recoverable economic damages was not sufficient 
to support a verdict finding a breach of the duty of good faith and fair 
dealing. We conclude that, analyzed from the perspective of federal due process, 
our procedure for awarding punitive damages and reviewing such awards is 
constitutionally infirm. Because we remand for a new trial, we offer guidance 
for submission of the issue of punitive damages to the jury based upon the 
direction provided by the Supreme Court of the United States. We also hold the 
jury instructions given by the district court regarding first-party bad faith do 
not comport with Wyoming law; were prejudicially misleading for the jury; and 
did not afford due process of law to Farmers. Further, the amount awarded as 
punitive damages was not reasonably related to the compensatory damages awarded 
at trial. There was, however, no abuse of discretion by the trial judge in 
refusing to allow the rebuttal witness to testify. The case is reversed and 
remanded for further proceedings in accordance with this 
opinion.

 

[¶2] The issues as Farmers 
states them in its Brief of Appellant are:

 

I. 
Did the District Court commit error when it submitted the case to the jury on 
the basis of instructions, which transformed the intentional tort of bad faith 
into a mere negligence action?

 

II. Did the District Court commit error when it 
overruled Defendant's Motion for Judgment as a Matter of Law despite 
uncontradicted and unimpeached evidence that Farmers Insurance Exchange, its 
agents and its employees never undertook any conscious or deliberate action 
intended to delay or avoid payment of Mrs. Shirley's claim for medical payments 
coverage?

 

III. Did the District Court commit error when it 
overruled Defendant's Motion for Judgment as a Matter of Law, or in the 
alternative, for New Trial and/or Remittitur, thereby permitting the jury's 
award of punitive damages to stand, despite the absence of any evidence to 
support a finding of willful or wanton misconduct and despite the absence of any 
reasonable relationship between the amount of actual compensatory damages 
awarded and the amount of punitive damages awarded?

 

IV. Did the District Court commit error when it 
refused to allow Defendant the opportunity to call an impeachment witness to 
refute Plaintiffs' trial testimony which directly contradicted Plaintiffs' sworn 
deposition testimony?

 

[¶3] In a Supplemental Brief 
of Appellant, Farmers asserts this additional issue:

 

[V]. Did the District Court commit error, when it 
failed to instruct the jury that in a case based upon an alleged violation of 
the covenant of good faith and fair dealing the Plaintiff can only recover 
emotional distress damages where there is evidence of substantial other 
injury?

 

[¶4] The issues articulated 
by the Shirleys in the Response Brief of Appellees are:

 

1. Was it error for the jury to find a bad faith 
breach of an insurance contract in this case, where the jury was properly 
instructed on this subject?

 

2. Where the jury awarded punitive damages under 
instructions which required a finding that "defendant must not only 
intentionally have breached his duty of good faith, but in addition must [be] 
guilty of oppression, fraud, or malice", does this finding make moot Defendant's 
contentions that the bad faith instructions did not set a sufficiently stringent 
standard for bad faith conduct?

 

3. Was a punitive damage instruction appropriate, 
where Defendant repeatedly failed to make timely payment of med pay claims of 
many of its insureds until complaints were made, continually threw away medical 
bills to avoid application of Wyoming's 45 day payment rule, and made a 
conscious decision to save money by not correcting these 
problems?

 

4. Where Defendant did not object to the punitive 
damage instructions or offer additional instructions, has it waived its right to 
contend that the jury was not properly instructed on the issue of punitive 
damages?

 

5. Has Defendant established that the District Court 
abused its discretion when it denied its motion to set aside or reduce punitive 
damages?

 

6. Did Plaintiffs sustain "substantial other damages" 
sufficient to sustain an award for emotional damages, where Plaintiffs, who were 
already in a physically debilitated condition, were subjected to threats of 
creditors, inconvenience, the need to retain counsel, a lawsuit, and who 
demonstrated outward symptoms of, and sought medical treatment for, such 
emotional distress[?]

 

7. Has Defendant established that the District Court 
abused its discretion, when it prohibited it from calling a non-listed witness 
to testify?

 

[¶5] We begin by reviewing 
the demands of due process of law the Supreme Court of the United States has 
inscribed upon the law of punitive damages. In BMW the Supreme Court capped a 
series of cases addressing punitive damages by holding that the award of 
punitive damages was grossly excessive and went beyond the constitutional limit 
imposed by the due process clause of the Constitution of the United States. The 
history of the treatment of this issue by the Supreme Court of the United States 
must be perceived as somewhat tortured, but in BMW the court articulated a 
majority opinion that permitted Justice O'Connor to shift from her previous 
dissenting positions and join in the majority opinion, while also joining in the 
concurring opinion authored by Justice Breyer.  The court not only has articulated a 
demand for objective standards as distinguished from subjective standards for 
awarding punitive damages, but it has signaled a future requirement that for due 
process to be present those objective standards should be given to the jury in 
the form of instructions. If the objective standards are not communicated to the 
jury, then the invocation of such standards only for the purposes of review 
would infringe upon the right of the parties to a jury 
trial.

 

[¶6] BMW builds upon the 
decisions of the Supreme Court of the United States in Pacific Mut. Life Ins. 
Co. v. Haslip, 499 U.S. 1, 111 S. Ct. 1032, 113 L. Ed. 2d 1 (1991), and TXO 
Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S. Ct. 2711, 125 L. Ed. 2d 366 (1993). The majority in BMW recognizes that punitive damages may be 
imposed to further the legitimate interests of any state in punishing unlawful 
conduct and deterring its repetition. The primary role of the states in the 
articulation of state policy is acknowledged, and indeed the split between the 
dissenting faction of the court and the majority is simply over the appropriate 
stance of responsible federalism. The key to the majority position is found in 
its statement, "[e]lementary notions of fairness enshrined in our constitutional 
jurisprudence dictate that a person receive fair notice not only of the conduct 
that will subject him to punishment but also of the severity of the penalty that 
a State may impose." BMW, 517 U.S.  at 574, 116 S. Ct. 1589 (footnote omitted). 
The court then invokes three guide posts each of which is said to demonstrate 
that BMW did not receive adequate notice of the magnitude of the sanction that 
might be imposed, resulting in the court's conclusion that the award of punitive 
damages against BMW was grossly excessive.

 

[¶7] Those three guide posts 
are the degree of reprehensibility; the disparity between the harm or potential 
harm suffered and the award of punitive damages; and the difference between 
punitive damages and the civil penalties authorized or imposed in comparable 
cases. The court alluded to the application by the Supreme Court of Alabama of 
the factors articulated in Green Oil Co. v. Hornsby, 539 So. 2d 218, 223-24 (Ala. 
1989), which had been approved by the Supreme Court of the United States in 
Haslip, 499 U.S.  at 21-22, 111 S. Ct. 1032. While apparently not intended to be 
exclusive, the seven factors adopted from the concurring opinion of Justice 
Houston, in Aetna Life Ins. Co. v. Lavoie, 505 So. 2d 1050, 1062 (Ala. 1987), 
are:

 

"(1) Punitive damages should bear a reasonable 
relationship to the harm that is likely to occur from the defendant's conduct as 
well as to the harm that actually has occurred. If the actual or likely harm is 
slight, the damages should be relatively small. If grievous, the damages should 
be much greater.

 

"(2) The degree of reprehensibility of the 
defendant's conduct should be considered. The duration of this conduct, the 
degree of the defendant's awareness of any hazard which his conduct has caused 
or is likely to cause, and any concealment or "cover-up" of that hazard, and the 
existence and frequency of similar past conduct should all be relevant in 
determining this degree of reprehensibility.

 

"(3) If the wrongful conduct was profitable to the 
defendant, the punitive damages should remove the profit and should be in excess 
of the profit, so that the defendant recognizes a loss.

 

          
"(4) The financial position of the defendant would be 
relevant.

 

"(5) All the costs of litigation should be included, 
so as to encourage plaintiffs to bring wrongdoers to 
trial.

 

"(6) If criminal sanctions have been imposed on the 
defendant for his conduct, this should be taken into account in mitigation of 
the punitive damages award.

 

"(7) If there have been other civil actions against 
the same defendant, based on the same conduct, this should be taken into account 
in mitigation of the punitive damages award."

 

Green Oil, 539 So. 2d  at 223-24.

 

[¶8] The history of punitive 
damages in our jurisdiction demonstrates that juries are given only very general 
instructions with respect to their determination of punitive damages.1 After BMW, our jurisprudential 
approach in Wyoming would not pass muster before the Supreme Court of the United 
States in an instance such as this in which the punitive damage award is 234.375 
times the actual damage award. "When the ratio is a breathtaking 500 to 1, 
however, the award must surely 'raise a suspicious judicial eyebrow.' TXO, 509 
U.S., at 482, 113 S. Ct. 2711, 125 L. Ed. 2d 366 (O'CONNER, J., dissenting)." BMW, 
517 U.S.  at 583, 116 S. Ct. 1589. The Supreme Court would find the ratio in this 
case equally breathtaking, and our standards of review are totally subjective.2

 

[¶9] BMW demands that we 
articulate objective standards for the imposition of punitive damages that can 
be communicated to the jury in the form of instructions and against which the 
imposition of the punitive award can be weighed in the process of judicial 
review.  Otherwise we hazard 
litigants in our courts to future reversal by the Supreme Court of the United 
States because of the denial of due 
process of law resulting from the 
application of our current process.

 

[¶10] With this concept 
before us, we turn to this case. Barbara Shirley was involved in an automobile 
accident on October 9, 1989. At the time of the accident, the Shirleys were 
insured under an automobile insurance policy issued by Farmers. This is the 
second time the case has been before this Court. In State ex rel. Farmers Ins. 
Exchange v. District Court of Ninth Judicial Dist., County of Teton, 844 P.2d 1099 (Wyo. 1993), we disposed of the claim by the Shirleys that they had a right 
to recover against Farmers based upon the uninsured or underinsured motorist 
language in the Farmer's policy. This record is silent as to any impact that the 
pending claim for uninsured or underinsured motorist coverage may have had upon 
the claim for medical payments. We do know that Farmers was obligated under the 
terms of the policy to pay for medical bills resulting from the accident up to 
$5,000.

 

[¶11] The accident was 
caused by another car which pulled out in front of Barbara Shirley, and she hit 
it. The collision occurred without fault on the part of Barbara Shirley, and she 
ultimately obtained a settlement from the other driver. As a result of the 
accident, she suffered injuries to her back and head, and she was hospitalized. 
The head injuries affected her memory and her ability to smell and to taste. She 
also suffered many symptoms of anxiety, including loss of sleep, fear of riding 
in a car, fear of staying home or being alone; and headaches. She sought and 
obtained both counseling and medical treatment for these symptoms, and she was 
on heavy medication.

 

[¶12] When the Farmers' 
agent in Jackson learned of the accident, he suggested to the Shirleys that, if 
they wanted to submit a claim under their medical coverage provision, they could 
furnish medical bills to him, and he would forward them to the Cheyenne branch 
claims office. Ultimately, the medical bills incurred by Barbara Shirley 
exceeded the $5,000 limitation on coverage. Barbara Shirley testified that she 
or her husband first began to take bills to the office of the Farmer's agent in 
December of 1989 or January of 1990.  
Farmers did open a claims file for Barbara Shirley on January 24, 1990. 
The Shirleys continued to take medical bills to the insurance agent until 
February of 1990. After that, the Shirleys began to rely upon their attorney to 
handle the processing of their claims for medical payments under their insurance 
policy.

 

[¶13] This was the same 
attorney who was representing the Shirleys in their action against the other 
driver. He called the Farmers' agent some two or three times prior to February 
15, 1990 to find out what was happening with respect to the medical payments 
claim. The agent advised that he had sent the bills to the branch office in 
Cheyenne. The medical bills received by the Shirleys after the end of February, 
1990, were delivered to their attorney because no payments for the medical 
coverage had been received in response to furnishing the bills to the Farmers' 
agent. The attorney and his secretary testified that the Shirleys became notably 
very angry and disillusioned because they were unable to pay medical bills and 
were worried about their credit rating.

 

[¶14] The attorney and his 
secretary also testified that, on January 29, February 20, and February 27 of 
1990, they sent medical bills to an adjuster for Farmers in a different 
community. Early in April, the attorney copied all the medical bills in his 
possession and gave them to the Shirleys to take to the agent in Jackson. On 
April 23, 1990, the agent called the branch office to advise that the claim 
exceeded the policy limits. On April 26, 1990, the attorney again had all the 
medical bills in his possession copied and mailed to the agent. During this 
time, the emotional strain on the Shirleys was evident, and their demeanor was 
worsening. On July 23, 1990, the attorney copied and, for the last time, sent 
all the medical bills in his possession to the Farmers' 
agent.

 

[¶15] On August 1, 1990, the 
agent left a message for the Shirleys' attorney stating that Farmers had sent a 
check to Barbara Shirley.  On August 
9, the attorney wrote a letter to the branch office endeavoring to confirm that 
payment was being made. On August 13, 1990, the attorney sent a letter to the 
agent stating that the Shirleys had not received the check. On August 17, 1990, 
the Shirleys filed an action to recover the medical benefits under the policy 
and for breach by Farmers of its duty of good faith and fair dealing. The 
Shirleys cashed a check for $5,000 from 
Farmers on August 21, 1990.

 

[¶16] At trial, an 
ex-employee of Farmers testified that Farmers office staff continually threw 
away medical bills to avoid application of Wyoming's 45-day payment rule. She 
had no knowledge of that actually happening with respect to the Shirleys' bills, 
but she asserted that it was a common practice instigated by the claims clerical 
supervisor.

 

[¶17] Following a jury 
trial, the jury returned a verdict finding that Farmers had breached the 
covenant of good faith and fair dealing with the Shirleys and had violated the 
provisions of WYO. STAT. § 26-15-124 (1991), resulting in liability for 
attorney's fees and interest.  The 
jury also found that Farmers was subject to punitive damages. The jury awarded 
attorney's fees in the amount $2,000 and damages in the amount of $1,400 to 
Barbara Shirley and $5,000 to Darol Shirley. In a separate verdict, the jury 
imposed punitive damages against Farmers in the amount of $1,500,000. Farmers 
has appealed from the Judgment on Jury Verdict entered on March 7, 
1994.

 

[¶18] We turn first to the 
dispositive issue, whether the Shirleys established the damage element of their 
claim for breach of the implied covenant of good faith and fair dealing. Farmers 
raised this issue by virtue of its supplemental brief relying upon our decision 
in Shrader. We there said:

 

We 
hold the scope of available compensatory damages for a breach of the duty of 
good faith and fair dealing includes damages for harm to pecuniary interests and 
emotional distress. Crisci [v. Security Ins. Co. of New Haven, Conn., 66 Cal. 2d 425] 58 Cal.Rptr. [13,] at 19, 426 P.2d [173,] at 179 [(1967)]. There is a 
limitation, however, upon the recovery of damages for emotional distress for a 
breach of this duty. Gruenberg [v. Aetna Ins. Co., 9 Cal. 3d 566], 108 Cal.Rptr. 
[480,] at 489, 510 P.2d [1032,] at 1041 [(1973)]; Anderson [v. Continental Ins. 
Co., 85 Wis.2d 675], 271 N.W.2d [368,] at 378 [(1978)]. We agree with the 
court in Gruenberg, that to recover damages for emotional distress, the insured 
must allege that as a result of the breach of the duty of good faith and fair 
dealing, the insured has suffered substantial other damages, such as economic 
loss, in addition to the emotional distress. Gruenberg, 108 Cal. Rptr.  at 
489, 510 P.2d  at 1041. See Restatement (Second) of Torts, supra, at § 905 cmt. 
c. The economic losses may include loss of earnings, inability to pay creditors, 
loss of business, costs of litigation brought against the insured as a result of 
the breach and medical expenses. Gruenberg, 108 Cal. Rptr.  at 489-90, 510 P.2d  
at 1041-42. This limitation is imposed to prevent fictitious claims for 
emotional distress and preserve judicial resources. Crisci, 58 Cal. Rptr.  at 19, 
426 P.2d  at 179.

 

[¶19] The Shraders alleged 
substantial damages for loss of earnings as a part of their cause of action for 
breach of the duty of good faith and fair dealing. Therefore, the jury was 
entitled to receive evidence of damages for emotional distress. We do not find 
prejudicial error in the giving of Instruction No. 31.

 

Shrader, 882 P.2d  at 833-34 
(emphasis added).

 

[¶20] Our opinion in Shrader 
was filed after this case had been tried. In the amended complaint, the Shirleys 
arguably allege economic loss in that they allege "plaintiffs' credit has been 
damaged * * *" and "[d]amage to credit and credit reputation of the plaintiffs * 
* *."  They also allege damages for 
emotional distress. Farmers contends, however, that the Shirleys did not 
demonstrate "substantial other damages" aside from emotional distress. Shrader 
was decided upon the pleadings, as was Gruenberg, but, if a plaintiff must 
allege "substantial other damages, such as economic loss," it is essential to 
prove those damages at trial.

 

[¶21] The record discloses 
the following colloquy between counsel and Barbara 
Shirley:

 

Q. 
Have you had any problems in terms of getting credit which you attribute to your 
failure to pay the medical bills on time?

 

          
A. Have I applied for credit?

 

          
Q. At any time and been denied?

 

          
A. Yes.

 

          Q. When was 
that?

 

A. I want to say December of '91. I applied for a JC 
Pennys credit card. I was denied. And also a Broadway card which is a store in 
California. A department store.

 

          
Q. Were you given any reasons for your denials?

 

         
 A. They told me 
-

 

          
* * * * * *

 

Q. 
Without asking you to relate any conversations, do you believe that those 
denials were related to your failure to pay these hospital bills on 
time?

 

[Counsel for Farmers]: Objected to as speculative. 
And also, Your Honor, this does still bring up the other point. There was a 
specific request for any documents that they might have to evidence any type of 
loss of credit or damage of credit.

 

Q. Let me ask that question, Your 
Honor. Do you have any documents that reflect the denial of those?

 

A. Yes. I might still have the 
letters. I'm not sure if I do but I might have them.

 

[¶22] On cross-examination about economic damages Barbara 
Shirley testified:

 

Q. All right. Can I move past 
that now to another segment of issues on damage? Did you ever suffer any loss of 
income because of anything that Farmers did or failed to do?

 

          
A. No.

 

Q. Did you suffer any economic 
loss or financial loss because of anything that Farmers did or failed to do?

 

          
A. Could you repeat that?

 

Q. Yeah. Did you ever suffer any 
financial or economic loss because of what Farmers did or failed to do?

 

          
A. Financially?

 

          
Q. Financial loss, yes.

 

A. Sure. Because I had to take 
money we didn't have and pay some of the bills so they wouldn't go into 
collection. I couldn't do it to all of them but I did do to some of them.

 

Q. 
Weren't you able to work everything out with all the health care providers for 
arranging for payment or holding them off until you got the money from the 
Cleveland settlement?

 

          
A. Not from all of them, no.

 

Q. All right. Well, there was 
actually one outfit that ultimately did file a lawsuit against you; isn't that 
right?

 

          
A. No, I want to say there's two. I'm just trying to remember. I'm not 
sure.

 

Q. We know that in October of 
1990, the radiologist here in Jackson filed a suit for about $565.00; do you 
recall that?

 

          
A. That's right.

 

Q. And you immediately went in 
and worked out a payment schedule with them?

 

          
A. Yes.

 

          
Q. Did you need the services of any lawyer to do that?

 

          
A. No.

 

Q. Was there any other person 
that ever filed suit against you because of any financial problems? Person or 
entity, I guess I should say. Group.

 

A. Well, there was a doctor in 
Lander and I can't recall his name right now that turned it over to collection, 
and it stayed on my record for like 7 years, or will.

 

          
Q. All right.

 

          
A. Because he did not want to work out the payments and he didn't 
care.

 

          
Q. So the Lander doctor did not?

 

          
A. And he didn't care that it was an insurance thing.

 

          
* * * * * *

 

          
Q. Well, did you pay the doctor in Lander?

 

          
A. Did I pay him?

 

          
Q. Yes.

 

          
A. No.

 

          Q. Are you 
paying him?

 

          
A. No.

 

          
Q. Have you made any effort to pay him?

 

A. No, because he said it wasn't 
going to do any good to pay him because he already turned it in to - it went on 
my TRW.

 

Q. I 
guess my question is this: Did the doctor in Lander ever sue you for the money 
or any collection agency sue you for the money that the doctor in Lander owed - 
or that you owed the doctor in Lander? Excuse me.

 

A. No. He just - it just went to 
when I called and tried to make payments he told me that it was too late, and 
that it would just show on my record for 7 years.

 

[¶23] In light of what we said in Shrader, this record is 
not adequate to show substantial other damages beyond the damages for emotional 
distress. Furthermore, the jury was not instructed with respect to such a 
requirement. We have said that a jury is not permitted to speculate or engage in 
conjecture in awarding damages. Martinez v. City of Cheyenne, 791 P.2d 949, 960 
(Wyo. 1990); Reposa v. Buhler, 770 P.2d 235, 238 (Wyo. 1989); Reiman Const. Co. 
v. Jerry Hiller Co., 709 P.2d 1271, 1277 (Wyo. 1985); Krist v. Aetna Cas. & 
Sur., 667 P.2d 665, 672 (Wyo. 1983). Had the jury been properly instructed as to 
the Shrader requirement of economic damages, the jury could not have determined 
such damages other than by speculation or conjecture. The dilemma confronting 
the jury is dramatically illustrated by this note which was sent to the 
judge:

 

If we decide to award damages to 
Barbara Shirley and Darol Shirley, what basis do we use as a foundation to 
decide on a dollar amount?

 

[¶24] The Shirleys contend that their bills for medical and 
psychological treatment constitute other economic damages. These bills clearly 
were related to Barbara Shirley's physical injuries or to stress from her 
situation. As such, they may serve to demonstrate damages for emotional 
distress, but they do not establish other economic damage. The same is true with 
respect to reliance upon fees owed to their attorney. We do not choose to 
undermine Shrader by treating the fees of an attorney to challenge the actions 
of the insurer as other economic damages because that would automatically 
establish other economic damage in every action for breach of the implied 
covenant of good faith and fair dealing.

 

[¶25] We reverse the Judgment on Jury Verdict entered in 
this case because of the failure of the record to demonstrate compliance with 
the rule in Shrader. Normally, we would not remand for a new trial under these 
circumstances, but fairness and justice, even due process of law, demand that we 
afford the Shirleys the opportunity to establish a case under the Shrader rule. 
At the time this case was tried, they could not have anticipated the necessity 
for proving other economic damages. In that regard, we hold that a special 
verdict form should be submitted to the jury that will separate economic 
damages, established by the evidence, from damages for emotional distress, and 
identify those damages with specificity, so that it will be clear in any 
instance how the jury arrived at its damage award.

 

[¶26] Since we are remanding this case for a new trial, we 
address, as is our custom, those questions that are likely to arise upon 
retrial. As we said in Danculovich v. Brown, 593 P.2d 187, 194 (Wyo. 1979):

 

Although the foregoing is 
determinative of this case, the other two issues presented on appeal will 
probably arise again on the retrial of this case. In such instance "it is our 
right, if it is not our duty, to decide the question." Chicago & N.W. Ry. 
Co. v. City of Riverton, 70 Wyo. 119 [sic] [84], 127, 247 P.2d 660, 663 (1952); 
Bartlett v. State, Wyo., 569 P.2d 1235, 1241 (1977); Goodman v. State, Wyo., 573 P.2d 400, 413 (1977).

 

We have followed this course in more recent cases. Shrader, 
882 P.2d  at 831; Rhoades v. K-Mart Corp., 863 P.2d 626, 631 (Wyo. 1993); L. U. 
Sheep Co. v. Board of County Com'rs of County of Hot Springs, 790 P.2d 663, 665 
(Wyo. 1990); Rocky Mountain Oil and Gas Ass'n v. State, 645 P.2d 1163, 1167 
(Wyo. 1982); Madison v. Marlatt, 619 P.2d 708, 714 (Wyo. 1980); McGuire v. 
McGuire, 608 P.2d 1278, 1286 (Wyo. 1980). In resolving these questions, we 
address the due process concerns expressed in BMW, and incorporate those 
features in our decision.

 

[¶27] We begin with the claim by Farmers that Instructions 
Nos. 16 and 17 incorporated an improper standard for finding breach of the 
implied covenant of good faith and fair dealing. Those instructions read:

 

          
INSTRUCTION NO. 16

 

The law implies a duty of good 
faith dealing in every policy of insurance. The breach of this duty gives rise 
to an action for bad faith against an insurance company. To prevail on an action 
for bad faith against the insurance company, plaintiff must prove:

 

          
1. That there was/is a policy of insurance;

 

2. That the plaintiff was/is an 
insured under the policy of insurance and was/is entitled to claim benefits 
directly under the policy;

 

3. That the insurer denied or 
delayed payment of benefits that were owed to plaintiff under the policy without 
a reasonable basis for doing so;

 

          
4. That the conduct of the insurer caused plaintiff damages; and

 

5. That the insurer acted with 
knowledge of, or in reckless disregard of, the absence of a reasonable basis to 
deny or delay payment of benefits. Such knowledge or reckless disregard can be 
inferred if a reasonable insurer proceeding under the facts and circumstances of 
an adequate investigation would not have denied or delayed payment of the 
benefits.

 

          
GIVEN:

 

          
s/D. Terry Rogers 

District Judge

 

          INSTRUCTION NO. 17

 

The insurance company may be 
subject to liability for bad faith even though it has honored the express terms 
of its policy if you find that it violated the covenant of good faith and fair 
dealing in the manner in which it investigated, handled or denied the claim, and 
the plaintiff was damaged thereby.

 

Under certain circumstances such 
actions as inadequately investigating a claim; unreasonably withholding and 
delaying benefits under an insurance policy; forcing an insured to litigate or 
seek arbitration of a claim, knowing it has no substantial grounds to reject the 
claim; engaging in deception; or spoilation of evidence could constitute bad 
faith on the part of an insurance company.

 

It is up to the jury to determine 
whether or not, based on the evidence in this case and the instructions as a 
whole, whether or not the defendant in this case acted in bad faith.

 

The burden is on the plaintiffs 
to prove the allegations of bad faith by a preponderance of the evidence.

 

          
GIVEN:

 

          
s/D. Terry Rogers

 D. Terry Rogers

          
District Judge

 

[¶28] Farmers complains that these instructions had the 
effect of submitting the issue of breach of the implied covenant of good faith 
and fair dealing to the jury on a simple negligence standard. The Shirleys argue 
that the absence of any proper standard for breach of the covenant of good faith 
and fair dealing, if the instruction is defective, was cured by the standard 
articulated in the instruction with regard to punitive damages. Both arguments 
miss the essence of the thorny question of whether the standard for denial of 
insurance contract benefits is readily transferrable to a delay of payment. 
Apparently the trial court assumed this to be appropriate, probably relying upon 
a casual quote in McCullough v. Golden Rule Ins. Co., 789 P.2d 855, 860 (Wyo. 
1990), from Anderson, 271 N.W.2d  at 376-77, which has been repeated in claims 
denial cases. The only bad faith case in which we have addressed delay is Darlow 
v. Farmers Ins. Exchange, 822 P.2d 820, 823-29 (Wyo. 1991). We are satisfied 
that in a payment delay case, the law emphasizes the intentional nature of the 
tort of bad faith. As we said in Darlow, 822 P.2d at 826:

 

First, the court determined that 
the insurer's conduct was unreasonable by delaying the insured's claim against 
the tort-feasor. Id., 726 P.2d  at 573 [Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565 (1986)]. The court then determined that the insurer acted intentionally 
without fairly debatable grounds using deceit, nondisclosure, reneging on 
promises, violation of industry custom and deliberate attempts to obfuscate. 
Id., [151 Ariz. at 160-61] 726 P.2d  at 576-77.  Rawlings clearly followed the two-step test 
outlined in McCullough and Anderson for first-party liability. Clearwater v. 
State Farm Mut. Auto. Ins. Co., 164 Ariz. 256, 792 P.2d 719 (1990); accord, 
White v. Unigard Mut. Ins. Co., 112 Idaho 94, 730 P.2d 1014 (1986).

 

We conclude that in a first-party bad faith case involving a 
delay of payment as distinguished from a denial of payment, the jury must be 
instructed with clarity that the insurer, not only acted without justification, 
but acted intentionally and used deceit, nondisclosure, reneging on promises, 
violation of industry custom and deliberate attempts to obfuscate. Such language 
should appropriately be substituted for paragraphs 3 and 5 of Instruction No. 
16, as given by the trial court in this case.

 

[¶29] We also conclude that instruction No. 17, as given to 
the jury, was erroneous. It specifically alludes to denial of a claim. Further 
it encompasses a laundry list of examples that might appropriately be 
incorporated in an instruction such as No. 16, if any of them were established 
by the evidence. Its basic defect, however, is the implication that any of those 
factors could establish bad faith without encompassing the further requirement 
that the actions be taken with knowledge of or a reckless disregard of any 
justification for delaying payment. Again we emphasize the requirement of the 
law that a delay must be intentional.

 

[¶30] We next turn our attention to the claim of error in 
overruling [Farmers'] Motion for Judgment as a Matter of Law and, in the 
Alternative, Motion for New Trial and/or Remittitur with respect to the question 
of punitive damages. The law presented to this jury on the question of punitive 
damages is captured in instructions No. 32 and No. 36 which read as follows:

 

          
INSTRUCTION NO. 32

 

Plaintiff seeks from the 
defendant additional damages known in the law as exemplary or punitive 
damages.

 

Punitive damages are allowable, 
in a proper case, for the purpose of punishment of the defendant and to deter 
the defendant and others similarly situated from engaging in similar conduct in 
the future.

 

If you 
find that the plaintiff has suffered and is entitled to recover other damages as 
a result of the conduct of the defendant, you may in your sole judgment and 
discretion award additional punitive damages against the defendant if, and only 
if, you find by a preponderance of the evidence that the defendant was guilty of 
willful and wanton misconduct.

 

Willful 
and wanton misconduct is the intentional doing of an act, or an intentional 
failure to do an act, in reckless disregard of the consequences, and under such 
circumstances and conditions that a reasonable person would know, or have reason 
to know, that such conduct would, in a high degree of probability, result in 
harm to another.

 

          
GIVEN:

 

          
s/D. Terry Rogers 

District Judge

 

          
INSTRUCTION NO. 36

 

In considering the amount of 
punitive damages to be awarded against the defendant, you are instructed that 
the law provides no fixed standard as to the amount of such damages, but leaves 
the amount to the jury's discretion to be exercised without passion or 
prejudice.

 

In determining the amount of 
punitive damages, if any, you should consider:

 

          
(a) the financial condition or wealth of the defendant;

 

          
(b) the activity of defendant causing the harm; and

 

          
(c) the nature and extent of the injury suffered.

 

Financial wealth is not the sole 
criteria, and it alone will not support a large award of damages when the injury 
does not support that award. Although there is no fixed ratio by which to 
determine the propriety of a punitive damages award, punitive damages should 
bear a reasonable relationship to the compensatory damages awarded.

 

          
GIVEN:

 

          
s/D. Terry Rogers

 District Judge

 

While the accuracy of the language in instruction No. 32 
must be conceded, it consists of a number of concepts taken out of context. We 
conclude that specific language from Anderson, 271 N.W.2d  at 379, quoted, with 
approval, in McCullough, 789 P.2d  at 861, should be given as follows:

 

[P]roof of a bad faith cause of 
action [does not] necessarily make[ ] punitive damages appropriate. * * * For 
punitive damages to be awarded in addition to compensatory damages for the tort, 
there must be a showing of an evil intent deserving of punishment or something 
in the nature of special ill-will or wanton disregard of duty or gross or 
outrageous conduct. * * * For punitive damages to be awarded, a defendant must 
not only intentionally have breached his duty of good faith, but in addition 
must have been guilty of oppression, fraud or malice * * *.

 

In addition, the special definitions, as found in 
Mid-Continent Refrigerator Co. v. Straka, 47 Wis.2d 739, 178 N.W.2d 28 (1970), 
should be given as they specifically were adopted by this court.

 

[¶31] It is important for the trial court to distinguish the 
tort of breach of the duty of good faith and fair dealing and the standard for 
recovery from the standard for recovery of punitive damages. The former requires 
only that the defendant act intentionally. The latter requires more than 
intentional action, and encompasses "an intent to do an act, or an intent to not 
do an act, in reckless disregard of the consequences, and under such 
circumstances and conditions that a reasonable [person] would know, or have 
reason to know, that such conduct would, in a high degree of probability, result 
in substantial harm to another." Danculovich, 593 P.2d  at 193. They are to be 
awarded only for "conduct involving some element of outrage, similar to that 
usually found in crime." Weaver v. Mitchell, 715 P.2d 1361, 1369 (Wyo. 1986). 
The jury should be so advised, and the point should be clearly communicated that 
intentional action does not necessarily involve wilful and wanton 
misconduct.

 

[¶32] We find this record entirely silent with respect to 
the requirements for imposition of punitive damages upon an employer that we 
articulated in Campen v. Stone, 635 P.2d 1121, 1125 (Wyo. 1981). We there 
specifically adopted the requirements for imposition of punitive damages upon an 
employer incorporated in the RESTATEMENT (SECOND) OF TORTS § 909 (1977) and the 
RESTATEMENT (SECOND) OF AGENCY § 217C (1957). We there said:

 

          
Both of these sections provide that:

 

"Punitive damages can properly be 
awarded against a master or other principal because of an act by an agent if, 
but only if,

 

"(a) the principal or a 
managerial agent authorized the doing and the manner of the act, or

 

"(b) the agent was unfit and the 
principal or a managerial agent was reckless in employing or retaining him, 
or

 

"(c) the agent was employed in a 
managerial capacity and was acting in the scope of employment, or

 

"(d) the principal or a 
managerial agent of the principal ratified or approved the act."

 

This rule was maintained and reaffirmed in Condict v. 
Condict, 664 P.2d 131, 136 (Wyo. 1983). While Farmers may have waived such error 
by not tendering an instruction incorporating the requirements of Campen, given 
our policy posture with respect to punitive damages, a trial court should always 
give that instruction, as a fundamental aspect of the law of punitive damages, 
when punitive damages are sought from a principal or an employer.

 

[¶33] With respect to instruction No. 36, we must 
acknowledge that it incorporates existing law in Wyoming. We reexamine the 
validity of that instruction, however, in light of the teaching of BMW. Our 
precedent probably fits generally within the three guide posts articulated by 
the Supreme Court in BMW. "[T]he activity of defendant causing the harm * * *," 
might be equated with reprehensibility as would apparently, "the nature and 
extent of the injuries suffered." These factors should be given more 
specificity, however, in accord with those adopted in BMW from Haslip, 499 U.S. 
at 21-22, 111 S. Ct. 1032, which in turn adopted them from Green Oil, 539 So. 2d  
at 223-24. The jury should be told:

 

"(1) Punitive damages should bear 
a reasonable relationship to the harm that is likely to occur from the 
defendant's conduct as well as to the harm that actually has occurred. If the 
actual or likely harm is slight, the damages should be relatively small. If 
grievous, the damages should be much greater.

 

"(2) The degree of 
reprehensibility of the defendant's conduct should be considered. The duration 
of this conduct, the degree of the defendant's awareness of any hazard which his 
conduct has caused or is likely to cause, and any concealment or "cover-up" of 
that hazard, and the existence and frequency of similar past conduct should all 
be relevant in determining this degree of reprehensibility.

 

"(3) If the wrongful conduct was 
profitable to the defendant, the punitive damages should remove the profit and 
should be in excess of the profit, so that the defendant recognizes a loss.

 

          
"(4) The financial position of the defendant would be relevant.

 

"(5) All the costs of litigation 
should be included, so as to encourage plaintiffs to bring wrongdoers to 
trial.

 

"(6) If criminal sanctions have 
been imposed on the defendant for his conduct, this should be taken into account 
in mitigation of the punitive damages award.

 

"(7) If there have been other 
civil actions against the same defendant, based on the same conduct, this should 
be taken into account in mitigation of the punitive damages award."

 

In arriving at an appropriate amount of punitive damages 
with respect to insurance carriers, it would be appropriate to give as an 
instruction WYO. STAT. § 26-1-107 (1997), pertaining to general criminal and 
civil penalties.

 

[¶34] Until the position of the Supreme Court of the United 
States has been further established with regard punitive damages and due process 
of law, we are satisfied that the approach we recommend should meet the demands 
of the Court. While the Court stops short of requiring these factors to be given 
to the jury as instructions, we are satisfied that the only sensible approach is 
to tell the arbiter of punitive damages what the rules are. Consequently such 
instructions should be given.

 

[¶35] We treat only briefly the claim of error with respect 
to the failure of the trial court to grant the motion by Farmers for judgment as 
a matter of law. Our standard of review with respect to such motions, formerly 
styled a judgment not withstanding the verdict, is that we must "determine 
'whether the evidence is such that without weighing the credibility of the 
witnesses, or otherwise considering the weight of the evidence, there can be but 
one conclusion reasonable persons could have reached * * *.' Id. [Erickson v. 
Magill, 713 P.2d 1182, 1186 (Wyo. 1986)]. * * * We consider the evidence in the 
light most favorable to the party against whom the motion is directed, giving 
all reasonable and legitimate inferences to such evidence." Shrader, 882 P.2d  at 
836; Ames v. Sundance State Bank, 850 P.2d 607, 608-609 (Wyo. 1993); Wilson v. 
McMahon, 831 P.2d 1152, 1154 (Wyo. 1992); Inter-Mountain Threading, Inc. v. 
Baker Hughes Tubular Services, Inc., 812 P.2d 555, 558-559 (Wyo. 1991); See 
Rhoades, 863 P.2d  at 629; Carey v. Jackson, 603 P.2d 868, 877 (Wyo. 1979). We 
hold that the same standard of review is applicable to what is now denominated a 
judgment as a matter of law. Our examination of the evidence in this record, in 
light of this standard of review, persuades us that the trial court did not err 
in refusing to grant the judgment as a matter of law. There was sufficient 
evidence to permit submission to the jury of the question of any conscious or 
deliberate action intended to delay the payment of the Shirleys' claims for 
medical payments coverage.

 

[¶36] We do not address the claim of error arising out of 
the exclusion of the impeachment witness. Such a ruling is within the discretion 
of the trial court, and will not be disturbed absent a demonstration of an abuse 
of discretion. It well may be that upon retrial there will be further 
opportunity to submit pretrial information which will resolve this particular 
problem. We cannot, however, fault the trial court for enforcement of its 
pretrial orders.

 

[¶37] Reversed and remanded for further proceedings in 
accordance with this opinion.

 

FOOTNOTES

1Here, for example, the jury was instructed:

 

In considering the amount of punitive damages to be awarded 
against the defendant, you are instructed that the law provides no fixed 
standard as to the amount of such damages, but leaves the amount to the jury's 
discretion to be exercised without passion or prejudice.

 

In determining the amount of punitive damages, if any, you 
should consider:

 

          
(a) the financial condition or wealth of the defendant;

 

          
(b) the activity of defendant causing the harm; and

 

          
(c) the nature and extent of the injury suffered.

 

Financial wealth is not the sole criteria, and it alone will 
not support a large award of damages when the injury does not support that 
award. Although there is no fixed ratio by which to determine the propriety of a 
punitive damages award, punitive damages should bear a reasonable relationship 
to the compensatory damages awarded.

 

2While we always have 
recognized our authority to set aside or reduce an award of punitive damages, we 
uniformly suggested that we maintain a posture of flexibility and only do that 
on an ad hoc basis when the amount of the award is such as to shock our 
collective judicial conscience. TZ Land & Cattle Co. v. Condict, 795 P.2d 1204, 1210 (Wyo. 1990); Cates v. Eddy, 669 P.2d 912, 922 (Wyo. 1983); Town of 
Jackson v. Shaw, 569 P.2d 1246, 1253 (Wyo. 1977); Hall Oil Co. v. Barquin, 33 
Wyo. 92, 237 P. 255 (1925). Our basic premise is that the amount of punitive 
damages is largely in the discretion of the finder of fact. Town of Jackson, 569 P.2d  at 1251; Petsch v. Florom, 538 P.2d 1011, 1014 (1975); Wilson v. Hall, 34 
Wyo. 465, 244 P. 1002 (1926).

   

LEHMAN, J., filed a dissenting opinion.

         

THOMAS, Justice, specially concurring.

 [¶38] I undertake a concurring opinion to an opinion of the 
court that I authored with a definite degree of trepidation. I have listened to 
the views of learned jurists with respect to the propriety of such an effort. 
Most found the concept unique, and beyond that their thoughts ranged from the 
position that it simply should not be permitted to the thought that at best it 
is a matter of bad form. I have concluded to press forward, however, on the 
premise that any other member of the Court who joined in the majority opinion 
could write separately if he so chose. I have concluded that the same 
prerogative should be available to the author.

 

[¶39] The opinion of the court opts to reverse this case 
based upon trial error and remands for a new trial because the damage element of 
the cause of action for first-party bad faith articulated in State Farm Mut. 
Auto. Ins. Co. v. Shrader, 882 P.2d 813 (Wyo. 1994), had not been promulgated at 
the time this case was tried. I feel that the Court needs to offer more 
leadership with respect to the concept of punitive damages in light of the 
reveille call sounded in BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S. Ct. 1589, 134 L. Ed. 2d 809 (1996). In BMW the Supreme Court of the United 
States capped a series of cases addressing the onset of punitive damages by 
holding that the award of punitive damages was grossly excessive and went beyond 
the constitutional limit required by the due process clause of the Constitution 
of the United States.

 

[¶40] The history of the treatment of this issue by the 
Supreme Court of the United States must be perceived as somewhat tortured, but 
in BMW the court articulated a majority opinion that shifted Justice O'Connor 
from her previous dissenting positions so that she could join in the majority 
opinion while also joining in the concurring opinion authored by Justice Breyer. 
I admit to building upon the opinion of the court in BMW, but the court, in my 
opinion, not only was articulating a demand for objective standards as 
distinguished from subjective standards, it was signaling a future requirement. 
In order for due process to be honored those objective standards should be given 
to the jury in the form of instructions. If they are not, then the invocation of 
the objective standard for purposes of review would seriously infringe upon the 
right of the parties to a jury trial. Trial by jury is a classic example of the 
set of rights that our system perceives as due process. Due process surely must 
extend to the first stage of judicial proceedings that constitute the process 
for awarding punitive damages.

 

[¶41] I find that the views of my dissenting brother on the 
Court and mine are quite consistent in this regard. The policy of the State of 
Wyoming with respect to the award of punitive damages is best addressed in the 
halls of the legislature. In the overall scheme of things, the better 
articulation of state policy relative to punitive damage awards could be 
achieved by legislative consideration.  Certainly a broader evaluation of factors that 
impact state policy could be presented in the legislative forum without being 
limited to the issues between two parties or even two parties plus the several 
amici that might appear in our Court. In that regard, I call attention to the 
appendix to the dissenting opinion of Justice Ginsburg in the BMW case which I 
have reproduced as an appendix to this concurring opinion. Both my dissenting 
brother and I rely upon it in identifying our position.

 

[¶42] For myself, I would favor the legislative adoption of 
an approach that would allocate punitive damages to the state coffers. This 
essentially is the same view advocated by the dissent. The present system is 
deftly compared to the proposed system in the remarks of a venireman in this 
case, who, when asked an attitudinal question about punitive damages, 
responded:

 

A. Well, I got strong feelings 
about a lot of, I guess, civilian people making big bucks on a case where they 
were unfortunate but end up getting rich off of it, I guess, from punitive 
damages. If there's a lot of money to be made off of it it shouldn't go to the 
person, it should go to the State or county government.

 

After affording some fair apportion to the party to the 
litigation, and some fair award for attorney's fees, the balance of what must be 
perceived as a civil fine would flow to state coffers, perhaps to in some way 
redress the harmful situation that the punitive damages also address. That 
should be the first approach. Certainly there are ample legislative models to 
follow in achieving that purpose. Only if it became necessary in the future 
should a cap on punitive damages be sought. In Wyoming, there may well be a 
constitutional problem in that regard. Of course, we already have mandatory 
bifurcation of liability from punitive damages in the submission to the 
jury.

 

[¶43] Until some additional reform occurs, however, the 
choices that confront this Court are to adhere to our historical methodology, 
which I believe would not satisfy the constitutional concerns of the United 
States Supreme Court; invoke the factors found in Green Oil Co. v. Hornsby, 539 So. 2d 218, 223-24 (Ala. 1989), in our review and reduce the punitive damages 
according to our judgment; apply some arbitrary multiplying ratio as a ceiling; 
or submit the Green Oil Co. factors to the jury to use in the first instance. In 
my opinion, this latter course best preserves the right of the parties to have 
the issue tried to the jury in a way that would satisfy the constitutional 
concerns of the United States Supreme Court. Examples of the second and third 
options are to be found in the opinion of the Supreme Court of Alabama upon 
remand of BMW from the United States Supreme Court. BMW of North America, Inc. 
v. Gore, 701 So. 2d 507 (Ala. 1997). If the punitive damages award in this case 
were to be reviewed by that court, I believe it fair to say that it would be 
reduced to not more than $25,000.

 

[¶44] Given the potential choices that I envision, I am 
satisfied that the majority opinion in this case correctly balances the right to 
a jury trial with the constitutional due process requirements with respect to 
punitive damages.

 

APPENDIX TO OPINION OF GINSBURG, J.

 

STATE 
LEGISLATIVE ACTIVITY REGARDING PUNITIVE DAMAGES

 

[¶45] State legislatures have in the hopper or have enacted 
a variety of measures to curtail awards of punitive damages. At least one state 
legislature has prohibited punitive damages altogether, unless explicitly 
provided by statute. See N.H.Rev.Stat. Ann. § 507:16 (1994). We set out in this 
appendix some of the several controls enacted or under consideration in the 
States. The measures surveyed are: (1) caps on awards; (2) provisions for 
payment of sums to state agencies rather than to plaintiffs; and (3) mandatory 
bifurcated trials with separate proceedings for punitive damages 
determinations.

 

                                
I. CAPS ON PUNITIVE DAMAGES AWARDS

 

· Colorado Colo.Rev.Stat. §§ 
13-21-102(l)(a) and (3) (1987) (as a main rule, caps punitive damages at amount 
of actual damages).

 

· Connecticut Conn. Gen.Stat. § 
52-240b (1995) (caps punitive damages at twice compensatory damages in products 
liability cases).

 

· Delaware H.R. 237, 138th Gen. 
Ass. (introduced May 17, 1995) (would cap punitive damages at greater of three 
times compensatory damages, or $250,000).

 

· Florida Fla. Stat. §§ 
768.73(l)(a) and (b) (Supp. 1992) (in general, caps punitive damages at three 
times compensatory damages).

 

· Georgia Ga.Code Ann. § 
51-12-5.1 (Supp. 1995) (caps punitive damages at $250,000 in some tort actions; 
prohibits multiple awards stemming from the same predicate conduct in products 
liability actions).

 

· Illinois H. 20, 89th Gen. Ass. 
1995-1996 Reg. Sess. (enacted Mar. 9, 1995) (caps punitive damages at three 
times economic damages).

 

· Indiana H. 1741, 109th Reg. 
Sess. (enacted Apr. 26, 1995) (caps punitive damages at greater of three times 
compensatory damages, or $50,000).

 

· Kansas Kan. Stat. Ann. §§ 
60-3701(e) and (f) (1994) (in general, caps punitive damages at lesser of 
defendant's annual gross income, or $5 million).

 

· Maryland S. 187, 1995 Leg. 
Sess. (introduced Jan. 27, 1995) (in general, would cap punitive damages at four 
times compensatory damages).

 

· Minnesota S. 489, 79th Leg. 
Sess., 1995 Reg. Sess. (introduced Feb. 16, 1995) (would require reasonable 
relationship between compensatory and punitive damages).

 

· Nevada Nev.Rev.Stat. § 
42.005(l) (1993) (caps punitive damages at three times compensatory damages if 
compensatory damages equal $100,000 or more, and at $300,000 if the compensatory 
damages are less than $100,000).

 

· New Jersey S. 1496, 206th Leg., 
2d Ann. Sess. (1995) (caps punitive damages at greater of five times 
compensatory damages, or $350,000, in certain tort cases).

 

· North Dakota N.D. Cent.Code § 
32-03.2-11(4) (Supp. 1995) (caps punitive damages at greater of two times 
compensatory damages, or $250,000).

 

· Oklahoma Okla Stat., Tit. 23, 
§§ 9.1(B)-(D) (Supp. 1996) (caps punitive damages at greater of $100,000, or 
actual damages, if jury finds defendant guilty of reckless disregard; and at 
greatest of $500,000, twice actual damages, or the benefit accruing to defendant 
from the injury-causing conduct, if jury finds that defendant has acted 
intentionally and maliciously).

 

· Texas S. 25, 74th Reg. Sess. 
(enacted Apr. 20, 1995) (caps punitive damages at twice economic damages, plus 
up to $750,000 additional noneconomic damages).

 

· Virginia Va.Code Ann. § 
8.01-38.1 (1992) (caps punitive damages at $350,000).

 

II. 
ALLOCATION OF PUNITIVE DAMAGES TO STATE AGENCIES

 

· Arizona H.R. 2279, 42d Leg., 
1st Reg. Sess. (introduced Jan. 12, 1995) (would allocate punitive damages to a 
victims' assistance fund, in specified circumstances).

 

· Florida Fla. Stat. §§ 
768.73(2)(a)-(b) (Supp. 1992) (allocates 35% of punitive damages to General 
Revenue Fund or Public Medical Assistance Trust Fund); see Gordon v. State, 585 So. 2d 1033, 1035-1038 (Fla.App. 1991), aff'd, 608 So. 2d 800 (Fla. 1992) 
(upholding provision against due process challenge).

 

· Georgia Ga.Code Ann. § 
51-12-5.1(e)(2) (Supp. 1995) (allocates 75% of punitive damages, less a 
proportionate part of litigation costs, including counsel fees, to state 
treasury); see Mack Trucks, Inc. v. Conkle, 263 Ga. 539, 540-543, 436 S.E.2d 635, 637-639 (Ga. 1993) (upholding provision against constitutional 
challenge).

 

· Illinois Ill. Comp. Stat. ch. 
735, § 5/2-1207 (1994) (permits court to apportion punitive damages among 
plaintiff, plaintiff's attorney, and Illinois Department of Rehabilitation 
Services).

 

· Indiana H. 1741, 109th Reg. 
Sess. (enacted Apr. 26, 1995) (subject to statutory exceptions, allocates 75% of 
punitive damages to a compensation fund for violent crime victims).

 

· Iowa Iowa Code § 668A.1(2)(b) 
(1987) (in described circumstances, allocates 75% of punitive damages, after 
payment of costs and counsel fees, to a civil reparations trust fund); see 
Shepherd Components, Inc. v. Brice Petrides-Donohue & Assoc., Inc., 473 N.W.2d 612, 619 (Iowa 1991) (upholding provision against constitutional 
challenge).

 

· Kansas Kan. Stat. Ann. § 
60-3402(e) (1994) (allocates 50% of punitive damages in medical malpractice 
cases to state treasury).

 

· Missouri Mo.Rev.Stat. § 537.675 
(1994) (allocates 50% of punitive damages, after payment of expenses and counsel 
fees, to Tort Victims' Compensation Fund).

 

· Montana H. 71, 54th Leg. Sess. 
(introduced Jan. 2, 1995) (would allocate 48% of punitive damages to state 
university system and 12% to school for the deaf and blind).

 

· New Jersey S. 291, 206th Leg., 
1994-1995 1st Reg. Sess. (introduced Jan. 18, 1994); A. 148, 206th Leg., 
1994-1995 1st Reg. Sess. (introduced Jan. 11, 1994) (would allocate 75% of 
punitive damages to New Jersey Health Care Trust Fund).

 

· New Mexico H. 1017, 42d Leg., 
1st Sess. (introduced Feb. 16, 1995) (would allocate punitive damages to 
Low-Income Attorney Services Fund).

 

· Oregon S. 482, 68th Leg. Ass. 
(enacted July 19, 1995) (amending Ore.Rev.Stat. §§ 18.540 and 30.925, and 
repealing Ore.Rev.Stat. § 41.315) (allocates 60% of punitive damages to Criminal 
Injuries Compensation Account).

 

· Utah Utah Code Ann. § 
78-18-1(3) (1992) (allocates 50% of punitive damages in excess of $20,000 to 
state treasury).

 

III. MANDATORY BIFURCATION OF 
LIABILITY AND PUNITIVE DAMAGES DETERMINATIONS
 

· California Cal. Civ.Code Ann. § 
3295(d) (West Supp. 1995) (requires bifurcation, on application of defendant, of 
liability and damages phases of trials in which punitive damages are 
requested).

 

· Delaware H.R. 237, 138th Gen. 
Ass. (introduced May 17, 1995) (would require, at request of any party, a 
separate proceeding for determination of punitive damages).

 

· Georgia Ga.Code Ann. § 51-12-5. 
1(d) (Supp. 1995) (in all cases in which punitive damages are claimed, liability 
for punitive damages is tried first, then amount of punitive damages).

 

· Illinois H. 20, 89th Gen. Ass., 
1995-1996 Reg. Sess. (enacted Mar. 9, 1995) (mandates, upon defendant's request, 
separate proceeding for determination of punitive damages).

 

· Kansas Kan. Stat. Ann. § 
60-3701(a) and (b) (1994) (trier of fact determines defendant's liability for 
punitive damages, then court determines amount of such damages).

 

· Missouri Mo.Rev.Stat. §§ 
510.263(l) and (3) (1994) (mandates bifurcated proceedings, on request of any 
party, for jury to determine first whether defendant is liable for punitive 
damages, then amount of punitive damages).

 

· Montana Mont.Code Ann. § 
27-1-221(7) (1995) (upon finding defendant liable for punitive damages, jury 
determines the amount in separate proceeding).

 

· Nevada Nev.Rev.Stat. § 
42.005(3) (1993) (if jury determines that punitive damages will be awarded, jury 
then determines amount in separate proceeding).

 

· New Jersey N.J. Stat. Ann. §§ 
2A:58C-5(b) and (d) (West 1987) (mandates separate proceedings for determination 
of compensatory and punitive damages).

 

· North Dakota N.D. Cent.Code § 
32.03.2-11(2) (Supp. 1995) (upon request of either party, trier of fact 
determines whether compensatory damages will be awarded before determining 
punitive damages liability and amount).

 

· Oklahoma Okla. Stat., Tit. 23, 
§§ 9.1(B)-(D) (Supp. 1995-1996) (requires separate jury proceedings for punitive 
damages); S. 443, 45th Leg., 1st Reg. Sess. (introduced Jan. 31, 1995) (would 
require courts to strike requests for punitive damages before trial, unless 
plaintiff presents prima facie evidence at least 30 days before trial to sustain 
such damages; provide for bifurcated jury trial on request of defendant; and 
permit punitive damages only if compensatory damages are awarded).

 

· Virginia H. 1070, 1994-1995 
Reg. Sess. (introduced Jan. 25, 1994) (would require separate proceedings in 
which court determines that punitive damages are appropriate and trier of fact 
determines amount of punitive damages).

 

LEHMAN, Justice, dissenting.

 

[¶46] I respectfully dissent. I take exception with the 
majority's conclusion that "[a]fter BMW [of North America v. Gore, 517 U.S. 559, 
116 S. Ct. 1589, 134 L. Ed. 2d 809 (1996)], our jurisprudential approach in Wyoming 
would not pass muster before the Supreme Court of the United States." In order 
to bring Wyoming jurisprudence in line with BMW, the majority now requires that 
the jury be specifically instructed as to seven factors "adopted in BMW from 
[Pacific Mut. Life Ins. Co. v.] Haslip [499 U.S. 1, 111 S. Ct. 1032, 113 L. Ed. 2d 1 (1991)]."

 

[¶47] The majority in BMW does not mention the Haslip seven 
factors, much less mandate that those factors be incorporated into jury 
instructions in order to satisfy due process requirements. The BMW concurring 
faction reviewed the seven factors used by the Alabama appellate court to 
determine whether the BMW jury award was grossly excessive. 517 U.S.  at 589-92, 
116 S. Ct.  at 1606-07. In Haslip, the Court held that those factors imposed a 
sufficiently definite and meaningful constraint on the discretion of Alabama 
factfinders in awarding punitive damages. 499 U.S.  at 22, 111 S. Ct.  at 1045. 
However, the concurring justices in BMW concluded that while the factors, in 
principle, might make up for the lack of significant constraint on juries 
contained in the Alabama punitive damages statute,1 the manner in 
which the Alabama courts had previously interpreted the standards and their 
application in the BMW case imposed little actual constraint. This hardly 
equates to a demand that state courts adopt the factors or hazard reversal of 
punitive damage awards in the United States Supreme Court (and indeed, that 
approach certainly did not insulate the Alabama litigant in BMW).

 

[¶48] In addition, the discussions in both Haslip and the 
BMW concurrence speak of objective factors being used by the court in the course 
of reviewing a jury verdict as a means of imposing a meaningful constraint on 
the jury's decision, not as being included in instructions to the jury.2 As a general proposition, I do not disagree that 
it may be appropriate to provide the jury with the more specific instructions 
articulated by the majority. However, I do disagree insofar as such a 
requirement is imposed on this case to render the jury award invalid. The jury 
was properly instructed as to Wyoming law; and, as the majority acknowledges, 
our existing law generally fits within the three guideposts utilized by the 
Supreme Court in BMW. BMW requires no more. Our task as the reviewing court is 
to make certain that the punitive damages are reasonable in their amount and 
rational in light of their purpose to punish what has occurred and to deter its 
repetition.

 

[¶49] The facts in this case present a very different 
situation from those in BMW, and the award in this case withstands scrutiny 
under the three BMW guideposts: 1) degree of reprehensibility, 2) ratio of 
damages to harm, and 3) sanctions for comparable misconduct.  Without undertaking 
a detailed analysis, I note that the record reflects a great deal of culpability 
on the part of the defendant here that was lacking in BMW: the jury heard 
testimony that it was common practice for the office staff to throw away medical 
bills submitted for payment to avoid the 45-day payment rule set forth in W.S. 
26-15-124(a), and that this practice was instigated by the office manager. 
Whether or not this was the fate of the Shirleys' claims, clearly payment of 
their bills was delayed until a lawsuit was imminent. And while the ratio of 
punitive damages to harm is 234.375 to 1 and "must surely raise a suspicious 
judicial eyebrow," the Supreme Court has rejected a bright-line approach and 
acknowledged that higher ratios may be justified in cases in which a 
particularly egregious act has resulted in only a small amount of economic 
damages. In fact, in TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S. Ct. 2711, 125 L. Ed. 2d 366 (1993), where the ratio was a  "breathtaking 500 to 
1," the Court upheld the award.

 

[¶50] Punitive damages are often criticized because they are 
perceived as a windfall for plaintiffs and their lawyers, and some would argue 
that punitive damages be sharply limited or prohibited altogether. But punitive 
damages serve an important purpose  they punish defendants for reprehensible 
acts and deter such acts in the future. To limit or eliminate punitive damages 
gives defendants the ability to factor in a certain amount of wrongdoing (and 
the resulting punitive damage awards) as the cost of doing business. I would 
instead urge our legislature to consider a statutory enactment which would 
allocate a percentage of a punitive damage award to the plaintiff, with the 
remainder to be directed to the state. States have creatively directed revenue 
from similar statutory schemes to victims' assistance funds, legal services for 
low-income clients, to the state treasury, to their state university system, or 
to further the cause of the judiciary. See BMW, 517 U.S.  at 614-19, 116 S. Ct.  at 
1618-20 (Appendix to Dissenting Opinion of Ginsburg, J.). In this way, punitive 
damages will continue to serve their worthwhile and justifiable purpose of 
punishing and deterring reprehensible behavior; wronged plaintiffs will still 
have adequate incentive to bring suits to hold wrongdoers accountable; and the 
benefit of the award will not represent a "windfall" to an individual plaintiff, 
but rather be appropriately utilized by the public as a whole.

 

Footnotes for Dissenting Opinion

 

 

1 The statute permits punitive damages in cases of 
"oppression, fraud, wantonness, or malice." Ala.Code. § 6-11-20(a) (1993).

 

 

2 The jury instructions reviewed by the Haslip court were 
found to be sufficient because they "described for the jury the purpose of 
punitive damages, namely, 'not to compensate the plaintiff for any injury' but 
'to punish the defendant' and 'for the added purpose of protecting the public by 
[deterring] the defendant and others from doing such wrong in the future.' " Haslip, 499 U.S.  at 19, 111 S. Ct.  at 1044. The 
instructions "enlightened the jury as to the punitive damages' nature and 
purpose, identified the damages as punishment for civil wrongdoing of the kind 
involved, and explained that their imposition was not compulsory." Period.