Opinion ID: 1779024
Heading Depth: 2
Heading Rank: 1

Heading: The BMW I guideposts.

Text: We begin with an analysis of the guideposts established by the United States Supreme Court in BMW I.
Perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct. BMW I, 517 U.S. at 575, 116 S.Ct. 1589. Although the Supreme Court did not provide any particular yardstick by which to measure reprehensibility, it did acknowledge that trickery and deceit are more reprehensible than negligence, and that acts of affirmative misconduct, such as making deliberate false statements, are more reprehensible than making an innocent misrepresentation. The Supreme Court further recognized that economic damage inflicted upon a financially vulnerable plaintiff might well support a large punitive-damages award. BMW I, 517 U.S. at 576, 116 S.Ct. 1589. The crux of this case is Life of Georgia's marketing of insurance to customers who were particularly vulnerable because of their age, their lack of formal education, and their financial status. See Parker I, 706 So.2d at 1112. Although the record contains little evidence relating to the exact level of James Parker's understanding of insurance, [4] the jury could have concluded that the Parkers did not have Taunton's level of understanding as to what the consequences could be if they followed his advice to even up their coverage by cashing in one of their full benefit policies to buy two graded-death-benefits policies that they could not afford. The record contained evidence indicating that Taunton, as Life of Georgia's agent, had superior knowledge of the terms of the policies he sold. Taunton's years of experience in selling insurance, as well as his superior knowledge, placed upon him the duty to inform the Parkers, at the very least, of what kind of insurance they were buying. The evidence shows that, based upon Taunton's misrepresentations as to the kind of insurance he was selling to the Parkers, they were induced to buy more insurance and ultimately ended up with less coverage than they had before they were induced to act. Moreover, the jury apparently chose to believe Rosie Parker when she testified as to the assurances she said Taunton made to her about the amount of money the Parkers would receive upon surrendering James Parker's $500 policy. We note, however, that there is a marked lack of evidence indicating any malicious intent on Taunton's part; indeed, in a time when seven-figure awards against insurance companies in fraud cases receive great notoriety, the fact that the jury awarded punitive damages of only $200,000 is more consistent with a finding of recklessness than with a finding that Taunton had an intent to harm the Parkers. Viewed in this light, the defendants' conduct should not be regarded as having been highly reprehensible.
A second indicium of either reasonableness or excessiveness is the ratio of the punitive-damages award to the actual harm inflicted upon the plaintiff. BMW I, 517 U.S. at 580, 116 S.Ct. 1589. The guaranty of due process does not require that we apply a purely mathematical formula in determining whether a punitive-damages award is excessive; therefore, in most cases, a remittitur will not be justified solely on the basis of a high ratio. However, a general concern of reasonableness properly enters into the constitutional calculus. BMW I, 517 U.S. at 582-83, 116 S.Ct. 1589 (quoting TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993)). A higher award may be justified in a case in which the injury to the plaintiff is hard to detect or the monetary compensation for noneconomic harm is difficult to determine. Id. This Court has found constitutionally acceptable ratios ranging from 1:1 in Ford Motor Co. v. Sperau, 708 So.2d 111 (Ala.1997), to 121:1 in Foremost Ins. Co. v. Parham, 693 So.2d 409 (Ala.1997). The facts of those cases, and of cases in which ratios of punitive damages to compensatory damages fall between those of Sperau and Foremost, are varied and reflect the wisdom of this Court's refusal to draw a mathematical bright line to apply in every case. In this case, the punitive damages award of $200,000 is 46.77 times the compensatory damages award of $4,276. Although the harm to the Parkers for which they were compensated was comparatively small, the Parkers were both financially vulnerable and elderly, so that the economic loss, including the reduction of their insurance coverage as a result of Taunton's actions, had a more severe impact upon them than it might have had upon younger, more affluent customers. Under these circumstances, we conclude that a somewhat higher ratio of punitive damages to compensatory damages may be justified.
We must consider a third indicium of reasonableness or excessiveness, a comparison of the punitive-damages award and the civil or criminal penalties that could be imposed for comparable misconduct. BMW I, 517 U.S. at 583, 116 S.Ct. 1589. The maximum statutory sanction against insurance fraud in this state is only $1,000. As this Court has noted, [b]ecause the legislature has set the statutory penalty for deceitful conduct at such a low level, there is little basis for comparing it with any meaningful punitive damages award. BMW II, 701 So.2d at 514. Alabama has no criminal laws against insurance fraud.
After reviewing the evidence and analyzing the BMW I guideposts, we find, based upon the relatively low level of reprehensibility presented here, coupled with our uneasiness over the rather high 46.77:1 ratio of punitive damages to compensatory damages, an indication that the punitive-damages award was excessive.