Opinion ID: 562300
Heading Depth: 2
Heading Rank: 1

Heading: Circumstances Indicating Reasonableness of Award

Text: 18 Under Haslip, an award of punitive damages does not meet constitutional requirements unless the circumstances of the case indicate that the award is reasonable. This condition, contrary to the assertion of Reserve Life, is not a vehicle for expansive appellate review of punitive damages awards. It creates, instead, a narrow channel for appellate review in which the focus of a reviewing court is to ensure that, under the circumstances of the case in question, the award of punitive damages is not grossly excessive or unreasonable. 6 19 The calculation of an appropriate amount of punitive damages is traditionally left to the unique discretion of the factfinder. Whether judge or jury, the factfinder occupies the best position to determine the amount of a punitive damages award because the degree of punishment to be thus inflicted must depend on the peculiar circumstances of each case. Day v. Woodworth, 54 U.S. (13 How.) 363, 371, 14 L.Ed. 181 (1852). Accordingly, in reviewing the constitutionality of an award of punitive damages, a court may not explicitly or implicitly recalculate the award of damages; moreover, it may not express an opinion whether the award is too high or too low. 7 Rather, the court may only consider whether the circumstances of the case offer some support for the amount of the award. If there are any circumstances of probative force that support the amount of the award, then the award meets the reasonableness prong of the due process test in Haslip. 20 After careful consideration, we conclude that the award of punitive damages to Eichenseer did not lack support in the record. We recognize, for instance, that Reserve Life's conduct in the instant case was particularly egregious. Although Reserve Life did not maliciously mishandle Eichenseer's claim, it nonetheless acted with reckless disregard--if not intentional disregard--for the rights of its insured. 8 Its actions were far more offensive than mere incompetent recordkeeping or clerical error. Reserve Life refused to initiate even the most cursory investigation of Eichenseer's claim. The insurer failed to submit the claim to its in-house medical personnel for review, and in fact, it declined even to interview Eichenseer or her doctor. Understandably distressed, Eichenseer attempted to spur Reserve Life to investigate her claim more thoroughly. Eichenseer wrote Reserve Life several letters urging that the insurer provide specific reasons for the denial of her claim, and on her own initiative, Eichenseer submitted documents that indicated her claim was valid. Reserve Life, however, rebuffed Eichenseer's entreaties and lost the documents she submitted--often under suspicious circumstances. 9 Reserve Life's cavalier handling of Eichenseer's claim is an unfortunate example of an insurer's desire to save money at the expense of its insureds. A mere slap on the wrist is inadequate to punish such conduct. Thus, the egregious nature of Reserve Life's conduct is a significant factor that supports the $500,000 award of punitive damages to Eichenseer. 21 Another circumstance that indicates that the punitive damages award in this case is reasonable is the corporate size of Reserve Life. The net worth of Reserve Life is $157,000,000. The district court reasoned, in part on the basis of this net worth, that a $500,000 punitive damages award was necessary to deter the insurer from future misconduct. Rejecting an award that would have been closer in proportion with the plaintiff's compensatory damages, the district court recognized that a small award of punitive damages would have had little deterrent effect against a corporation of Reserve Life's magnitude. Reserve Life could have easily absorbed a $1000 or $10,000 punitive damages award as no more than a cost of business, and yet still have handsomely profited from its actions since most claims denials are not challenged in court. A $500,000 award, on the other hand, would get the attention of Reserve Life. Eichenseer v. Reserve Life Ins. Co., 682 F.Supp. 1355, 1373 (N.D.Miss.1988). 10 The court's consideration of the deterrent effect of its award was proper. One of the fundamental purposes of punitive damages is to deter a wrongdoer from future misconduct. While the Due Process Clause requires that punitive damages not be grossly excessive, it does not require that punitive damages be ineffectual and impotent. The corporate size of Reserve Life is another factor that supports the award of punitive damages against it. 22 In addition, and perhaps most importantly, this case is not the first instance in which a court has assessed a punitive damages award against Reserve Life. As previously recognized in footnote 9, a Mississippi state trial court in 1983 assessed a $150,000 punitive damages award against Reserve Life on the basis of conduct remarkably similar to the egregious conduct in the instant case. See Reserve Life Ins. Co. v. McGee, 444 So.2d 803 (Miss.1983) (Reserve Life failed to investigate the medical history of the insured before it issued a policy and then denied coverage once the insured submitted a claim under the policy). This $150,000 award appears to have had little effect on the manner in which Reserve Life handled claims. If a lesser and comparatively small punitive damages award does not deter wrongful conduct, then a court may reason, as a matter of common sense, that a larger award is necessary in subsequent cases. The district court concluded that, because the earlier $150,000 award had little deterrent effect, it should impose a larger $500,000 punitive damages award. This conclusion finds support in the record. 23 We need not, and indeed we cannot, express an opinion whether the award in this case is too large or too small. The award may or may not be excessive, but this is a matter of state law that is not in issue here. 11 We conclude simply that the record in this case provides sufficient support for the award of punitive damages against Reserve Life. The first of the two practical considerations in Haslip, therefore, does not suggest that the award against Reserve Life offended the requirements of due process. 24 Reserve Life misconceives the deferential nature of the due process standard in Haslip. It argues that the $500,000 punitive damages award is unconstitutional on its face because it exceeds the amount of the plaintiff's compensatory damages by a ratio of 500 to 1. The insurer suggests that, because the $840,000 award in Haslip was close to the line of constitutional impropriety even though it was four times the amount of the compensatory damages, the award in the instant case is well beyond the line of constitutional impropriety. The Court in Haslip, however, expressly rejected a mathematical bright line test of constitutionality. 111 S.Ct. at 1043. 12 Perhaps in some cases--even in many cases--an award of punitive damages that is five hundred times the amount of the compensatory damages will violate due process. This is not such a case. Sufficient circumstances indicate that the award of punitive damages against Reserve Life was well reasoned and, indeed, reasonable.