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

Heading: The Hammond /Green Oil factors.

Text: We now consider the factors established by this Court in Hammond and Green Oil.
`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.'  Green Oil, 539 So.2d at 223 (quoting Aetna Life Ins. Co. v. Lavoie, 505 So.2d 1050, 1062 (Ala.1987) (Houston, J., concurring specially)). As a result of the defendants' misconduct, the Parkers were induced to purchase insurance they could not afford, and the premiums for the new policies were added into the premiums they were paying on their existing policies. When the Parkers were unable to pay the increased premiums and the new policies lapsed, their existing policies were converted into lesser coverage. See Parker I, 706 So.2d at 1111. Moreover, based upon the defendants' misconduct, the Parkers cashed in a $500 full-benefit policy that they otherwise would have kept. Although the actual amount of their losses was not large, the fact that the Parkers were financially vulnerable made the losses more serious. We conclude that the degree of harm resulting from the defendants' conduct supports the imposition of more than token punitive damages. This factor thus weighs against a finding that the punitive-damages award was excessive.
Although we discussed this factor in our review of the BMW I guideposts, we note that in a Hammond /Green Oil review we assess the reprehensibility of a defendant's conduct by considering `[t]he 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.' Green Oil, 539 So.2d at 223. We have concluded that the defendants' misconduct resulted in damage to the Parkers that would correspond with a significant punitive-damages award; however, we note that the record does not indicate a pattern of like misconduct, and it does not contain evidence indicating that the defendants sought to cover up the misconduct. The reprehensibility of Taunton's misconduct lies in the fact that it resulted in a loss to the financially vulnerable Parkers, with whom he dealt recklessly, not in any demonstrated malicious intent to defraud the Parkers for profit. Compare Foster v. Life Insurance Co. of Georgia, 656 So.2d 333 (Ala.1994) (agent intentionally sold worthless Medicare-supplement policy to uneducated and financially vulnerable Medicaid recipient); Life Insurance Co. of Georgia v. Johnson, 701 So.2d 524 (Ala.1997) (agent engaged in intentional and reckless fraud and fraudulent suppression in selling worthless Medicare-supplement policy to elderly woman). Thus, while the misconduct at issue would support a significant punitive-damages award, we reiterate that it does not reflect the degree of reprehensibility, often marked by greed, that has been the basis of large punitive-damages awards in the past. This factor thus weighs against a finding that the punitive-damages award is excessive.
If a Hammond /Green Oil review indicates that the wrongful conduct was profitable to the defendant, we are required to determine whether the punitive-damages award removes the profit and whether it exceeds the profit so that the defendant recognizes a loss. Green Oil, 539 So.2d at 223. The evidence shows that Life of Georgia gained little, if any, profit from Taunton's sale of the two $1,000 policies because the Parkers were unable to pay even the first premiums on them. [5] Taunton's commission on the sale was nominal. Clearly, the punitive-damages award removes any profit the defendants realized and so far exceeds it that the defendants would recognize a loss. This factor thus weighs in favor of a finding that the punitive-damages award is excessive.
There is no specific evidence before this Court as to the net worth of either defendant at the time the jury awarded the damages, and the trial court's findings upon remand are silent as to the financial position of the defendants. No argument has been advanced as to the adverse effect of the award on either defendant. This factor thus weighs against a finding that the punitive-damages award is excessive.
In a Hammond /Green Oil review, we must consider whether the punitive-damages award was sufficient to reward the plaintiff's counsel for assuming the risk of bringing the lawsuit and to encourage other victims of wrongdoing to come forward. The trial court's findings upon remand are silent as to this factor. The record in this case reflects pretrial proceedings culminating in a two-day trial before a jury, and thereafter extensive posttrial and appellate proceedings, together with thorough briefs on both the initial appeal and on this return to the remand. The Parkers clearly incurred substantial litigation costs in order to recover on a relatively small out-of-pocket claim. Under the totality of the circumstances concerning the cost of litigation, this factor weighs against a finding that the punitive damages award is excessive.
No criminal sanctions have been imposed on Life of Georgia or Taunton; therefore, this factor is inapplicable here.
In its findings on remand, the trial court stated: [B]ecause ... Life of Georgia has been sued many times in Alabama, largely based on misconduct of its agents, [it] must be aware of the hazards of [its] actions. While it may not be said that Life of Georgia deliberately engages in misconduct through its agents, allegations of misconduct have happened frequently, and there have been numerous adverse verdicts throughout the state. The trial court also pointed out: By the very nature of the [insurance] business, there are fairly low-paid agents who may be largely untrained, who are not subjected to strict standards by the employer or the state, who are assigned debit routes, and must produce. The company knows this. We agree that Life of Georgia's past misconduct, for which it has been punished in other proceedings, places the company on notice of the punishment that it could receive for similar misconduct. However, Taunton's actions on Life of Georgia's behalf reflect a markedly lower degree of reprehensibility than that present in other cases that have resulted in large punitive-damages awards against Life of Georgia. See Foster v. Life Insurance Co. of Georgia, supra; Life Insurance Co. of Georgia v. Johnson, supra. The record does not indicate that any other civil actions have been filed against the defendants based on the level of misconduct present here; other cases against Life of Georgia that this Court has reviewed involved a far greater degree of reprehensibility. This factor thus weighs in favor of a finding that the punitive damages award is excessive.
After considering the seven Hammond /Green Oil factors, we conclude as follows: Three of the factors weigh in favor of a finding of excessiveness: the degree of reprehensibility of the defendants' conduct, the degree to which the defendants profited, and the other civil actions against them. Three of the factors weigh against a finding of excessiveness: the relationship of the damages award to the harm done to the Parkers, the defendants' financial position, and the costs of litigation. One of the factors is inapplicable.