Opinion ID: 1138293
Heading Depth: 1
Heading Rank: 15

Heading: Reprehensibility of the defendant's conduct.

Text: In Green Oil, we listed several factors relevant to determining the reprehensibility of a defendant's conduct. Those factors include: (1) the duration of the conduct, (2) the degree to which the defendant was aware that the conduct had caused or was likely to cause harm, (3) any concealment or cover-up of the harm, and (4) the existence and the frequency of similar past conduct. 539 So.2d at 223. A review of the record shows that Independent Life had the capability for at least 10 years to perform a computerized search of the type of policies in question in order to determine whether they were properly endorsed, and thereafter to endorse them, but failed to do so until a judgment was entered against it. The trial court noted that from such evidence a jury could have found an awareness of the problem on the part of Independent Life. The trial court held that from evidence presented to the jury it could have concluded that Independent Life attempted to cover up the problem caused by the misleading language of the policies at issue and purposely failed to inform its policyholders that it would pay claims made on the policy eventhough the policyholder was age 65 or older, or would refund premiums paid after age 65. The trial court concluded: This court knows of few reported decisions in Alabama where a defendant's conduct approached the reprehensibility of this defendant's conduct in this case, and the conduct was so pervasive and of such long standing. We, too, conclude that from the evidence presented the jury could have reasonably found that the degree of reprehensibility of Independent Life's misconduct was significant.
Independent Life notes that the trial court left it for this Court to determine what effect its post-verdict remedial efforts to place proper endorsements on the type of insurance policies at issue should have on the jury's punitive damages award. The trial court's Hammond order stated: Whether post-verdict efforts at remedying a wrong come too late is a matter for the Supreme Court of Alabama to determine; that Court may hold that remedies are to be prompt upon discovery of the wrong and not admissible at trial (but admissible post-trial) as subsequent remedial measures. As noted previously, Ala.Code 1975, § 6-11-23(b), requires a court reviewing a punitive damages award to consider whether the defendant has undertaken any effort to remedy the wrong complained of and also whether the defendant has had an opportunity to do so. Further, sound public policy dictates that the type of action taken by Independent Lifelocating and properly endorsing all outstanding policies of the type in question, action that benefits a much wider class of Alabama citizens than would a monetary award to a single plaintiffshould be encouraged by this Court's acknowledging that action as a mitigating factor in a review of a punitive damages award. However, the weight of that action as a mitigating factor in a punitive damages review would not be so great where, as in this case, the remedial action is taken only after the jury has returned a substantial punitive damages verdict.
We have stated that the purpose of punitive damages is twofold: to punish the wrongdoer and to deter the wrongdoer and others from committing similar wrongs in the future. Green Oil, 539 So.2d at 222. Accordingly, punitive damages should generally exceed the amount of profit created by the defendant's misconduct, so that the defendant recognizes a loss. See Gore, supra. During closing arguments, the plaintiff's counsel asked the jury to award $17 million in punitive damages, an amount he contended Independent Life had received in premiums on the type of policies at issue during one year. The trial court noted in its Hammond order that, by its own calculations, Independent Life had received approximately $7 million per year in premiums on the policies at issue and that if that figure was multiplied by the number of years since 1975, when Casey purchased her policy, even if the jury's entire award was considered to be punitive damages the award would not be excessive. On appeal, Independent Life asserts that the profit it makes on its policies is actually much less than the amount of premiums it receives, claiming that it makes only seven cents of profit for each premium dollar it receives. Further, Independent Life contends that an internal study has revealed that with regard to policyholders age 65 or older it actually lost money on the type of policies at issue. Thus, Independent Life argues that the punitive damages award is highly excessive. In this case, we find neither the trial court's, nor Independent Life's, profitability calculus to be helpful. The profit to Independent Life from its fraudulent suppression of facts relating to the termination provision on the policies at question was derived from not having refunded premiums paid by policyholders after reaching age 65 and in not having paid claims by policyholders over age 65 who, like Casey, did not file a claim because they believed their policies had terminated. The amount of those potential claims is unknown and cannot be calculated from the data presented at trial or during the Hammond hearing. Thus, we note that while Independent Life did profit by its misconduct, the record contains insufficient information for us to determine whether the size of that profit weighs for or against a remittitur of the punitive damages award.
As noted previously, punitive damages are imposed on a defendant both to punish for misconduct and to deter the defendant and others from acting similarly in the future. Green Oil, supra, at 223. Thus, the financial condition of the defendant is relevant in determining whether a punitive damages award is excessive. After having considered information regarding the financial condition of Independent Life, the trial court concluded: The verdict will punish this defendant, but at the same time it is not so large as to unduly burden this defendant based on what information is before this court. Likewise, we note that Independent Life showed a profit during 1992, the year this jury verdict was rendered, even though it had set aside reserves to cover the $6,230,000 verdict. During the Hammond hearing, Independent Life stated that it had a net worth of $102,826,000. Although Independent Life argues that a $6 million punitive damages award would have an enormous impact on its financial condition, by dropping its capital surplus below the $100 million threshold and subjecting it to more restrictive regulations, we conclude that it has sufficient ability to pay a $6 million judgment without the payment's having a significant impact on its financial condition. Thus, this factor does not weigh in favor of a remittitur of the verdict.
Green Oil mandates that the plaintiff's costs of litigation be considered when reviewing whether a punitive damages award is excessive. 539 So.2d at 223. This policy encourages bringing wrongdoers to trial. See Gore, supra. In this case, the trial court noted that the costs of litigation were significant and that this factor did not weigh in favor of remittitur. In fact, the trial court warned: If the verdict was reduced, this court fears that there would be a chilling effect on plaintiffs and their attorneys in the future that would discourage them from bringing wrongdoers to trial. This factor does not weigh in favor of remittitur of the punitive damages award.
No criminal sanctions have been imposed on Independent Life for the conduct that is the basis for the punitive damages award. Therefore, this factor is not applicable.
Independent Life has not made this Court aware of other civil actions that have been successfully maintained against it relating to the misconduct at issue in this case. Although two other civil actions may be pending, the mere existence of those actions does not suggest that the punitive damages award should be reduced.