Court Opinion

ID: 9597101
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:55:29.539814+00
Date Added: 2024-06-11T09:42:03.298793
License: Public Domain

GRAVES, Justice,
dissenting.
Respectfully, I dissent.
In mid-March 1992, Appellant issued an insurance policy to Appellees, which covered, among other things, fire loss. One month later, the covered property was damaged by arson and Appellees made a claim under the policy. Appellant retained Crawford & Company as adjusters and Crawford assigned Richard Shields to the case. The parties eventually disputed the value of the loss and whether the property could be reasonably repaired or had to be rebuilt from the ground up. In the first trial, the jury ultimately awarded Appellee $213,810.00 as the actual cash value of the premises. In the second trial, a bad faith action, the jury returned a verdict of $71,013.47 in attorneys fees and $3.1 million in punitive damages: $2 million *385against Appellant, $1 million against Crawford, and $100,000 against Shields. While Crawford and Shields have settled, Appellant has appealed, among other things, what it sees as an excessive verdict.
While Appellant is entitled to a new trial on other grounds, the error with this proceeding which most desperately needs to be addressed is the availability of punitive damages in Kentucky’s civil suits.
I. PUNITIVE DAMAGES ARE QUASI-CRIMINAL PENALTIES WITHOUT SAFEGUARDS OF CRIMINAL TRIALS
In 1988, the Kentucky General Assembly indicated its misgivings about punitive damage awards and attempted tort reform by enacting KRS 411.184. The statute redefined circumstances, and increased the burden of proof necessary to recover punitive damages. We ultimately held some of this legislation unconstitutional, which will be discussed in more detail below. However, under KRS 411.184(f), a section unaffected by our ruling on the statute’s constitutionality, punitive damages include “exemplary damages and means damages, other than compensatory and nominal damages, awarded against a person to punish and to discourage him and others from similar conduct in the future.” This focus on punishment and deterrence is inappropriate in the civil law context.
Proponents of punitive damages point to the long history of such awards, which stems back to ancient civilizations, including Babylon, Egypt, Greece, and Rome. Even the Bible suggests the use of punitive damages in some instances, as in this passage from Exodus: “[I]f a man shall steal an ox or a sheep, and kill it or sell it, he shall restore five oxen for an ox, four sheep for a sheep.” The problem with relying on this ancient basis to reaffirm the inherent correctness of punitive damages is that these civilizations made no attempt to distinguish civil from criminal law. Alan Calnan, Ending the Punitive Damages Debate, 45 DePaul L.Rev. 101, 105 (1995). Because common law developed into two branches, civil, which focuses on compensation, and criminal, which focuses on punishment, it no longer needs punitive damages, a hybrid category which imposes penalties in excess of compensation on civil defendants.
While the concept is accepted in most jurisdictions, including ours since the decision in Chiles v. Drake, 59 Ky. 146 (1859), some state courts realized well before the 20th century that something was wrong with the imposition of a penalty without the protections of a criminal trial. The Supreme Court of New Hampshire, one of the earliest American courts to hold so, stated, “The idea is wrong. It is a monstrous heresy. It is an unsightly and unhealthy excrescence, deforming the symmetry of the body of law.” Fay v. Parker, 58 N.H. 342, 382 (1872).
While the United States Supreme Court regularly upholds such awards, see BMW of North America v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) (guidelines given for determining an appropriate award), various members of that Court have voiced concerns about the appropriateness of punitive damages. Justices O’Connor and Scalia espoused some of these concerns in their dissent in Bankers Life and Cas. Co. v. Crenshaw, 486 U.S. 71, 108 S.Ct. 1645, 100 L.Ed.2d 62 (1988), and added that the imposition of standardless discretion to determine the severity of punishment could be inconsistent with due process. Id. at 87, 108 S.Ct. at 1656.
In his dissent in Smith v. Wade, 461 U.S. 30, 103 S.Ct. 1625, 75 L.Ed.2d 632 (1983), Justice Rehnquist gave three rationales for the awarding of punitive damages: punishing the defendant, deterring the defendant from similar conduct in the future, and acting as a bounty to encourage private lawsuits seeking to assert legal rights. Punitive damages are also thought to have arisen as an additional means of compensation, for such costs as attorneys *386fees and damages from emotional injuries, which historically were not recoverable in tort. 22 Am.Jur.2d, Damages § 732 (1988). No matter which rationale is given for punitive damages, the argument fails.
The. compensation rationale is the most quickly dismissed. Emotional harm, attorneys fees, and pain and suffering are regularly recoverable under current tort law. As noted in James B. Sales and Kenneth B. Cole, Punitive Damages: A Relic That Has Outlived Its Origins, 37 Vand.L.Rev. 1117 (1984) at 1161, high compensatory damages often have a sufficient deterrent effect and should they not, the plaintiff can seek an injunction, which, if violated, would subject the defendant to criminal sanctions. Thus the plaintiff, being fully compensated, has no interest in punishing the defendant. As the Washington Supreme Court noted in an early case, “Surely the public can have no interest in exacting a pound of flesh.” Spokane Truck & Dray Co. v. Hoefer, 2 Wash. 45, 25 P. 1072, 1074 (1891). But even if the public had such an interest, punitive damages should go to the state on behalf of the public and not to the plaintiff.
The most egregious problem with punitive damages is that they attempt to punish and deter conduct without providing the safeguards of a criminal trial, such as the requirement of proof beyond a reasonable doubt, the prohibition against self-incrimination, and the security of the codification of law. In his Wade, supra, dissent, Rehnquist stated:
[Pjunitive damages are frequently based upon the caprice and prejudice of jurors. We observed in Electrical Workers v. Foust, [442 U.S. 42, 50-51 n. 14, 99 S.Ct. 2121, 2126-2127 n. 14, 60 L.Ed.2d 698 (1979) ] that “punitive damages may be employed to punish unpopular defendants,” and noted elsewhere that “juries assess punitive damages in wholly unpredictable amounts bearing no necessary relation to the harm caused.” Finally, the alleged deterrence achieved by punitive damages awards is likely outweighed by the costs — such as the encouragement of unnecessary litigation and the chilling of desirable conduct....
461 U.S. at 59, 103 S.Ct. at 1641-42.
Furthermore, if the conduct is both tor-tious and criminal, a defendant could be forced to face a kind of double jeopardy: a civil trial resulting in the imposition of punitive damages and a criminal trial resulting in fines or imprisonment. Finally, particularly in the business context, punitive damages have a tendency to punish not those who acted tortiously, but innocents: shareholders, through lower profits, or consumers, through higher prices. The blending of civil and criminal penalties defies reason and should be abolished.
Awards of punitive damages are an anomaly of our legal system. Although they are assessed in connection with the common-law tort system — which has as its overriding goal the compensation of private parties for actual injuries — punitive damages are imposed to serve the identical purposes of the criminal law: retribution and deterrence. But the punitive damage system lacks every protection of the criminal justice system. Criminal punishments can be imposed only in prosecutions by disinterested public officials who serve the public interest. They may be imposed only pursuant to clear legislative standards and punishment levels. And criminal prosecutions are subject to a panoply of explicit constitutional procedural safeguards.
Punitive damages, on the other hand, are pursued by self-interested private bounty hunters who are motivated to impose the largest possible punishment in every case. They are assessed in unlimited amounts for violation of vague, elastic, retroactive, and highly subjective standards of conduct. And, while punitive damage defendants are not afforded the numerous procedural rights of the criminal system, punitive damage awards often vastly exceed criminal punishments for comparable conduct.
*387The purpose of punitive damages is to punish an offender rather than to compensate a victim. The goals of punishment include: retribution, which here means to give a wrongdoer- his “just dessert:” and deterrence, in creating an economic disincentive to engage in prohibited activity. In this regard, punitive damages more closely resemble a criminal, rather than civil, sanction.
Under the criminal law, of course, any fines levied as punishment are paid to the state and not the victim. This conforms with the notion that it is society as a whole which has an interest in maintaining order and public safety. In light of this generally accepted premise, the award of punitive damages to the victim represents an anomaly. As the Wisconsin Supreme Court noted over a century ago: “It is difficult on principle to understand why, when the sufferer by a tort has been fully compensated for his suffering, he should recover anything more. And it is equally difficult to understand why, if the tortfeasor is to be punished by exemplary damages, they should go to the compensated sufferer, and not the public in whose behalf he is punished.” Bass v. Chicago & Northwestern Railway Co., 42 Wis. 654, 672 (1877) (conc.opinion, Ryan, C.J.).
Punitive damages invite jurors to rely on private beliefs and personal predilections. Juries are permitted to target unpopular defendants, penalize unorthodox or controversial views, and redistribute wealth.
The arguments for and against punitive damages that have developed over time are well-defined. Some lawyers argue that punitive damages: (1) serve a wholly distinct function from compensatory awards in that they deter and punish wrongful conduct; (2) encourage the continued development of safer work practices and products; and (3) are subject to review by trial and appellate courts, with new trials as a viable check on a jury’s abuse of discretion or unreasonable awards bearing little relationship to the facts of the case or the award of compensatory damages. Other lawyers argue that punitive damages: (1) are a mere surrogate for compensatory damages; (2) are often awarded by juries given unfettered discretion based on ill-defined jury instructions to award as much as they feel is necessary to punish; and (3) are viola-tive of constitutionally-protected procedural and substantive rights. In particular, the constitutional challenges raised most frequently in recent years are violations of the Due Process Clause of the Fourteenth Amendment.
Punitive damages present a persistent problem of lack of uniformity and vagueness of standards. Of greater concern is the chilling effect the unfettered discretion given jurors in considering punitive awards will have upon defendants in attempting to adequately assess the risks associated with litigating claims.
In Bankers Life & Casualty Co. v. Cren-shaw, supra, the Court declined to discuss the constitutional issues of punitive damages. However, Justice O’Conner, joined by Justice Scalia, stated in her concurrence:
Appellant has touched on a due process issue that I think is worthy of the Court’s attention in an appropriate ease. Mississippi law gives juries discretion to award any amount of punitive damages in any tort case in which a defendant acts with a certain mental state. In my view, because of the punitive character of such awards, there is reason to think that this may violate the Due Process Clause.
Punitive damages are not measured against actual injury, so there is no objective standard that limits their amount. Hence, “the impact of these windfall recoveries is unpredictable and potentially substantial.” (citation omitted). For these reasons, the Court has forbidden the award of punitive damages in defamation suits brought by private plaintiffs ... and in unfair representation suits brought against unions under *388the Railway Labor Act. (citations omitted). For similar reasons, the Court should scrutinize carefully the procedures under which punitive damages are awarded in civil lawsuits.
486 U.S. at 87-88,108 S.Ct. at 1655-56.
In Browning-Ferris Indus. v. Kelco Disposal, 492 U.S. 257, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989), Justice Brennan, in his concurrence, expressed concern about punitive damages procedures and stated:
Without statutory (or at least common-law) standards for the determination of how large an award of punitive damages is appropriate in a given case, juries are left largely to themselves in making this important, and potentially devastating, decision. Indeed, the jury in this ease was sent to the jury room with nothing more than the following terse instruction: “In determining the amount of punitive damages, ... you may take into account the character of the defendants, their financial standing, and the nature of their acts.” App. 81. Guidance like this is scarcely better than no guidance at all. I do not suggest that the instruction itself was in error; indeed, it appears to have been a correct statement of Vermont law. The point is, rather, that the instruction reveals a deeper flaw: the fact that punitive damages are imposed by juries guided by little more than an admonition to do what they think is best.
Id. at 280, 109 S.Ct. at 2923
Punitive damages may be excessive and akin to a criminal punishment, especially when compared with criminal fines. If a civil defendant is to be exposed to such “criminal liability,” the defendant should be entitled to criminal procedural protections: (1) a “beyond a reasonable doubt” burden of proof; (2) a unanimous jury; (3) an upper limit on the punishment; and (4) bifurcation of the liability and punitive damages portions of the trial.
Aside from my belief that punitive damages have no place in modern tort law, two other issues at trial require a reversal in this case: the trial court’s refusal to allow the testimony of proposed expert witness Mike Breen, and the failure of the jury instructions to mirror the relevant punitive damages statute.
II. TRIAL COURT ERRED IN EXCLUDING APPELLANT’S EXPERT WITNESS.
Breen is a Bowling Green attorney whom Appellants offered at trial as an expert witness on various bad faith issues. The trial court ruled that Breen was not competent to testify because he did not have sufficient experience in fire litigation. By avowal, it was shown that Breen has been licensed to practice law in Kentucky since 1983, and that his practice consists primarily of plaintiff litigation, concentrating on personal injury and insurance litigation, particularly bad faith issues. At the time of trial, this witness had lectured on six occasions on this topic, practiced several bad faith cases, reviewed numerous bad faith claims, and written a leading treatise on Kentucky bad faith law. Bad Faith in Kentucky: A Primer. By avowal, Breen testified that Appellant’s interpretation of the policy, its settlement offer, and the basis of that offer were reasonable, and that its response had been timely.
Appellants rightfully argue that Breen need not be an expert in fire litigation to be qualified as a bad faith expert, which encompasses a range of litigation topics. KRE 702, which governs the admissibility of testimony by experts, reads:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.
Thus, the test for allowing an expert witness is whether his testimony would assist the trier of fact. This Court held in Kentucky Power Co. v. Kilbourn, Ky., 307 *389S.W.2d 9,12 (1957), that no precise method of obtaining expertise exists. “A witness may become qualified by practice or an acquaintance with the subject. He may possess the requisite skill by reason of actual experience or long observation.”
Jurors would have little reason to know what is evidence of bad faith in the adjustment of insurance claims, and Breen himself in his treatise calls bad faith a general “substantive abstraction at its greatest.” Breen at 1. Examples of what would constitute bad faith in various insurance adjusting practices cannot differ so greatly that Breen’s testimony would not have at least made the amorphous concept more concrete. His testimony could have aided the trier of fact in putting Appellant’s actions in the context of the industry, of which he has studied hundreds of claims. That alone would qualify him as one who obtained his expertise by “long observation.”
Breen is not out of line with other expert witnesses this court has upheld. In Manchester Insurance & Indemnity Co. v. Grundy, Ky., 531 S.W.2d 493, 501 (1975), although we held that the two attorneys who acted as expert witnesses in a bad faith claim gave irrelevant testimony, we did not say they were unqualified to testify. In Washington v. Goodman, Ky.App., 830 S.W.2d 398 (1992), an internist was deemed qualified to testify about the probability and nature of infectious diseases. In Ford, supra, a serotologist who identified biological material for size, quantity and quality was allowed to testify to the likelihood that pieces of skin had come from the holes in a particular hand. In that case the appellant admitted that he knew of no one who was a direct expert in matching skin to holes, while the opposition’s physician testified that such matching would be impossible because the skin flecks would shrink, while the holes would enlarge 665 S.W.2d at 309-10. This Court in Arndell v. Peay, Ky., 411 S.W.2d 473 (1967), held that a general practitioner could give expert testimony about whether a party had senile dementia based on his observations. We stated, “[I]t has been held that the lack of specialized training by a doctor goes only to weight and not to competency.” Id. at 475. This rule was expanded beyond doctors to all expert witnesses in Washington, supra, at 400.
It is settled in Kentucky that the decision to allow an expert witness is within the discretion of the trial judge. See Ford v. Commonwealth, Ky., 665 S.W.2d 304 (1983); Gentry v. General Motors Corp., Ky.App., 839 S.W.2d 576 (1992); Washington, supra. Considering past rulings on expert witnesses, the ruling in this case was clearly erroneous and should be reversed.
In this case, the trial court abused its discretion by not allowing Breen’s testimony. Although he had little expertise on fire litigation, he had a well-grounded knowledge of bad-faith claims against insurance companies. His lack of fire experience should go only to weight and he should have been allowed to testify.
III. JURY INSTRUCTIONS SHOULD HAVE MIRRORED APPLICABLE STATUTE.
Appellant argues that the trial court erroneously failed to give an instruction on punitive damages which mirrored KRS 411.184, the punitive damages statute. Our opinion in Williams v. Wilson, Ky., 972 S.W.2d 260 (1998), declared KRS 411.184(1) (c)1 unconstitutional, but stated that the constitutionality of KRS 411.184(2) was not properly before this Court on appeal. Appellant’s objection to the instruction related to KRS 411.184(2)2. *390In its instructions, the trial court used a three-part test enumerated in Justice Leibson’s dissent in Federal Kemper Insurance Co. v. Hornback, Ky., 711 S.W.2d 844, 846 (1986), which was accepted as the state of the law in Curry v. Fireman’s Fund Insurance Co., Ky., 784 S.W.2d 176 (1989).3 The trial court also instructed the jury using KRS 411.184(f), which defines punitive damages, and KRS 411.186(2), which lists the appropriate factors to consider in determining the amount of punitive damages.
The trial court’s error lies in the belief that it can choose which portions of the statute to use in jury instructions. The trial court and Court of Appeals rely on Justice Leibson’s statement in Federal Kemper, supra, where he noted that this test was the equivalent of that for punitive damages that was described in Feathers v. State Farm Fire and Casualty Co., Ky. App., 667 S.W.2d 693 (1983), overruled by Federal Kemper, supra. Appellees also claim that the scienter requirement described by KRS 411.184(2) is incorporated into parts two and three of the three-part test. Both of these arguments fail for two reasons.
First, this Court in Williams, supra, stated, “[W]here statutes are applicable, trial courts must instruct in statutory language.” Id. at 264. See also Sorg v. Purvis, Ky., 487 S.W.2d 943 (1972), and McCulloch’s Adm’r v. Abell’s Adm’r, 272 Ky. 756, 115 S.W.2d 386, 390 (1938) (“Where the statute speaks in no uncertain terms, it hardly can be said that the use in an instruction of other terms not meaning substantially the same thing is not prejudicial error.”) Because it is imperative to instruct the jury in the exact language of applicable statutes, this Court found KRS 411.184(l)(c) unconstitutional. We stated, ‘We are unimpressed by the argument that the statute could be ‘loosely interpreted’.... It would be the height of duplicity to at once uphold the constitutionality of a statute and declare that it not be literally observed.” Williams, supra at 264.
Second, in considering the timing of the cited cases and the statute’s enactment, the statute controls. KRS 411.184 was enacted after Feathers, supra, between Federal Kemper, supra, and Curry, supra, and before Williams, supra. The statute provides in KRS 411.184(5). “This statute is applicable to all cases in which punitive damages are sought and supersedes any and all existing statutory or judicial law insofar as such law is inconsistent with the provisions of this statute.” Because of its timing, this statute would supersede Feathers, supra, and Federal Kemper, supra, in as much as Federal Kemper, supra, noted that the enumerated three-part test for bad faith is the equivalent of the test for punitive damages in Feathers, supra.
Appellees argue that if the Court had meant for the statute to control jury instructions, it would have said so in Curry, supra, or Wittmer, supra, both of which were decided after the statute’s enactment. However, nothing in Curry, supra, which simply incorporated the dissent in Federal Kemper, supra, is inconsistent with the statute. Furthermore, in considering Justice Leibson’s statement in Federal Kem-per about the similarity to the three-prong test of bad faith and the punitive damages considerations in Feathers, supra, the lower courts’ holdings are not persuasive. On the issue of punitive damages, the Court of Appeals in Feathers, supra, only stated, “if State Farm was not justified in its actions then its conduct was tortious against the *391policyholder for which consequential and punitive damages may be presented to the factfinder.” Id. at 697. (emphasis added). This statement suggests not that the finding of bad faith is the direct equivalent of finding of the appropriateness of punitive damages, but that the finding of bad faith opens the door for consideration of punitive damages. None of that trumps a statute which this court has not found to be unconstitutional. In Wittmer, supra, this Court only addressed its fear that the statute would infringe upon jural rights. We acted on that fear five years later, by holding the statute partially unconstitutional, but at no time did that affect the consideration to be given to KRS 411.184(2) in formulating jury instructions.
For the above reasons, I would reverse.
COOPER, J., joins this dissent only as to Part II and Part III.

. " 'Malice' means either conduct which is specifically intended by the defendant to cause tangible or intangible injury to the plaintiff or conduct that is carried out by the defendant both with a flagrant indifference to the rights of the plaintiff and with a subjective awareness that such conduct will result in death or bodily harm.” KRS 411.184(l)(c)

. "A plaintiff shall recover punitive damages only upon proving, by clear and convincing *390evidence, that the defendant from whom such damages are sought acted toward the plaintiff with oppression, fraud or malice.” KRS 411.184(2)

. These factors are:
1.The insurer must be obligated to pay the claim under the terms of the policy.
2. The insurer must lack a reasonable basis in law or in fact for denying claim.
3. It must be shown that the insurer either knew there was no reasonable basis for denying the claim or acted with reckless disregard for whether such a basis existed.