Court Opinion

ID: 9754411
Source: CourtListenerOpinion
Date Created: 2023-08-28 19:59:37.804934+00
Date Added: 2024-06-11T09:55:41.450868
License: Public Domain

SWANN, Judge,
concurring in part and dissenting in part.
¶ 103 I agree with the majority that the evidence at trial was sufficient to permit the jury to find MetLife liable for bad faith. But because I disagree that there was sufficient evidence to permit a reasonable jury to find by clear and convincing evidence that Met-Life’s conduct justified an award of punitive damages under Arizona law, I respectfully dissent in part.
¶ 104 Punitive damages “should be appropriately restricted to only the most egregious of wrongs. ‘A standard that allows exemplary awards based upon gross negligence or mere reckless disregard of the circumstances overextends 'the availability of punitive damages, and dulls the potentially keen edge of the doctrine as an effective deterrent of truly reprehensible conduct.’” Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 331, 723 P.2d 675, 680 (1986) (in banc) (quoting Tuttle v. Raymond, 494 A.2d 1353, 1361 (Me.1985)). Even viewing the evidence in the light most favorable to the Nardellis, this case simply does not involve “the most egregious of wrongs.”
¶ 105 Severe damage to a car is a maddening occurrence. No doubt most owners would prefer a new car even to one that has been well-repaired after heavy damage. But the policy the Nardellis paid for did not require that the vehicle be totaled unless specific criteria were met. There is ample evidence that MetLife handled the investigation of the damage poorly, and that it paid some amount less than it should have for the repairs. MetLife acted in a manner that failed to give equal consideration to the rights of its insureds. It was therefore appropriate for the jury to award compensatory damages for bad faith — even compensatory damages that significantly exceeded the theoretical limits of the policy.34 But “[t]he type *613of tortious conduct justifying punitive damages should be only those limited classes of consciously malicious or outrageous acts of misconduct where punishment and deterrence is both paramount and likely to be achieved.” Linthicum, 150 Ariz. at 331, 723 P.2d at 680. I find no evidence, much less clear and convincing evidence, that MetLife’s conduct approached this level of outrage. Indeed, if the conduct in this case is sufficient to warrant punitive damages, I find it difficult to imagine a ease in which an insurer could be liable for bad faith without facing a punitive award.
¶ 106 Though it is an intentional tort, commission of bad faith does not itself establish eligibility for punitive damages. In Rawl-ings v. Apodaca, 151 Ariz. 149, 161-62, 726 P.2d 565, 577-78 (1986) (in bane), our supreme court rejected the notion that punitive damages should be available in every bad faith case and (as the majority notes) endorsed the view that “something more” than the conduct necessary to establish the tort must be proven. Not surprisingly, the phrase “something more” has proven to be a difficult legal standard for both judges and juries to apply predictably in practice.
¶ 107 In Linthicum, our supreme court forcefully addressed the perils of amorphously defined standards for punitive damages, and warned against their use to justify punitive awards in garden-variety intentional tort cases:
Having juries decide whether to award compensatory vs. punitive damages based on vague verbal distinctions between mere negligence, gross negligence and reckless indifference is often futile and nothing more than semantic jousting by opposing attorneys. Further, it leads to misapplication of the extraordinary civil remedy of punitive damages____
We, therefore, conclude that a less broad standard for punitive damages is needed. As discussed earlier, it is the “evil mind” that distinguishes action justifying the imposition of punitive damages. In whatever way the requisite mental state is expressed, the conduct must also be aggravated and outrageous. It is conscious action of a reprehensible character. The key is the wrongdoer’s intent to injure the plaintiff or his deliberate interference with the rights of others, consciously disregarding the unjustifiably stibstantial risk of significant harm to them. While the necessary “evil mind” may be inferred, it is still this “evil mind” in addition to outwardly aggravated, outrageous, malicious, or fraudulent conduct which is required for punitive damages. We hold that before a jury may award punitive damages there must be evidence of an “evil mind” and aggravated and outrageous conduct.
150 Ariz. at 331, 723 P.2d at 680 (emphases added) (internal citations omitted).
¶ 108 To illustrate the need for a “less broad” standard, the Linthicum court identified 13 separate standards for punitive damages that had appeared in past cases, including the “intent to injure” and “reckless disregard for or indifference to the rights of others” that it later identified as “key.” See id. at 330-31, 723 P.2d at 679-80. By articulating a two-pronged standard containing both intent and recklessness, however, the Linthicum decision can be misread to hold that any tortfeasor who acts at least recklessly may be exposed to punitive damages. I read Linthicum to eschew such a broad punitive damage doctrine.
¶ 109 The majority’s opinion acknowledges the heightened standard in these oft-cited cases, and finds the “something more” in the fact that MetLife had engaged in an aggressive internal campaign to increase its profits. At bottom, the majority opinion appears to reason that MetLife’s focus on profits caused it recklessly to disregard the Nardellis’ rights under the policy. But this reasoning conflates the “recklessness” prong of Linthi-cum and the standard for mere tort liability. In Rawlings, the court made clear that bad faith is an intentional tort, holding:
The “intent” required here is an “evil hand” — the intent to do the act. Mere negligence or inadvertence is not sufficient — the insurer must intend the act or omission and must form that intent with*614out reasonable or fairly debatable grounds.... To be liable for tort damages, it need only to have intended its act or omission, lacking a founded belief that such conduct was permitted by the policy.
The founded belief is absent when the insurer either knows that its position is groundless or when it fails to undertake an investigation adequate to determine whether its position is tenable. In either event, its position is without reasonable basis and subjects it to payment of damages in addition to those traditionally recoverable in a breach of contract action.
151 Ariz. at 160, 726 P.2d at 576 (emphasis added) (footnote omitted).
¶ 110 Here, there was evidence that Met-Life “intended” its acts — it failed to conduct an adequate investigation into the Nardellis’ claim and arguably chiseled the claim without a good faith belief that it was acting appropriately under the policy. And its actions were not the result of mere negligence — as the majority forcefully demonstrates, a reasonable inference exists that MetLife’s behavior was motivated by concerns for its own profit position.
¶ 111 But a bare profit motive is not “something more,” and it is not the “most egregious of wrongs.” To the contrary, the quest for profits is among the most ordinary of motivations, and one that our law actually seeks to promote in most commercial contexts.35 Indeed, it is difficult to imagine my ease in which an insurer’s bad faith is not motivated by its own economic self-interest. By creating the tort of bad faith, our supreme court has made clear that an insurer may not elevate its economic interests above the interests of its insured. But by holding that only the rare and extreme bad faith case qualifies for punitive damages, the court has made clear that a profit motive alone cannot suffice.
¶ 112 This is not a case in which the evidence showed, for example, that MetLife directed its adjusters to determine the proper value of a claim and underpay it, either individually or system-wide. There is no evidence that MetLife set out to defraud its insureds by, for example, misrepresenting the quality of parts used in repairs. There is no evidence that MetLife deprived its insureds of care necessary for life (and even that fact did not result in punitive damages in Linthi-cum). There is no evidence that MetLife set up its system to deny valid claims. And of course there is no evidence that MetLife affirmatively intended to injure the Nardellis.
¶ 113 For these reasons, I would hold that the trial court should have granted MetLife judgment as a matter of law on the issue of entitlement to punitive damages, and I dissent from the portion of the majority’s opinion concerning punitive damages. I concur with the remainder of its analysis.

. The fact that an Arizona insurer can be exposed to compensatory damages exceeding policy limits — and attorney’s fees — provides a signifi*613cant deterrent without the need for punitive damages in every case.

. Even torts that would seem inherently to involve an "evil mind," such as fraud, do not automatically qualify for punitive damages. Rawlings, 151 Ariz. at 162 n. 8, 726 P.2d at 578 n. 8 (“[P]unitive damages are not recoverable in every fraud case, even though fraud is an intentional tort.”). Against that restrictive test, it is anomalous to suggest that ordinary business pressures amount to clear and convincing evidence of an "evil mind.”