Court Opinion

ID: 9693131
Source: CourtListenerOpinion
Date Created: 2023-08-25 16:24:03.5775+00
Date Added: 2024-06-11T18:19:40.668852
License: Public Domain

KLEIN, J.,
Dissenting.
¶ 1 I respectfully dissent from the majority and would remand for a new trial for three reasons:
1. I believe it was error for the trial court to rely upon Erie’s behavior during the bad faith action after the underlying policy limits were paid.
2. I believe no pattern of improper behavior was attributable to Erie other than the actions involved in this matter.
3. The trial judge rendered its decision before the United States Supreme Court decision in State Farm v. Campbell, [538 U.S. 408] 123 S.Ct. [1513]1512 [155 L.Ed.2d 585] (2003) and therefore did not consider the Campbell factors when reaching its decision.
Actions during the bad faith litigation
¶2 It is clear from Conclusion of Law # 103 that the trial court relied impermis-sibly on Erie’s actions during the bad faith trial to determine bad faith and the applicability of punitive damages. The trial court stated:
Further, in awarding punitive damages, this court has considered, at great length, the conduct of Erie and its employees not only during the pendency of the Hollock UIM claim, but, just as importantly, throughout the trial.
*423Findings of Fact and Conclusions of Law, p. 88 (1/7/02).
¶ 3 Our Court, in a matter of first impression, held that bad faith suits may extend to the conduct of an insurer during the pendency of litigation. O’Donnell v. Allstate Ins. Co., 734 A.2d 901, 906 (Pa.Super.1999). However, we later limited this concept in Ridgeway v. U.S. Credit Life Ins. Co., 793 A.2d 972, 977-78, (Pa.Super.2002). In Ridgeway, we held that because the duty of good faith and fair dealing is extinguished once a settlement has been reached or a judgment entered, the insurer’s fiduciary duty does not extend past that point. Thus, no bad faith can be imputed to the insurer for actions taken post-judgment or post-settlement.
¶ 4 It is undisputed that once the UIM arbitration award was entered and molded in November 1998, Erie paid the limits of the policy. Thus, any actions taken by Erie after that date cannot be considered to be bad faith. Hollock filed the bad faith action in October 1999, almost one year after the payment of the UIM claim. No action taken by Erie in defense of the bad faith claim can be considered in determining whether Erie committed bad faith in the investigation and handling of the underlying UIM claim.
¶ 5 Further, the United States Supreme Court in State Farm v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003), held that only conduct that relates to the bad faith harm should be considered when evaluating the appropriateness of punitive damages. The Supreme Court stated:
A defendant’s dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages.
Id. at 1523. In this case, the trial court apparently gave equal weight to Erie’s actions during the bad faith trial, which is irrelevant, as it did to its actions in handling the underlying UIM claim. I believe this was improper and requires reversal.
The amount of punitive damages
¶ 6 Because the trial court issued the Findings of Facts and Conclusions of Law before the United States Supreme Court decision in Campbell, it was not able to utilize that binding authority in formulating the award.
¶ 7 The guideposts for determining whether a punitive damage award is constitutionally excessive were initially set forth in BMW of North America, Inc. v. Gore, 517 U.S. 559, 575, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) and refined in Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001) and Campbell, supra.
¶ 8 As stated in Campbell, 123 S.Ct. at 1515, in reviewing punitive damages the appellate court must consider:
1. the degree of reprehensibility of the defendant’s misconduct,
2. the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award, and
3. the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.
¶ 9 Under those guideposts, the punitive damages award cannot be supported by the conclusions of law as stated by the trial court. Thus, a new trial is necessary before a different judge.
The degree of reprehensibility
¶ 10 While the facts as found by the trial court support a conclusion that there was a significant degree of reprehensibility in Erie’s dealing with Hollock, this represents just the handling of a single claim. *424As noted in Campbell, an award cannot be justified on the grounds that Erie was a recidivist. Just as there is “scant evidence” in Campbell that there was a pattern of behavior by the insurance company, there is scant evidence here that the excesses in the handling of this file were standard practice on the part of Erie.
The disparity between the actual harm and the punitive damages award
¶ 11 Because the amount of the claim involved was the policy limits of $500,000,1 agree with the plaintiff that the approximately $280,000 in interest and attorney fees alone should not be considered in establishing the ratio. I believe $780,000 is a fairer figure. However, in examining the currents facts under the Campbell analysis, particularly considering that there is no evidence to show that this represents anything other than the mishandling of one file, the Supreme Court’s comment, “[the degree of reprehensibility] likely would justify a punitive damages award at or near the compensatory damages amount.” Campbell, 123 S.Ct. at 1526, is particularly relevant.
The possible civil penalties
¶ 12 Once again, absent proof of a pattern of this kind of behavior on the part of Erie, it is unlikely that the company would be suspended or that any significant fine would be imposed by the insurance department.
The standard of review
¶ 13 The United States Supreme Court held in Cooper, supra, that federal appellate courts must apply a de novo review standard when examining whether a punitive damage award is unconstitutionally excessive. Id. This is a major question we are now presented with. I do not believe Cooper stands for the proposition that we, appellate court judges, should ourselves fix the amount of punitive damages. We were not in the courtroom. We did not have the opportunity to observe the witnesses. We are not in a position to take testimony and assess credibility. I believe that it is our responsibility to take a fresh look at the record and apply the relevant factors to determine whether we view the evidence as sufficient to sustain the. punitive damage award fixed by the trier of fact.
¶ 14 Following Cooper, there has been considerable consternation and confusion regarding the difference between a trial court reviewing the award of punitive damages as an abuse of discretion or conducting a de novo review. It is not only unclear what the precise difference between the two standards is, it is also unclear whether the de novo standard applies to the states. However, under either standard, I believe that Cooper requires a reversal of the trial court in this instance.
¶ 15 I do not believe that the Supreme Court mandated that the Courts of Appeals fix the punitive damages anew. Were those appellate courts to put a new figure on an award for punitive damages, they would, by necessity, have to conduct hearings, assess the credibility of witnesses and act as a trial court in making the determination. Rather than forcing an appellate court to abandon its traditional role as reviewer of a record, I interpret Cooper to mean that the appellate court should simply review each relevant factor to determine whether the punitive damage award assessed at trial is reasonable and supportable, not to reassess the award. This is what I propose here.
¶ 16 As noted by a number of judges and justices, the difference between a review based on abuse of discretion or a de novo review of the facts may be a distinction without a difference. Even the majority in Cooper stated its ruling could apply to only a relatively small number of cases. Cooper, 532 U.S. at 441, 121 S.Ct. 1678. *425Justice Ginsberg, dissenting, stated: “But to the extent the inquiry is “legal” in character, there is little difference between review de novo and review for abuse of discretion.” Id. at 448, 121 S.Ct. 1678. Nonetheless, I propose to follow Cooper and use the language of de novo review.
¶ 17 I believe that Cooper will apply to the Pennsylvania courts as well as the federal. In the majority opinion the reasoning behind the de novo standard is that punitive damages are akin to a criminal fíne and therefore, constitutional safeguards must apply. While the Cooper majority noted that many states have passed legislation placing limits on the permissible size of punitive damage awards, Pennsylvania has not. The Pennsylvania Supreme Court has adopted the test that punitive damages must “shock the conscience” before they will be reduced. This standard has allowed for punitive damages that would be unacceptable under Campbell. Therefore, if there is no real judicial standard nor any legislative standard set to limit punitive damages, it appears that a de novo review is necessary to insure that the constitutional rights of the defendant are preserved. The Due Process Clause of the Fourteenth Amendment makes the Eighth Amendment’s prohibition against excessive fines and cruel and unusual punishment applicable to the states. Furman v. Georgia, 408 U.S. 238, 92 S.Ct. 2726, 33 L.Ed.2d 346 (1972) (per curiam); BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996).
¶ 18 Because I believe that the trial court has in no small measure based its decision to award punitive damages on improper factors, and because I believe this Court is in no position to reassess and recalculate the award of punitive damages, I must dissent from the majority. I would reverse the decision of the trial court and remand for a new trial.
¶ 19 HUDOCK, J. joins.