go on welfare, declare bankruptcy, or be evicted if she had still been
receiving her disability benefits from Defendants. (Tr. 494:10-18)
The damage awards for emotional distress in other California and
federal cases are comparable to Plaintiff's. Larger awards for emotional
distress have been upheld — $400,000 and more. Clayton v. United
Services Auto Assn. (1997) 54 Cal.App.4th 1158 (upholding emotional
distress award of $400,000 for insurance bad faith); (Tomaselli v.
Transamerica Ins. Co., 25 Cal.App.4th 1269, 1286 (1994); (upholding
emotional distress award of $500,000).
Defendants claim they are being penalized for Plaintiff's financial
losses due to bad investments.*fn25 Defendants cannot in fairness shift
the blame for their wrongful actions to Plaintiff by citing her unwise
investments as the cause of her damages. Under California law, Defendants
are responsible for injuries where their conduct was a substantial
factor. Defendants seek to use a comparative fault analysis, but are
barred from asserting comparative bad faith or any modification of their
fault based on Plaintiff's conduct. Kransco v. American Empire Surplus
Lines Ins. Co., 23 Cal.4th 390 (2000). Defendants did not seek a jury
instruction on ordinary comparative fault. The jury impliedly found that
Plaintiff could have weathered her own financial mismanagement but for
Defendants' termination of her benefits.
Conclusion on damage awards: Plaintiff presented substantial evidence
of her damages, both contractual and extra-contractual, including the
loss of her income, and her emotional distress. The jury's awards were
reasonable, under both California and federal law.
14) Defendants contend that Punitive damages award of $5 million is
grossly excessive — unconstitutional under the due process clause,
and grossly excessive under California law.
The jury awarded Plaintiff $5 million as punitive damages. This amount
represents 0.1% of UnumProvident's net worth of $5 billion and 6.25% of
Paul Revere's net worth of $800 million. The percentages are well within
California's 10% of net worth standard for punitive damages. Sierra Club
Foundation v. Graham, 72 Cal.App.4th 1135, 1163 (1999); Weeks v. Baker
& McKenzie, 63 Cal.App.4th 1128, 1166 (1998). Some California courts
have approved punitive damages awards representing 10-23% of defendants'
net worth. Valbona v. Springer, 43 Cal.App.4th 1525, 1539 n. 15 (1996)
(23.1%); Sommer v. Gabor, 40 Cal.App.4th 1455, 1464 (1995) (7.25%);
Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc., 155 Cal.App.3d 381, 391
(1984) (17.5%); Wollersheim v. Church of Scientology, 212 Cal.App.3d 872
(1989) (12.5%); Schomer v. Smidt, 113 Cal.App.3d 828 (1980) (10%).
The goal is to award an amount of punitive damages that is sufficient
to deter the conduct but is not excessive. [1/10 of 1 percent of
defendant's gross assets and less than a week's worth of its net income
in 1974; held not excessive].)
Notrica v. State Compensation Ins. Fund
70 Cal.App.4th 911, *952 (1999). (citation omitted)
The ratio between compensatory and punitive damages is not overly
significant. "The rule that the exemplary should bear a reasonable
relation to the actual damages is only for the purpose of guarding
against excess. [Citations.] But these cases also state that there is no
fixed ratio by which to determine the proper proportion between the two
classes of damages." (Finney v. Lockhart (1950) 35 Cal.2d 161, 164 [in
defamation case, $2,000 in punitives, $1 award]; see also Neal v. Farmers
Ins. Exchange, supra, 21 Cal.3d at &. 928-929 [$740,000 punitive damages
award and about $10,000 in compensatory damages, a 74 to 1 ratio]; 952
Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co. (1987)
189 Cal.App.3d 1072, 1097-1098 [$5 million in punitive damages and
$152,983.43 in compensatory damages, a ratio of 32.7 to 1]; Chodos v.
Insurance Co. of North America (1981) 126 Cal.App.3d 86, 90, 103-104,
[$200,000 in punitive damages and $5,146.71 in compensatory damages, a
ratio of about 40 to 1]; Wetherbee v. United Ins. Co. of America (1971)
18 Cal.App.3d 266, 270-271 [$200,000 in punitive damages and $1,050 in
compensatory damages, a ratio of about 190 to 1].) Notrica v. State
Compensation Ins. Fund 70 Cal.App.4th 911, 951-952 (Cal.App. 2 Dist.,
In the case at bar the ratio of punitive damages ($5 million) to
compensatory damages ($2.67 million) is less than 2:1, well under the
ratios approved by California courts, Neal, supra, 21 Cal.3d at 928
(affirming 74:1 ratio for insurer's bad faith); Weeks, supra, 63
Cal.App.4th at 1166 (70:1); Steven v. Owens-Corning Fiberglas Corp.,
49 Cal.App.4th 1645, 1651 (1996) (80:1); Leonardini v. Shell Oil Co.,
216 Cal.App.3d 547, 555 (1989) ($1 million punitives — 25:1);
Ballou v. Master Properties No. 6, 189 Cal.App.3d 65, 71 (1987) ($2
million punitives — 13:1).
Conclusion regarding punitive damages: The jury awarded $5 million as
punitive damages. The jury had evidence of Defendants' net worth (over $5
billion for UnumProvident and $800 million for Paul Revere) and of the
egregiousness of their conduct. (Targeting a particular category of
claims for termination, subjecting their own insured to biased claims
handling and withdrawing benefits rightfully due her, driving her into
poverty).*fn26 A reasonable person could well conclude that the award of
punitive damages was not excessive.
15) Defendants assert that Plaintiff failed to establish entitlement to
any award of attorney's fees.
The jury awarded Plaintiff $750,000 for attorneys' fees. Defendants
rely on the California Supreme Court decision in Brandt v. Superior
Court, in which the court held that a successful plaintiff in an action
against an insurance company may only receive an award of attorney's fees
incurred to obtain the amount due under the policy. (Normally, each party
to a civil action must bear his or her own legal fees (Ca Civ Pro §
However, fees reasonably incurred by an insured to enforce payment of
benefits due under an
insurance policy — as distinguished from fees
attributable to proving the insurer's "bad faith" — are recoverable
damages in a "bad faith" action against the insurer. Brandt v. Sup.Ct.
(Standard Ins. Co.) (1985) 37 Cal.3d 813, 817. The court in the case at
bar will look first at which benefits are due under Plaintiff's policy.
This court finds as a matter of law that in addition to past and future
unpaid benefits, Plaintiff may recover under a theory of insurance bad
faith for both emotional distress and future benefits as benefits
recoverable under the policy. Furthermore, the court also finds as a
matter of law that the jury may award attorney fees without an hourly
itemization, but according to the reasonable value of the work performed
to obtain Plaintiff's benefits due under the policy. The court reaches
this conclusion based on the following decisions by other courts, both
state and federal.
In Crisci v. Security Ins. Co. of New Haven, Conn., 66 Cal.2d 425, 434
(1967), the California Supreme Court unanimously upheld an award of
emotional distress damages for breach of a liability insurance contract
sounding in both contract and tort:
"(P)laintiff did not seek by the contract involved
here to obtain a commercial advantage but to protect
herself against the risks of accidental losses,
including the mental distress which might follow from
the losses. Among the considerations in purchasing
liability insurance, as insurers are well aware, is
the peace of mind and security it will provide in the
event of an accidental loss, and recovery of damages
for mental suffering has been permitted for breach of
contracts which directly concern the comfort,
happiness or personal esteem of one of the parties.
(Chelini v. Nieri, 32 Cal.2d 480, 482 (1948).)"
See Westervelt v. McCullough, 68 Cal.App. 198 (1924).
Likewise, in Fletcher v. Western National Life Ins. Co.,
10 Cal.App.3d 376, 404 (1970), the above statement from Crisci was quoted
with approval in the context of a disability insurance contract. The
court elaborated as follows:
"These considerations (the insured's peace of mind and
security) are particularly cogent in disability
insurance. The very risks insured against presuppose
that if and when a claim is made, the insured will be
disabled and in strait financial circumstances and,
therefore, particularly vulnerable to oppressive
tactics on the part of an economically powerful
entity." Kewin v. Massachusetts Mut. Life Ins. Co.
409 Mich. 401, 442, 295 N.W.2d 50, 65 (Mich., 1980)
Accordingly, in the case at bar, this court finds that Plaintiff's
peace of mind was a policy benefit, and that any efforts by her attorneys
to obtain damages for her emotional distress caused by Defendants' bad
faith termination of her policy benefits are compensable as incurred to
obtain benefits due her under the policy.