Bankers Life and Casualty Company v. Crenshaw

• Decision Date: 16 May 1988
• Docket Number: No. 85-1765,85-1765
• Citation: 100 L.Ed.2d 62,486 U.S. 71,108 S.Ct. 1645
• Parties: BANKERS LIFE AND CASUALTY COMPANY, Appellant, v. Lloyd M. CRENSHAW
• Court: U.S. Supreme Court

486 U.S. 71

108 S.Ct. 1645

100 L.Ed.2d 62

BANKERS LIFE AND CASUALTY COMPANY, Appellant,

v Lloyd M. CRENSHAW.

No. 85-1765.

Argued Nov. 30, 1987.

Decided May 16, 1988.

Syllabus

In a state-court suit upon an insurance claim for loss of a limb, the jury awarded appellee the $20,000 provided by his policy and punitive damages of $1.6 million based on appellant's bad-faith refusal to pay the claim. Concluding that the punitive damages award was not excessive in light ofappellant's financial worth and the degree of its wrongdoing, the Mississippi Supreme Court affirmed the verdict without modification, and assessed an additional 15% penalty against appellant in accordance with a state statute imposing such a penalty on parties who appeal unsuccessfully from money judgments or other categories of judgments whose value may be readily determined. Although the appeal had not raised a federal constitutional challenge to the size of the punitive damages award, appellant argued, in its petition for rehearing, that the award "was clearly excessive, not reasonably related to any legitimate purpose, constitutes excessive fine, and violates constitutional principles." Appellant's Motion to Correct Judgment also alleged that the statutory penalty violated its equal protection rights under the Federal and State Constitutions. Without opinion, the State Supreme Court denied the petition for rehearing and the Motion to Correct Judgment.

Held:

1. This Court will not reach appellant's claims that the punitive damages award violated the Due Process, Contract, and Excessive Fines Clauses of the Federal Constitution, since those claims were not raised and passed upon in state court. Hathorn v. Lovorn, 457 U.S. 255, 102 S.Ct. 2421, 72 L.Ed.2d 824, distinguished. The petition for rehearing's vague and general appeal to constitutional principles was insufficient to adequately raise the Contract Clause or due process claims. Similarly, the petition's reference to the award's excessiveness is too oblique to have properly raised the Federal Excessive Fines Clause claim, since no mention was made of the Clause, the Federal Constitution, or federal law, and the Mississippi Constitution contains its own Excessive Fines Clause, which the State Supreme Court could have taken to underlie the excessiveness challenge if it understood appellant to be offering a constitutional challenge. Assuming that this Court's "not pressed or passed upon below" rule is not jurisdictional but is merely a prudential restriction, the more prudent course here is to decline review of the important and difficult Federal Excessive Fines Clause issue. This course will permit a number of less intrusive and possibly more appropriate, resolutions by the state legislature or courts, while any ultimate review of the question in this Court will gain the benefit of a well-developed record and a reasoned opinion on the merits by the State Supreme Court. Pp. 76-80.

2. Mississippi's penalty statute does not violate the Equal Protection Clause of the Fourteenth Amendment, since it is reasonably tailored to achieve the State's legitimate objectives of discouraging frivolous appeals, compensating appellees for the intangible costs of litigation, and conserving judicial resources. The statute does not discriminate against a particular class of appellants in an arbitrary and irrational fashion, since it broadly applies to both plaintiffs and defendants, as well as to a variety of specified types of readily determined judgments, and since its limitation to appellants from such judgments represents a rational, if partial, attempt to deter frivolous appeals without the substantial judicial intervention that the inclusion of other types of claims would require. Moreover, the statute poses little danger of discouraging meritorious appeals along with insubstantial ones, since the 15% penalty operates only after a judgment has been affirmed without modification and represents a relatively modest additional assessment. Lindsey v. Normet, 405 U.S. 56, 92 S.Ct. 862, 31 L.Ed.2d 36, distinguished. Although the State might have enacted a statute that more precisely served the intended goals, perfection is not required under the rational-basis test. Pp. 80-85.

483 So.2d 254 (Miss.1985), affirmed.

MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, J., joined, in all but Part II of which WHITE, J., joined, in all but Part II and n. 1 of which O'CONNOR, and SCALIA, JJ., joined, and in all but Part III of which BLACKMUN, J., joined. WHITE, J., filed an opinion concurring in part, in which SCALIA, J., joined, post, p. ----. O'CONNOR, J., filed an opinion concurring in part and concurring in the judgment, in which SCALIA, J., joined, post, p. ----. SCALIA, J., filed an opinion concurring in part and concurring in the judgment, post, p. ----. BLACKMUN, J., filed an opinion concurring in part and dissenting in part, post, p. ----. STEVENS and KENNEDY, JJ., took no part in the consideration or decision of the case.

Theodore B. Olson, Washington, D.C., for appellant.

Bruce J. Ennis, Jr., Washington, D.C., for appellee.

Justice MARSHALL delivered the opinion of the Court.

In this case we must decide whether a Mississippi statute imposing a 15% penalty on parties who appeal unsuccessfully from a money judgment violates the Equal Protection Clause.

I

This action grows out of allegations that appellant Bankers Life and Casualty Company refused in bad faith to pay appellee Lloyd Crenshaw's insurance claim for loss of a limb. According to testimony at trial, appellee was injured on January 6, 1979, when a car alternator he was repairing rolled off his workbench and landed on his foot. Three days later, after the injury had not responded to home treatment, appellee went to the emergency room of the local Air Force base hospital. Hospital doctors prescribed a splint, crutches, and pain medication, and told appellee to return in a week. Appellee revisited the hospital three times over the next five days, each time complaining of continuing pain in his foot. By the last visit, appellee's foot had swollen and begun to turn blue, and the examining doctor recommended a surgery consultation. Appellee was admitted to the hospital, where on January 17, an Air Force general surgeon determined that a surgical amputation was necessary. The following day, appellee's leg was amputated below the knee.

At the time of the amputation, appellee was insured under a group policy issued by appellant. The policy provided a $20,000 benefit for loss of limb due to accidental bodily injury. In April 1979, appellee submitted a claim under the policy. Appellant denied the claim. The apparent basis for the denial was an opinion of appellant's Medical Director, Dr. Nathaniel McParland, that the cause of the amputation was not appellee's accident but a pre-existing condition of arteriosclerosis, a degenerative vascular disease. Appellee responded to the company's denial by furnishing a statement signed by three doctors who treated him at the hospital. They stated that appellee's arteriosclerosis was " 'an underlying condition and not the immediate cause of the gangrenous necrosis. The precipating [sic] event must be considered to be the trauma which initially brought him to the Emergency Room on 9 January.' " 483 So.2d 254, 261 (Miss.1985). Dr. McParland and a company analyst concluded that this statement was inconsequential, and appellant adhered to its position that the arteriosclerosis was responsible for the loss of limb.

Appellee persisted in his efforts to recover under the policy, eventually hiring an attorney, and appellant persisted in its intransigence. In its correspondence with appellee and his attorney, appellant repeatedly asserted that appellee had not suffered an injury as defined in the policy, that is, a " ' "bodily injury, causing the loss while this policy is in force, directly and independently of all other causes and effected solely through an accidental bodily injury to the insured person." ' " Id., at 262, quoting letter of Apr. 8, 1980, from Wm. Herzau to appellee. In contemporaneous internal memoranda, however, appellant noted that notwithstanding the policy language, appellee was entitled to recovery under Mississippi law if his injury had "aggravate[d], render[ed] active, or set in motion a latent or dormant pre-existing physical condition or disease." Id., at 262, 263. The memoranda also demonstrated that appellant knew its files were incomplete yet never attempted to obtain appellee's medical records, most notably his emergency room report, even though Mississippi law and internal company procedures required such efforts.

After appellant again denied the claim on the ground that there was no evidence that appellee's " 'injury caused this loss "directly and independently of all other causes," ' " see id., at 263, appellee brought this suit in Mississippi state court. His complaint requested $20,000 in actual damages, and, as amended, $1,635,000 in punitive damages for the tort of bad-faith refusal to pay an insurance claim. The jury awarded appellee the $20,000 provided by the policy and punitive damages of $1.6 million.

The Mississippi Supreme Court affirmed the jury verdict without modification. It concluded that the punitive damages award was not excessive in light of appellant's financial worth and the degree of its wrongdoing. See id., at 279. Because the money judgment was affirmed without modification, a penalty of $243,000, or 15% of the judgment, was assessed against appellant and added to appellee's recovery in accordance with Mississippi's penalty statute. See Miss.Code Ann. § 11-3-23 (Supp. 1987). In its appeal to the Mississippi Supreme Court, appellant did not raise a federal constitutional challenge to the size of the punitive damages award.¹ Following the affirmance of the jury verdict, appellant filed a petition for rehearing. Appellant...