James v. Horace Mann Ins. Co.

• Decision Date: 27 November 2006
• Docket Number: No. 26231.,26231.
• Citation: 638 S.E.2d 667
• Court: South Carolina Supreme Court
• Parties: Russell JAMES and Teresa James, Respondents, v. HORACE MANN INSURANCE COMPANY, James D. Geiger, and Ronald Wilson, Defendants, of whom Horace Mann Insurance Company is Appellant.

Page 667

638 S.E.2d 667

Russell JAMES and Teresa James, Respondents, v. HORACE MANN INSURANCE COMPANY, James D. Geiger, and Ronald Wilson, Defendants of whom Horace Mann Insurance Company is Appellant.

No. 26231.

Supreme Court of South Carolina.

Heard November 1, 2006.

Decided November 27, 2006.

Lawrence B. Orr, of Orr, Elmore & Ervin, LLC, of Florence, for Appellant.

Kevin M. Barth, of Ballenger, Barth & Hoefer, of Florence, for Respondents.

Justice BURNETT:

In this action, a jury found Horace Mann Insurance Company (Appellant) liable for bad faith related to the handling of an insurance claim and awarded actual and punitive damages to Russell and Teresa James (Respondents). Appellant appeals the trial court's denial of its motion for judgment notwithstanding the verdict (JNOV), new trial, or new trial nisi remittitur as to punitive damages. Appellant also appeals the trial court's admission of evidence regarding Respondents' lost wages and attorneys' fees. We certified the case for review from the Court of Appeals pursuant to Rule 204(b), SCACR, and we affirm.

FACTUAL/PROCEDURAL BACKGROUND

In the early 1980s, Respondents purchased a homeowner's insurance policy from Appellant through its agent, Ronald Wilson. In 2000, Appellant sent a renewal notice to Respondents which included a new endorsement for liability coverage for animal bites. The endorsement provided coverage for liability arising out of animal bites, with several exclusions, and limited the coverage to $25,000 per occurrence. Respondents renewed their homeowner's insurance policy, including the animal bite liability coverage, in 2000, 2001, and 2002.

On August 2, 2002, James D. Geiger was bitten by Respondents' dog and was hospitalized due to injuries arising out of the bite. Respondents subsequently submitted a claim to Appellant under their homeowner's insurance policy to cover Geiger's damages. Appellant assigned the matter to a claims adjuster, Bruce Garner (Adjuster). On August 16, 2002, Adjuster contacted Geiger and told Geiger that there was a medical payments coverage, which was immediately payable. Adjuster also told Geiger that Respondents had liability coverage for animal bites up to $25,000, but denied Geiger could collect under that coverage without further proof.

Geiger hired an attorney and sued Respondents for damages arising out of the dog bite. Settlement negotiations failed and the case went to trial. South Carolina Code Ann. § 47-3-110 (1987) imposes strict liability on a dog owner for damages arising out of a dog bite when the victim is lawfully on the owner's property, except when the victim provokes the dog. A jury returned a verdict against Respondents and awarded Geiger $50,500 in damages. Appellant paid $25,000 of the judgment and Respondents paid the remaining $25,500.

Respondents filed this action against Appellant and Wilson¹ alleging seven causes of action including, inter alia, a declaratory judgment to determine the liability coverage under their homeowner's insurance policy for injuries arising out of a dog bite, breach of contract, negligence, and bad faith. At trial, Respondents testified when they submitted Geiger's claim to Appellant, they believed the applicable coverage under their homeowner's insurance policy was the general personal liability coverage. Respondents testified that prior to submitting Geiger's claim they were unaware their homeowner's insurance policy included a specific coverage for liability arising out of animal bites. Respondents also testified Wilson never advised them of this liability coverage for animal bites.

Geiger testified Adjuster told him that under Respondents' homeowner insurance policy, Geiger must prove negligence to recover any amount beyond the medical payments coverage. Geiger also testified he would have accepted a settlement offer prior to hiring an attorney and he would not have hired an attorney if Adjuster had told him the correct law and agreed to cover his medical bills and lost wages. Geiger's attorney and Respondent Russell James also testified Adjuster took the position that Geiger must prove negligence before he could recover from Respondents. Adjuster testified Geiger had to prove he did not provoke the dog to recover damages from Respondents.

Respondent Russell James testified he believed Adjuster, and thus Appellant, had mishandled the insurance claim by refusing to pay Geiger's medical bills and lost wages without proof of Respondents' negligence. He further testified he felt Appellant had mishandled the claim by encouraging Geiger to sue Respondents.

This action was submitted to a jury on the following causes of action: negligence on the part of Wilson for failing to advise Respondents of the animal bite liability coverage and bad faith on the part of Appellant in handling the claim. The jury found Wilson was not liable to Respondents. The jury also found Appellant was liable for bad faith and awarded $146,600 actual damages and $1,000,000 punitive damages to Respondents.

ISSUE

Did the trial court err in finding the punitive damages award did not violate the Due Process Clause of the Fourteenth Amendment?

STANDARD OF REVIEW

A motion for new trial nisi remittitur asks the trial court to reduce the verdict because the verdict is merely excessive. See O'Neal v. Bowles, 314 S.C. 525, 527, 431 S.E.2d 555, 556 (1993). The denial of a motion for a new trial nisi is within the trial court's discretion and will not be reversed on appeal absent an abuse of discretion. Id. If the amount of the verdict is grossly inadequate or excessive so as to be the result of passion, caprice, prejudice, or some other influence outside the evidence, the trial court must grant a new trial absolute. Id.

LAW/ANALYSIS

Appellant argues the trial court erred in denying its motion for a new trial nisi remittitur as to punitive damages. Appellant contends the trial court did not conduct a proper post-verdict review of the punitive damages award as required by Gamble v. Stevenson, 305 S.C. 104, 406 S.E.2d 350 (1991), and BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). We disagree.

The practice of awarding punitive damages originated in principles of criminal law "to deter the wrongdoer and others from committing like offenses in the future." Laird v. Nationwide Ins. Co., 243 S.C. 388, 393, 134 S.E.2d 206, 210 (1964) (internal citation omitted). Because punitive damages are quasi-criminal in nature, the process of assessing punitive damages is subject to the protections of the Due Process Clause of the Fourteenth Amendment of the United States Constitution. Atkinson v. Orkin Exterminating Co., 361 S.C. 156, 164, 604 S.E.2d 385, 389 (2004); see also Gore, 517 U.S. at 568, 116 S.Ct. at 1595, 134 L.Ed.2d at 822 ("The Due Process Clause of the Fourteenth Amendment prohibits a State from imposing a grossly excessive punishment on a tortfeasor.") (internal quotations omitted).

In Gamble, this Court developed an eight factor post-verdict review that trial courts are required to conduct to determine if a punitive damages award comports with due process. The United States Supreme Court has also set forth three guideposts that trial courts must apply to an award of punitive damages to determine whether the award violates due process. Gore, 517 U.S. at 575, 116 S.Ct. at 1598-99, 134 L.Ed.2d at 826.

The trial court conducted a post-verdict review of the punitive damages award to determine whether the award violated due process. The trial court found Appellant's degree of culpability was significant based on evidence of Adjuster's false statement to Geiger regarding the applicable law for dog bite cases. The trial court also found Adjuster's conduct began the time the claim was assigned to him and continued throughout trial, and the court determined Appellant attempted to conceal Adjuster's wrongful behavior through the last day of trial. The trial court further found the punitive damages award was 6.82 times the amount of actual damages and determined this ratio was reasonable. Appellant stipulated it had the financial resources to satisfy a substantial judgment against it; therefore, the trial court found Appellant's ability to pay was not at issue. Based on this review, the trial court determined the punitive damages award of $1,000,000 was reasonable and was not the result of passion, prejudice, or improper influence. The trial court concluded there was no violation of due process.

A. Gamble Factors

The Gamble factors are: (1) defendant's degree of culpability; (2) duration of the conduct; (3) defendant's awareness or concealment; (4) the existence of similar past conduct; (5) likelihood the award will deter the defendant or others from like conduct; (6) whether the award is reasonably related to the harm likely to result from such conduct; (7) defendant's ability to pay; and (8) other factors deemed appropriate. Gamble, 305 S.C. at 111-12, 406 S.E.2d at 354. The trial court is not required to make a finding of fact for each Gamble factor to uphold a punitive damages award. McGee v. Bruce Hosp. Sys., 321 S.C. 340, 346, 468 S.E.2d 633, 637 (1996). Further, the amount of damages, actual or punitive, remains largely within the discretion of the jury, as reviewed by the trial court. Gamble, 305 S.C. at 112, 406 S.E.2d at 355.

The trial court properly conducted a post-verdict Gamble review. The evidence supports the trial court's finding that Appellant's misconduct was extremely culpable. Geiger, Geiger's attorney, and Respondent Russell James testified Adjuster misrepresented the applicable law to Geiger. There is also evidence to support the trial court's findings that Appellant continuously misrepresented the law and denied coverage under Respondent's insurance policy based on this misrepresentation from the time the claim was submitted until the end of trial. The punitive damages award comports with due process under Gamble.

B. ...