Life Ins. Co. of Georgia v. Johnson

• Decision Date: 15 August 1997
• Citation: 701 So.2d 524
• Parties: LIFE INSURANCE COMPANY OF GEORGIA v. Daisey L. JOHNSON. 1940357.
• Court: Alabama Supreme Court

Page 524

701 So.2d 524

LIFE INSURANCE COMPANY OF GEORGIA v. Daisey L. JOHNSON.

1940357.

Supreme Court of Alabama.

Aug. 15, 1997.

Theodore B. Olson, Theodore J. Boutrous, Jr., and Jerry S. Fowler, Jr., of Gibson, Dunn & Crutcher, L.L.P., Washington, D.C.; and Davis Carr and James W. Lampkin II of Carr, Alford, Clausen & McDonald, L.L.C., Mobile, for appellant.

Sidney W. Jackson III and Robert J. Hedge of Jackson, Taylor & Martino, P.C., Mobile; and Wyman O. Gilmore, Jr., of Gilmore & Gilmore, Grove Hill, for appellee.

On Remand from the Supreme Court of the United States

SHORES, Justice.

Our first opinion in this case was issued on November 17, 1995. On application for rehearing, this Court withdrew that opinion and issued a new opinion, dated April 26, 1996. That opinion is published at 684 So.2d 685. On certiorari review, the Supreme Court of the United States vacated this Court's judgment and remanded this case for us to determine whether the punitive damages awarded in this case are reasonable under the guidelines established by the Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). See Life Ins. Co. of Georgia v. Johnson, --- U.S. ----, 117 S.Ct. 288, 136 L.Ed.2d 207 (1996)(memorandum).

In our April 26, 1996, opinion, we summarized the facts as follows:

"Ms. [Daisy L.] Johnson, a resident of Grove Hill, Alabama, is an 84-year-old woman who went through the third grade in school and who spent her life as a domestic worker. Because Ms. Johnson had dealt with [Life Insurance Company of Georgia] for over 25 years, paying premiums on nine different policies, she trusted its agents. Sometime before January 8, 1990, a Life of Georgia agent, Barbara Holt, came to Ms. Johnson's home to collect the monthly premiums on her existing policies. Ms. Holt recommended that Ms. Johnson purchase a Medicare supplement policy. The next week Ms. Holt returned and again discussed the Medicare supplement policy with Ms. Johnson, who agreed to purchase the policy. Ms. Johnson testified that Ms. Holt told her that the Medicare supplement policy would protect her. She testified: 'If I got in the hospital, you wouldn't have to worry about your doctor bill, you could stay in there because they would pay your doctor bill, and I got it.' Ms. Holt filled out the application for Ms. Johnson.

"At first, Barbara Holt testified that she asked Ms. Johnson for her Social Security card; later, she testified that she asked Ms. Johnson for her Medicaid card and that she asked the questions on the application, one of which was whether Ms. Johnson was on Medicaid. At trial, Ms. Johnson disputed Ms. Holt's testimony that she was asked whether she was on Medicaid. Ms. Johnson showed the jury how she gave her cards to Ms. Holt, by pulling a vinyl holder out of her purse. She testified that she always kept her cards in this vinyl holder, which contained her Medicaid, Medicare, and Social Security cards.

"Despite the fact that Ms. Holt knew that it was illegal and against company policy to sell a Medicare supplement policy to Ms. Johnson, because she was on Medicaid, Ms. Holt completed the application and collected the premiums on the policy. Initially the premiums were $71 per month; by 1992, they had risen to $103--almost one-third of Ms. Johnson's fixed income. Over almost a three-year period from 1990 through 1992, Ms. Johnson paid a total of $3,132 in premiums on this policy."

684 So.2d at 687-88.

Ms. Johnson sued Life Insurance Company of Georgia ("Life of Georgia"), alleging that it had engaged in intentional and reckless fraud and fraudulent suppression by selling her a Medicare supplement insurance policy that was worthless to her because she was eligible for Medicaid. The jury returned a verdict in favor of Ms. Johnson, assessing compensatory damages at $250,000 and punitive damages at $15 million. Life of Georgia moved for a new trial or for a remittitur of damages. The trial judge held a hearing pursuant to Hammond v. City of Gadsden, 493 So.2d 1374 (Ala.1986), Green Oil Co. v. Hornsby, 539 So.2d 218 (Ala.1989), and § 6-11-23(b), Ala.Code 1975. ¹ Following the hearing, the trial judge, pursuant to Ala.Code 1975, § 6-11-21, ordered a remittitur of the punitive damages award to $12.5 million, and this remittitur was accepted by the plaintiff. This Court affirmed, conditioned upon the plaintiff's filing in this Court a remittitur of $7.5 million, resulting in an award of $5 million in punitive damages. 684 So.2d at 702. On remand from the United States Supreme Court, we affirm the judgment of the trial court, conditioned upon the plaintiff's filing in this Court a $9.5 million remittitur of punitive damages, reducing the punitive damages award to $3 million.

After we issued our April 26, 1996, opinion in this case, the United States Supreme Court granted certiorari review in this case along with several other cases involving jury verdicts awarding punitive damages. In its BMW opinion, the Supreme Court addressed the constitutional challenge to such verdicts and announced a decision requiring states to judicially review jury verdicts that award punitive damages, to determine whether such verdicts violate the tortfeasor's rights under the Due Process Clause of the United States Constitution. The Supreme Court emphasized that this postverdict judicial review must be meaningful, with special emphasis being given to three "guideposts": (1) the degree of reprehensibility of the defendant's conduct, (2) the ratio of punitive damages to the amount of actual or potential harm suffered by the plaintiff, and (3) a comparison of the amount of the jury's verdict with civil or criminal penalties (if any) that could be imposed under the law for comparable misconduct. BMW, 517 U.S. at ---- - ----, 116 S.Ct. at 1598-1603. ² This Court, on the Supreme Court's remand of BMW, discussed these guideposts in BMW of North America, Inc. v. Gore, 701 So.2d 507 (Ala.1997) ("BMW II ").

It is ironic, or at least curious, that the United States Supreme Court has selected mostly Alabama cases to examine for constitutional deficiencies in jury verdicts, because since 1915, long before it was thought to be mandated by the Federal constitution, Alabama has required judicial review of jury verdicts for excessiveness. ³ In reviewing the cases remanded to us for reconsideration in light of the Supreme Court's BMW opinion, we have done our best to give effect to every requirement we can read into the BMW opinion and to the requirements of Alabama law for post-verdict review as set forth in Hammond, Green Oil, and § 6-11-23(b), Ala.Code 1975. ⁴

1. Degree of Reprehensibility

In discussing the first guidepost, the United States Supreme Court stated:

"Perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct. As the Court stated nearly 150 years ago, exemplary damages imposed on a defendant should reflect 'the enormity of his offense.' ... This principle reflects the accepted view that some wrongs are more blameworthy than others. Thus, we have said that 'nonviolent crimes are less serious than crimes marked by violence or the threat of violence.' ... Similarly, 'trickery and deceit' ... are more reprehensible than negligence."

BMW, 517 U.S. at ----, 116 S.Ct. at 1599. (Citations and footnotes omitted.) Alabama courts consider this "guidepost" in the excessiveness review mandated in Green Oil Co. v. Hornsby, 539 So.2d 218 (Ala.1989). This "guidepost" was enumerated as the second factor in the Green Oil analysis, but the factors set out there were not listed in any particular order of importance, insofar as the weight to be given them was concerned.

The trial judge wrote the following in the Hammond order:

"Clear and convincing evidence was presented at trial that Life of Georgia was aware of the fraudulent sale of these Medicare supplement policies. Considering the degree of reprehensibility of Life of Georgia's conduct, this Court considered the duration of the conduct, the degree of the awareness of the hazard which the conduct caused or [that] is likely to be caused in any concealment, cover-up or failure to remedy that hazard, and the existence and frequency of similar past conduct. Evidence was submitted at the trial that another lawsuit had been filed in Mobile County Circuit Court alleging activity almost identical to the [activity] presented in the instant situation. Plaintiff further produced clear and convincing evidence through the testimony of three live pattern witnesses that Life of Georgia's conduct in selling these policies to elderly, uneducated, single black women was not an isolated event and had not ceased and these people were paying a very substantial portion of their fixed income for useless policies. Evidence was presented at trial that Life of Georgia was aware of the unfitness of its agent in selling this specialized type policy. Eric Peek testified that he trained Barbara Holt for Life of Georgia yet gave her no training relative to the Medicare supplement policies because he himself did not receive training to enable him to understand and properly sell these policies. Evidence was presented at trial that Life of Georgia began marketing the Medicare supplement policies in 1986 and that continuing through the date of the verdict in June of 1994, Life of Georgia had done nothing to ferret out and correct the problem. In fact, Life of Georgia's corporate officers testified during the Plaintiff's presentation of her case that Life of Georgia had done nothing to try to prevent the sale of Medicare supplement policies to unqualified persons even though in 1992 Life of Georgia had been faced with trial in Mobile County and experienced an adverse verdict. The Court can only conclude from Life of Georgia's failure to produce any rebuttal testimony as to Life of Georgia's failure to remedy this...