Robertsen v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 12 February 1979
• Docket Number: Civ. A. No. 78-233.
• Court: U.S. District Court — District of South Carolina
• Parties: Roger ROBERTSEN, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

464 F. Supp. 876

Roger ROBERTSEN, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

Civ. A. No. 78-233.

United States District Court, D. South Carolina, Charleston Division.

February 12, 1979.

COPYRIGHT MATERIAL OMITTED

Andrew K. Epting, Jr., Charleston, S. C., for plaintiff Roger Robertsen.

Joseph W. Cabaniss, Charleston, S. C., for defendant State Farm Mut. Auto. Ins. Co.

ORDER

BLATT, District Judge.

Plaintiff instituted this action seeking actual and punitive damages from his own insurer for an alleged bad faith refusal of the insurer to pay first party personal injury protection benefits provided in the contract of insurance. Defendant has filed a motion to dismiss on the ground that the required jurisdictional amount is not present in this case, a motion that, apparently simple on its face, casts this court into a difficult jurisdictional and jurisprudential inquiry.

BACKGROUND

Plaintiff's son was injured while riding his bicycle and, as a result of such injuries, he received medical care, admittedly valued at $2,165.05, from the United States Navy. Pennsylvania National Insurance Company, the insurance carrier for the motorist inflicting the injury, paid its full $1,000.00 personal injury protection (PIP), and plaintiff alleges that the balance of the medical expenses owed the Navy—($1,165.05)—is due under defendant's policy which provides for $1,000.00 basic personal injury protection as well as $1,000.00 supplemental injury protection. The defendant insurer refused to make such payment and the instant litigation has resulted.

THE MOTION

The defendant has moved to dismiss the instant action for failure to meet the jurisdictional amount. Taking the allegations of the complaint as true, it is clear that the maximum possible actual medical damages are $1,165.05; thus, unless there are other compensable elements of actual damages, or unless punitive damages are allowable in this type of action, the jurisdictional prerequisite is lacking.

ISSUES

The seemingly simple facts set out above give rise to the following issues:

1. Would South Carolina recognize a cause of action for bad faith, wrongful refusal to settle a first party insurance claim and allow actual damages based on elements other than the amount claimed under the policy plus substantial punitive damages in such an action?

2. Should this court abstain from deciding the issue raised above pending an authoritative statement on this question from the South Carolina Supreme Court?

The court, to develop the issues logically, will answer the second question first.

TO ABSTAIN OR NOT TO ABSTAIN

Federal courts have long followed the principle that abstention is appropriate under certain circumstances to accommodate delicate considerations of federal-state comity. To that end, federal courts have abstained when a decision by a state court on an unsettled question of state law might avoid a difficult constitutional issue, Railroad Commission of Texas v. Pullman Company, 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941); or when a decision by a federal court would disrupt orderly state administrative procedures, interfere with essential state functions, or create needless friction with important state policies, Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). See generally, County of Allegheny v. Frank Mashuda Company, 360 U.S. 185, 79 S.Ct. 1060, 3 L.Ed.2d 1163 (1959). Both of these situations involve constitutional or statutory issues of a public as opposed to a private nature.¹ In cases involving private litigants raising important unsettled questions of state law which involve—(apart from normal precedential effect)—only the rights of these private parties, abstention is deemed to be inappropriate, even if it is felt that the federal decision may conflict with later state decisions on the same issue. See, Wohl v. Keene, 476 F.2d 171, 174 (4th Cir. 1973). The instant case clearly involves the final category of litigation, for while the issues involved are "groundbreaking" and difficult, they are not the type categorized as "policy problems of substantial public import whose importance transcends the result in the case then at bar." Colorado River Water Conservation District v. United States, 424 U.S. 800, 814, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976). Even though the public will have an interest in the creation of a new cause of action against first party insurers, this is not, in this court's opinion, the type of "public interest" represented by state policies, procedures, or adjudications at which Burford, supra, abstention is aimed; therefore, the court has determined that abstention, as urged by the defendant, is inappropriate.

THE FACTOR OF EIGHT

Federal courts do not sit to issue advisory opinions or engage in fascinating conjecture as law review writers are wont to do; they sit to decide actual cases and controversies. In the present situation, if this court can say with legal certainty that it would refuse an award of extra-contractual damages of $9,000.00—(approximately eight times the possible medical damage award of $1,165.05)—it should not decide the issue of whether a cause of action for wrongful failure to settle may exist, because, in any event, the plaintiff would be unable to meet the jurisdictional amount necessary to proceed in this court.

In assessing the propriety of a possible punitive² damage award eight times that of the actual damages, the court has reviewed the factors that the South Carolina Supreme Court has considered in determining an appropriate amount in a particular case; among these factors are "the character of the tort committed, the punishment which should be meted out therefor, and the ability of the wrongdoer to pay." Hicks v. Herring, 246 S.C. 429, 144 S.E.2d 151, 155 (1965).

The South Carolina Supreme Court has repeatedly shown no great discomfort with punitive damage awards in the range of three to ten times the actual damage award and has, on occasion, approved awards much higher. For instance, in one of the earlier cases found considering the issue, the court approved $1,014.00 punitive damages in a trespass case where the actual damage award was only $2.50. Beaudrot v. Southern Railway Co., 69 S.C. 160, 48 S.E. 106 (1904). Other representative cases allowing a wide range of punitive damage awards both in amount as well as in percentage are: Bradley v. Metropolitan Life Insurance Co., 162 S.C. 303, 160 S.E. 721 (1931) $180.00 actual, $2,000.00 punitive— breach of contract accompanied by fraudulent act; Eaddy v. Greensboro-Fayetteville Bus Lines, 191 S.C. 538, 5 S.E.2d 281 (1939) $100.00 actual, $400.00 punitive—breach of duty by common carrier; Morrow v. Evans, 223 S.C. 288, 75 S.E.2d 598 (1953) $5,000.00 actual, $15,000.00 punitive—auto collision; Weatherford v. Home Finance Co., 225 S.C. 313, 82 S.E.2d 196 (1954) $15.00 actual, $2,000.00 punitive—fraud; Hall v. Walters, 226 S.C. 430, 85 S.E.2d 729 (1955) $1,000.00 actual, $25,000.00 punitive —assault; Norton v. Ewaskio, 241 S.C. 557, 129 S.E.2d 517 (1963) $310.00 actual, $3,440.00 punitive—traffic accident with Catholic monk as defendant; Hicks v. Herring, 246 S.C. 429, 144 S.E.2d 151 (1965) $2,000.00 actual, $7,500.00 punitive—auto collision; Thompson v. Home Security Life Insurance, S.C., 244 S.E.2d 533 (1978) $433.00 actual, $12,500.00 punitive—breach of insurance contract accompanied by fraudulent act.

As indicated by the wide range of dollar and percentage variance between the aforementioned actual and punitive damage awards allowed to stand, the South Carolina Supreme Court does not adhere to any per se rule on such matters. As stated by that court:

"The appellant attempts to place a definite mathematical rule upon the assessment of punitive damages as to the proportion which the same should bear to actual damages. There is no reason for such rule and the same does not exist in South Carolina." Eaddy, supra, (5 S.E.2d at 283).

Based on both ancient and recent precedent in South Carolina, this court cannot say to a legal certainty that, after hearing the facts of this case—(if this court should permit the cause of action plaintiff proposes)—it would strike a $9,000.00 punitive damage award should such facts indicate an unusually wrongful situation.

ALLOWANCE OF THE CAUSE OF ACTION

Having concluded the preliminary "sparring" hereinabove stated, the court now reaches the "main event"—the question of whether this court, under Erie,³ applying South Carolina law, will predict that the South Carolina Supreme Court, if faced with the identical question, would allow a cause of action against a first party insurer for wrongful failure to pay first party benefits. Such a decision requires considerable immersion into the "Tyger River"⁴ doctrine to analyze its jurisprudential underpinnings; additionally, recent cases from other jurisdictions may provide guidance as to the trend of law in this area, but, in the final analysis, true to Erie, the court must prognosticate what the South Carolina Supreme Court would do. Brendle v. General Tire & Rubber Co., 505 F.2d 243 (4th Cir. 1974); Doyle v. United States, 441 F.Supp. 701, 713 (D.S.C.1977).

Although apparently unrecognized by some judges, who otherwise possess excellent jurisprudential reputations, the South Carolina Supreme Court is, in this court's opinion, in the vanguard of the law when consumer protection or redress of personal rights is involved. In a recent case removing barriers to suits against charitable hospitals, Brown v. Anderson County Hospital, 268 S.C. 479, 234 S.E.2d 873 (1977), that court provided a timely reiteration of its philosophy:

"The defendant argues that no change in the law of charitable immunity should be made by this Court by reason of stare decisis. We reject this argument. This doctrine is not intended `to effect a "petrifying rigidity", but to assure the justice that flows from certainty and stability'. citation

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