MICHELLE THOMAS, ADMININSTRATRIX OF THE ESTATE OF MARK J. THOMAS, JR. v. GRANGE MUTUAL CASUALTY COMPANY
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RENDERED:
DECEMBER 1, 2006; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2005-CA-002352-MR
AND
NO. 2005-CA-002378-MR
MICHELLE THOMAS, ADMININSTRATRIX
OF THE ESTATE OF
MARK J. THOMAS, JR.
v.
APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE DENISE CLAYTON, JUDGE
ACTION NO. 01-CI-008589
GRANGE MUTUAL CASUALTY COMPANY
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING
** ** ** ** **
BEFORE: COMBS, CHIEF JUDGE; ACREE, JUDGE; KNOPF,1 SENIOR JUDGE.
KNOPF, SENIOR JUDGE: This appeal and cross-appeal arise from a
jury verdict awarding $150,000.00 in punitive damages for a
third-party bad faith insurance claim, which was reduced to
$15,000.00 by the trial court.
1
We affirm.
Senior Judge William L. Knopf sitting as Special Judge by assignment of
the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution
and KRS 21.580.
A full exposition of the facts underlying this case was
recounted in this Court’s previous opinion in case no. 2003-CA000449-MR and we adopt it here:
“On January 8, 2000, Daniella Dolson was operating an
automobile owned by her mother, Martha Dolson, in Louisville,
Kentucky, when she collided with a parked automobile owned by
Mark J. Thomas, Jr.
Because the Thomas automobile was not
occupied at the time of the accident, Daniella left a note
apologizing for the accident and requesting the owner to call
her.
Upon finding the note, Thomas’s daughter, Michelle Thomas,
the exclusive driver of the Thomas automobile, contacted the
Dolson residence and spoke with Daniella’s mother, Martha.
During their conversation, Martha told Michelle that the Dolsons
did not want a damage claim submitted to their insurance
company, Grange, and that her husband, James, would be
contacting Michelle in the near future in regard to obtaining an
estimate for the necessary repairs to her automobile.
“On January 21, 2000, Michelle took her damaged
automobile to Hall’s Collision Center and obtained a repair
estimate in the amount of $1,502.14.
On January 24, 2000, at
the request of James Dolson, Michelle took her automobile to
Senn’s Body & Paint Shop and obtained a repair estimate in the
amount of $1,015.14.
After receiving these two repair
estimates, James informed Michelle that, in his opinion,
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Daniella had not caused all the damage listed on the repair
estimates.
“Claiming that there was pre-existing damage to the
rear of the Thomas automobile, the Dolsons offered Michelle only
$300.00 to settle the matter.
She rejected the settlement offer
and, on April 10, 2000, she received a letter from the Dolsons’
attorney advising her that the $300.00 settlement offer had been
withdrawn.
Further, the letter requested information concerning
the nature and extent of any pre-existing damage to the
automobile.
“Even though the Dolsons did not want the claim
submitted to their insurance company, on May 11, 2000, Michelle
filed a written claim with Grange and attached the Hall’s
Collision Center repair estimate of $1,502.14.
The matter was
referred to a claim supervisor, Millie Snyder.
According to the
records of Grange, Snyder received a call from James Dolson on
June 1, 2000, reaffirming to her that he did not want Grange
involved in the matter.
On the same day, Snyder wrote a letter
to Martha Dolson advising the Dolsons that Grange would close
its file at their request but that Martha Dolson would first
have to sign a ‘waiver of coverage’ letter.
Martha signed the
letter and returned it to Grange on July 17, 2000.
Pursuant to
the ‘waiver of coverage’ letter and the Dolsons’ request that
Grange not be involved in the matter, Grange apparently
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considered the matter closed.
“On December 18, 2000, Michelle wrote Snyder a letter
and advised her that her attempts to resolve the matter with the
Dolsons had been unsuccessful.
She further demanded that Grange
immediately pay the amount of $1,502.14.
Further, Michelle
stated that a copy of her letter was being sent to the Kentucky
Department of Insurance.
“Snyder replied to Michelle in a letter dated December
21, 2000.
She advised Michelle that Martha Dolson was
responsible for the outcome of the claim and that ‘we will not
be making payment to you on behalf of our insured Ms. Martha
Dolson.’
On January 5, 2001, the Kentucky Department of
Insurance sent Michelle a letter advising her that the matter
was ‘out of Grange’s hands’ and that she would have to proceed
directly against Martha Dolson to get her money ‘because Grange
is no longer involved.’
The letter also stated that the
Kentucky Department of Insurance “cannot be involved.”
Thereafter, Michelle retained an attorney.
On January
9, 2001, the attorney sent a letter to Grange demanding payment
to Thomas in the amount of $1,502.14.
Snyder responded to the
attorney with a letter on January 22, 2001, advising him that
Grange would not be issuing payment to his client because ‘Ms.
Dolson is considered to be self-insured for the alleged
accident.’
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“On October 11, 2001, Michelle’s attorney again wrote a
letter to Snyder advising her of numerous court decisions and
treatises which have held that agreements between an insurer and
an insured not to pay a claim, entered into after a property
damage loss has occurred, are not effective against innocent
third-party claimants.
On October 19, 2001, Snyder responded
with a letter to Michelle’s attorney advising him that Grange
was denying the claim based on the fact that Martha Dolson had
requested that Grange make no payments.
“On December 14, 2001, Mark Thomas, Jr., Michelle’s
father and the owner of the automobile, filed a civil complaint
in the Jefferson Circuit Court against Daniella Dolson and
Grange.
The complaint asserted a property damage claim against
Dolson as well as a bad faith claim against Grange under the
Unfair Claims Settlement Practices Act. See KRS 304.12-230.
On February 14, 2002, Grange’s attorney sent a letter
to Michelle’s attorney offering to settle the property claim
against Dolson for $1,258.64.
The offer was refused. On March
6, 2002, Grange paid Mark Thomas, Jr., $1,502.14, the full
amount of the highest repair estimate, to settle the claim
against Dolson.
An agreed order was entered dismissing that
claim and dismissing Dolson as a defendant.
Thomas’s claims
against Grange remained pending.
“On June 11, 2002, Mark Thomas, Jr., died, and Michelle
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was subsequently appointed as the administratrix of his estate.
The action against Grange was revived by Michelle by the filing
of an amended complaint pursuant to an order entered by the
circuit court on September 3, 2002.
The amended complaint set
forth the same claims alleged in the original complaint.
The trial of the case began on February 11, 2003.
At
the close of Michelle’s case, Grange moved the court for a
directed verdict.
The court granted the motion and entered a
judgment in Grange’s favor dismissing Michelle’s complaint.”
This Court reversed the judgment in favor of Grange.
Upon remand, the jury awarded Michelle Thomas (Thomas)
$150,000.00 in punitive damages.
amount to $15,000.00.
The trial court reduced that
This appeal and cross-appeal followed.
Thomas argues that the original jury award should be
reinstated as it does not violate due process, while on crossappeal Grange argues that the trial court should have reduced
the award further.
The award of punitive damages is reviewed under the de
novo standard.
State Farm Auto Ins. Co. v. Campbell, 538 U.S.
408, 418 (2003).
The reviewing court must evaluate the award
under these three factors: “1) the degree of reprehensibility of
the defendant’s conduct; 2) the disparity between the actual or
potential harm suffered by the plaintiff and the punitive
damages award; and 3) the difference between the punitive
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damages awarded by the jury and the civil penalties authorized
or imposed in comparable cases.”
Id.
We now look to the three
factors.
The degree of reprehensibility of the defendant’s
conduct is the most important indicium when determining the
reasonableness of a punitive damages award.
Id. (citing BMW of
N. Amer., Inc. v. Gore, 517 U.S. 559 (1996)).
In determining
reprehensibility, courts should consider whether: “the harm was
physical as opposed to economic; the tortious conduct evinced an
indifference to or a reckless disregard of the health and safety
of others; the target of the conduct had financial
vulnerability; the conduct involved repeated actions or was an
isolated incident; and the harm was the result of intentional
malice, trickery, or deceit, or mere accident.”
Campbell at
419.
Applying these factors to the present case, we find
that there is a sufficient degree of reprehensibility to sustain
the punitive damages award.
Although the harm to Thomas was
purely economic, payment on her claim was delayed for almost two
years without a reasonable basis to deny the claim, without any
investigation, and without any attempt to settle the claim in
good faith.
The evidence shows that these actions and omissions
were an intentional violation of Kentucky law.
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Next, we look to the difference between the actual or
potential harm suffered by Thomas and the award of punitive
damages.
There is no bright-line limitation on the ratio
between harm or potential harm and punitive damages.
at 424.
Campbell
In practice however, single-digit ratios are more
likely to satisfy due process than ratios in excess of 500 to 1.
Id.
at 425.
That being said, higher ratios may be upheld
“where a particularly egregious act has resulted in only a small
amount of economic damages.”
Id.
In this case, the jury awarded $150,000.00 in punitive
damages without an award of compensatory damages.
court reduced that award to $15,000.00.
The trial
The harm to Thomas was
the unpaid property damage claim of approximately $1,500.00.
The ratio between the harm suffered and the actual award is,
therefore, 10 to 1.
Considering the circumstances surrounding
Grange’s actions and that the harm suffered was only economic in
nature, we conclude that the award of $15,000.00 was
appropriate.
The third factor is the difference between any civil
penalties authorized and the punitive damages award.
The civil
penalties authorized for violation of the insurance code include
the revocation of an insurer’s license to do business and/or a
fine of not more than $10,000.00 per violation.
KRS 304.99-020.
Grange argues that Department of Insurance approved of their
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course of action in this case and, therefore, no civil penalties
were authorized.
However, it is the range and possibility of a
civil penalty rather its actual imposition on the tortfeasor in
a particular case that serves as the basis for comparison under
this factor.
Here, KRS 304.99-020 clearly authorizes the
imposition of civil penalties on insurance companies.
Whether
such penalties were or were not imposed has no bearing on the
issue of the reasonableness of a punitive damage award.
Instead, the courts look to the range of penalties authorized
compared with the punitive damages award.
We find that the
punitive damages award of $15,000.00 is reasonable in light of
the civil penalty of $10,000.00 per violation as authorized by
Kentucky law.
Thomas next argues that the trial court erred in
denying her claim for attorney fees.
While Thomas acknowledges
that Motorist Mutual Ins. Co, v. Glass, 996 S.W.2d 437 (Ky.
1997), prohibits the award of attorney fees in a third-party bad
insurance claim, she argues that pre-suit attorney fees are
available pursuant to KRS 446.070.
We disagree.
KRS 446.070 provides as follows:
A person injured by the violation of any statute may
recover from the offender such damages as he sustained
by reason of the violation, although a penalty of
forfeiture is imposed for such violation.
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This section read alongside KRS 304.12-230 creates the statutory
bad faith cause of action.
State Farm Mut. Auto. Ins. Co. v.
Reeder, 763 S.W.2d 116, 117-18 (Ky. 1988).
Attorney fees are
generally not available in the absence of a statute or contract
expressly authorizing them.
Kentucky State Bank v. AG Services,
Inc., 663 S.W.2d 754, 755 (Ky.App. 1984).
Because KRS 446.070
does not contain such language, there was no error.
Thomas next claims that she was entitled to prejudgment interest.
She argues that the $1,500.00 claim was
liquidated and that she was entitled to pre-judgment interest on
that amount under Reeder, supra.
However, Thomas did not
receive the $1,500.00 from a judgment.
The underlying property
damage claim was settled out of court.
Clearly, the punitive
damages sought by Thomas were not ascertainable by computation.
The trial court properly denied the award of pre-judgment
interest.
On cross-appeal, Grange argues that the trial court
erred by striking eight jurors for cause because they refused to
consider a punitive damages award exceeding $100,000.00.
Grange
further argues that the refusal of the jurors to consider such
an award amounted to a layperson’s version of the holding of
Campbell, supra, and a dismissal on that basis constituted an
abuse of discretion.
We disagree.
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During voir dire, a litigant may properly inquire into
whether the prospective jurors have any conscientious scruples
that would prevent them from considering the full amount of
damages sought regardless of the evidence.
Temperly v.
Sarrington’s Administrator, 293 S.W.2d 863, 868 (Ky. 1956).
In
this case, eight of the prospective jurors stated that they
could not consider a punitive damage award in excess of
$100,000.00 regardless of the evidence presented.
We cannot
conclude that the trial court abused its discretion in striking
these jurors for cause.
Grange next argues that the trial court erred by
excluding evidence that Thomas failed to mitigate her damages by
failing to pursue a judgment against the Dolsons in small claims
court.
Grange argues that this evidence should have been
allowed to contradict Thomas’s focus on the delay in payment of
her claim.
Any evidence may be introduced to demonstrate the
mitigation of punitive damages so long as the evidence is not
otherwise objectionable.
(Ky.App. 1984).
Gum v. Coyle, 665 S.W.2d 929, 932
However, the evidence that Thomas failed to
proceed against the Dolsons in small claims court is not
relevant to the claim of bad faith against Grange.
Generally,
evidence of actual damage amounts paid by settlements or
judgments is not admissible to mitigate punitive damages.
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Am.
Jur. 2d Damages § 725 (2003).
The trial court did not abuse its
discretion by excluding this evidence.
Finally, Grange argues that the trial court erred by
failing to grant a new trial because the damages awarded were
clearly excessive.
This claim is premised not on the
constitutionality of the award, but rather under the common law.
The determination of whether to grant a new trial
because of excessive punitive damages will not be overturned on
appeal unless the decision was clearly erroneous.
Owens-Corning
Fiberglass Corp. v. Golightly, 976 S.W.2d 409, 413-14 (Ky.
1998).
The trial court must determine whether the award
appeared “to have been given under the influence of passion or
prejudice or in disregard of the evidence or the instructions of
the court.” CR 59.01(d).
Here the reduction in damages was made
solely on the basis of constitutional considerations and the
trial court upheld the punitive damages award in all other
respects.
Based upon our review of the record, we cannot
conclude that the trial court committed clear error by refusing
to grant a new trial.
Accordingly, the judgment of the Jefferson Circuit
Court is affirmed.
ALL CONCUR.
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BRIEFS FOR APPELLANT/CROSSAPPELLEE:
BRIEFS FOR APPELLEE/CROSSAPPELLANT:
John R. Shelton
SALES, TILLMAN, WALLBAUM,
CATLETT & SATTERLEY, PLLC
Louisville, Kentucky
Kim F. Quick
QUICK & COLEMAN, PLLC
Elizabethtown, Kentucky
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