Goddard v. Farmers Insurance III
Prof. Bill Long 3/6/05
The Bad Faith Verdict and Appeal
Recall that the Multnomah County judge had thrown out Goddard's bad faith claim in 2000 when it was first presented. The 2001 opinion of the Ct of Appeals quotes the judge:
"Well, I'm going to grant [Farmers] Motion for summary Judgment. I don't think there's a question of fact triable to a jury or to any trier of fact. I think that the policy limits were $100,000 [as the Marion County jury decided in 1998]. As it turned out, the plaintiff guessed wrong. They were trying to be tough and hold it at $200,000. There was never an opportunity to settle within the policy limits, and none is alleged in the Fourth Amended Complaint."
What was at stake in the summary judgment hearing was the issue of causation. What this means is that even if Farmers admitted that its agents kind of stonewalled Goddard before the 1990 trial, and had thereby breached its duty of care to Munson, they could only be liable for bad faith if this breach of duty "caused" the jury to find against Munson as it did. As the court said, "to prevail, however, plaintiff must show proof not only that Farmers breached a duty of care to its insured, Munson, by failing to negotiate and offer a policy-limits settlement to Goddard, but also that Munson's damages were caused by that breach."
Farmers asserted that plaintiff offered no evidence that she would have accepted a policy-limits settlement if one had been offered. Thus, in no sense could Farmer's breach of duty be said to be the "cause" of Munson's loss. However, the Ct of Appeals held that there was ample evidence in the (admittedly conflicting) testimony of Goddard's two trial attorneys that they would have accepted a policy limits offer if one had been timely made. Thus, if Farmers had been faithful to its duty to its client, the case would have been over back in 1990. Because Farmers was not faithful to its client duty, the jury could and did return the verdict that they did. Hence, causation is possible.
On Remand
In 2002, then, 15 years after the drunk driving accident that took the life of her son, Mrs. Goddard finally got a jury verdict on her bad faith claim. The result? The Multnomah County jury awarded her one of the largest jury verdicts in Oregon history: a $20,718,576 punitive damage judgment against Farmers Insurance Company of Oregon. I will provide a copy of the Special Verdict Form in class on 3/7/05.
How quickly do you think it took Farmers to appeal this verdict? Well, of course they did right away. They hired my old firm to represent it on appeal. Goddard, who was now using the services of William Barton of Newport (WUCL '72), who won the award at the bad faith trial for her, decided to use Mr. Jeffrey Batchelor (WUCL '72) to write her appeal. Briefs were written in 2003-2004, and the case had not yet been heard by the Court of Appeals. It will be closely watched by the insurance industry, to be sure.*
[Note from 10/15/05. The Court of Appeals filed its decision in this case on October 12, 2005. The next essay reviews the decision.]
An Intervening Issue
Such a high punitive damages figure raises red flags, but not necessarily in Oregon. Oregon has a long tradition in its state courts of honoring jury verdicts and not remitting them on appeal. Hence, this number would probably look pretty firm had it not been the intervention by an unlikely source: the United States Supreme Court. In 2003 they handed down the State Farm Mut. Auto. Insu Co v. Campbell case (April 7, 2003) in which they held that an award of $145 million in punitive damages for an insurer's bad faith conduct, where only $1 million in compensatory damages were awarded, was excessive and in violation of the Due Process Clause of the Fourteenth Amendment. Further, the Court held that ratios exceeding a single digit ratio (between compensatory and punitive damages) would rarely pass constitutional muster.
So, where does this leave the Goddard case on appeal? On the one hand, Goddard's attorneys (in their Respondent's brief) have argued that this is one of those rare cases which justify more than a single digit ratio. On the other hand, aware that you should probably not start trying to argue for exceptions the minute the USSCt decision comes out of the chute, the Goddard attorneys argued that, in fact, the ratio was not much more than 10:1. They figured that when you calculate the time value of money, the amount awarded at the lower court and other insurance payments along the way, that actually this $20,000,000+ figure represented only about a 12:1 ratio between it and the compensatory damages.
Conclusion
I don't know how this will come out, but Oregon has a reputation of trying to parse US Sup Ct decisions rather closely, especially when it comes to plaintiffs' rights, and thus I think there will be a strong movement to try to keep the figure as intact as possible on appeal. Time will tell whether the issue will be considered en banc by the court or whether it will be appealed after the Ct of Appeals deals with it. I don't think we have heard the last of Goddard for a long time. And, you can be sure, when the decisions come down, the Oregon appellate courts will have thought long and hard about the nature of bad faith claims against an insurer in Oregon. As a matter of fact, this case might just be the vehicle to send a clear message to insurers that their duty is, first of all, to their clients and not necessarily to deny coverage or to offer minimal amounts to settle cases.
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