The decision raises at least two important questions in future cases: (1) can bad faith be found on summary judgment for all intentional torts, or just those alleging bad faith by an insurer; and (2) how can this decision be reconciled with the recent U.S. Supreme Court decision in State Farm Mut. Auto. Ins. Co. v. Campbell, 123 S.CT. 1513 (2003).
Although it is common for summary judgment to be granted to defendants in bad faith claims for the plaintiffs failure to meet the objective and/or subjective standard this is the first published case to approve a grant of summary judgment for the plaintiff.
The sole authority for the holding is the statement in Ander-son that the knowledge of the lack of a reasonable basis may be inferred and imputed to an insurance company where there is a reckless disregard of a lack of a reasonable basis for denial of a reckless indifference to facts or to proofs submitted by the insured. Anderson, 85 Wis.2d at 693.
However, any attempt to grant summary judgment outside the context of an insurance bad faith action will run square into the longstanding law in Wisconsin that the credibility of a person with respect to his subjective intent does not lend itself to be determined by affidavit. Doern v. Crawford, 30 Wis.2d 206, 214, 140 N.W.2d 193, 196 (1966).
The damages question will prove more vexing, because reconciling the courts decision with Campbell will not be easy; indeed, the majority opinion did not even try.
In that case, Campbell, who had only $50,000 maximum coverage, caused an automobile accident, resulting in death to one person, and permanent disability to another. State Farm could have and should have, but refused to, settle for the policy limits. It also assured Campbell that he had no risk of individual liability.
The jury returned a verdict for $185,849, whereupon State Farm told him to put his house up for sale. Only years later did State Farm pay the excess judgment. Campbell, 123 S.Ct., at 1517-1518.
Campbell sued for bad faith, and State Farm altered documents to make Campbell appear less at fault. The jury awarded $2.6 million for emotional distress, and $145 million in punitive damages, which the trial court reduced to $1 million and $25 million, respectively.
The Utah Supreme Court reinstated the $145 million punitive damage award, but the U.S. Supreme Court reversed. Id., at 1519.
Discussing the propriety of the punitive damage award, the Court stated, The compensatory award in this case was substantial; the Campbells were awarded $1 million for a year and a half of emotional distress. This was complete compensation. The harm arose from a transaction in the economic realm, not from some physical assault or trauma; there were no physical injuries; and State Farm paid the excess verdict before the complaint was filed, so the Campbells suffered only minor economic injuries for the 18-month period in which State Farm refused to resolve the claim against them. Id., at 1524-1525.
The court also found the award disproportionate to the $10,000 civil liability that Utah statutes could impose for such conduct.
The court ultimately suggested that a punitive damage award near the amount of compensatory damages would be appropriate, given that the compensatory damage award of $1 million likely contained a punitive element. The court stated, An application of the Gore guideposts to the facts of this case, especially in light of the substantial compensatory damages awarded (a portion of which contained a punitive element), likely would justify a punitive damages award at or near the amount of compensatory damages [$1 million]. Id., at 1526.
At no point did the court even consider the ratio of punitive damages to the roughly $135,000 worth of personal liability to which the insurer recklessly exposed its insured.
Effectively, the court held that, even if one were to impute the entire compensatory damage award as being essentially punitive, $2 million is the maximum punitive damages that should be awarded for bad faith by an insurer far more egregious than in the case at bar.
In Trinitys case, as in Campbell, the relevant Wisconsin statute imposing liability has a maximum of $10,000. Like Campbell, the harm arose from a transaction in the economic realm, … there were no physical injuries, the insurer paid the underlying judgment before the bad faith claim was filed, and Trinity suffered only minor economic injuries.
Furthermore, State Farms conduct was more egregious, in that Tower never altered documents. Also Tower never wrongfully told Trinity that it was not at risk of personal liability; far to the contrary, Trinity was never at any risk of being held responsible at all in the underlying action, because either Tower or the agents E & O carrier would be responsible.
Finally, there was no emotional distress here. The Campbells on the other hand, were wantonly put at risk of losing their home, and everything else they owned, for 18 months.
As a result of the majoritys failure to even attempt fitting its decision within Campbell, it will likely require substantial ingenuity on the part of trial courts in Wisconsin to issue decisions consistent with both cases.
– David Ziemer
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David Ziemer can be reached by email.