• Nickerson v. Stonebridge Life Ins. Co. (2nd Dist. Ct. App. 2016) ---Cal. App. 4th ---, 2016 DJDAR 11028, Case No. B234271
  • January 25, 2017
  • Law Firm: McCormick Barstow Sheppard Wayte Carruth LLP - Fresno Office
  • UNDERLYING CLAIM

    Nickerson was injured when he fell from the wheelchair lift on his van. After being hospitalized for 109 days, he made a claim under an indemnity benefit policy issued by Stonebridge which provided for benefits of $350 per day for hospital stays made necessary by a covered injury. Stonebridge determined, without consulting Nickerson's treating physicians, that the hospitalization was only medically necessary for 18 days and issued payment of $6300 representing 18 days and $150 for a visit to the emergency room.

    Nickerson filed suit alleging breach of contract and breach of the covenant of good faith and fair dealing. The parties stipulated before trial that the issue of Brandt fees would be decided by the trial court in the event of a judgment in favor of Nickerson. Therefore, no evidence of fees or costs was presented to the jury. The trial court issued a directed verdict on the breach of contract claim and awarded $31,500 in unpaid benefits. On the bad faith claim, the jury awarded $35,000 for emotional distress. It also determined that Stonebridge had engaged in fraudulent conduct and awarded $19 million in punitive damages. The court then awarded $12,500 in Brandt fees as stipulated by the parties. Stonebridge moved for a new trial claiming that the punitive damages award was excessive as compared to the compensatory damages. The trial court agreed and granted the new trial motion unless Nickerson agreed to a reduction of the punitive damages award to $350,000. In so deciding, the trial court considered only the $35,000 in compensatory damages awarded by the jury and refused to consider the Brandt fees awarded post verdict. Nickerson rejected the reduction and appealed the new trial order. The appellate court affirmed, determining that when Brandt fees are awarded by the trial court after the punitive damages are awarded, they should not be included in determining the constitutionality of the punitive damage award. The California Supreme Court granted review.

    THE CALIFORNIA SUPREME COURT'S RULING

    In reversing the decision of the Court of Appeal, the California Supreme Court first agreed with the premise argued by Nickerson that Brandt fees are ordinarily included as compensatory damages for purposes of analyzing the second guidepost of BMW of North America, Inc. v. Gore (1996) 517 U.S. 559, namely the ratio between compensatory and punitive damages. Stonebridge argued that the procedure caused the jury to act irrationally and it was up to the court to "suss out" the irrationality by applying the second Gore guidepost. The Court disagreed, noting that since "the Gore guideposts are designed to govern post-verdict judicial review of the amount of a jury's award, and not the adequacy of the jury's deliberative process, there is no apparent reason why a court applying the second guidepost may not consider a post-verdict compensatory damages award in its constitutional calculus." As such, the court concluded that there was no reason to exclude the fees from the constitutional analysis and a failure to consider the fees would be to overlook a substantial component of the harm suffered by the insured. The court remanded the case to the Court of Appeal for further proceedings consistent with its ruling.

    EFFECTS OF THE COURT'S RULING

    The decisions by the California Supreme Court and the Court of Appeal on remand clear up any ambiguity over whether Brandt fees awarded post verdict can be considered in determining whether a punitive damages award is excessive when compared to the compensatory damages award. There had been some question about this issue in light of two California appellate court decisions: Major v. Western Home Ins. Co. (2009) 169 Cal. App. 4th 1197 [holding Brandt fees properly considered in determining ratio between compensatory and punitive damages] and Amerigraphics, Inc. v. Mercury Casualty Co. (2010) 182 Cal. App. 4th1538[trial court held to have properly excluded post verdict Brandt fees in determining the compensatory damage award.] The Supreme Court's decision in Nickerson, supra and the present opinion establish that post-verdict Brandt fees should be considered.