Only weeks after its opinion in Williams v. Philip Morris upholding a punitive damage award that was nearly 100 times the amount of punitive damages (and largely ignoring the U.S. Supreme Court’s directions through its application of state law to jury instructions), the Oregon Supreme Court issued a new opinion discussing the constitutionallity of punitive damages yesterday in the context of a bad faith claim against an insurer.
In Goddard v. Farmers Ins. Co. of Oregon, an Oregon jury had awarded $20.7 million in punitive damages against Farmers after its failure to pay its $100,000 auto limit resulted in a $863,274 verdict against the insured. The Oregon Supreme Court affirmed te jury’s finding of bad faith, noting that:
In summary, we conclude that defendant’s actions were directed at a financially vulnerable victim, were not confined to this victim alone, and involved intentional malice and deceit. On the other hand, defendant’s actions caused economic harm only and did not evince a reckless disregard for the health or safety of others, although defendant is entitled to little credit for either factor — cases of economic harm like the present one seldom provide malefactors with an opportunity to meet either of those criteria. Taken together, our analysis of the five reprehensibility factors set out in Gore, considered in light of the economic nature of defendant’s wrongdoing, leads us to conclude that defendant’s actions were very reprehensible.
Despite Farmers’ argument that Campbell required a 1:1 ratio of punitive to compensatory damages, the Oregon Supreme Court concluded that a ratio of 4:1 was more appropriate. Since the ratio here was closer to 16:1, the court held that a new trial limited to punitive damage was necessary unless the insured agreed to accept a reduced award based on a 4:1 ratio.
In calculating the ratio, the Supreme Court held that it was appropriate to consider pre-judgment interest awarded to the plaintiff in applying such ratios but that the amount of the damages was also properly reduced by the jury’s finding of 20% comparative fault.