Elardo, Bragg, Appel & Rossi

Insurance Bad Faith – Punitive Damages CAP

NARDELLI V. METROPOLITAN GROUP PROPERTY AND CASUALTY INS. CO., 634 Ariz. Adv. Rep. 11, 277 P.3d 789 (APP. DIV. 1 05/01/2012). Vehicle owners brought action against insurer for breach of the implied covenant of good faith and fair dealing regarding their insured vehicle, which was stolen and discovered in Mexico. After hearing evidence that MetLife had turned to their claims department to help meet a profit goal, the jury found in favor of the Nardellis, and awarded them $155,000 in compensatory damages and $55 million in punitive damages. The trial court entered judgment on jury verdict awarding $155,000 in compensatory damages, but reduced jury’s award of $55,000,000 in punitive damages to $620,000. Owners appealed, and insurer cross-appealed. HOLDING: The Court of Appeals, Division One, reduced the punitive damage award, however, holding that due process required a ratio of no more than 1:1 to the compensatory damages. Applying the guideposts for determining the appropriate ratio, as pronounced by the U.S. Supreme Court in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003), the Court held that because the compensatory damages were high relative to the actual damage, and because the degree of reprehensibility of MetLife’s conduct was not egregious, the 1:1 ratio was appropriate.