17th Oct 2016

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Prior to June 2016 there was a question concerning the proper calculation of the punitive-compensatory ratio dispute and whether Brandt fees are to be included in the compensation-ratio.  In Major v. Western Home Ins. (2009) 116 Cal. App. 4th 1197, 1224, the “amount of the jury’s award of Brandt fees could be properly considered”.  In Major the jury awarded Brandt fees as part of tort damages.  See Major v. Western Home Ins. discussed in § A109:9.7 Testimony of insured’s counsel to establish Brandt fees.

In some badfaith trials, the parties will stipulate before trial that if the insured succeeds on its complaint, the trial court can determine the amount of attorney fees to which the insured is entitled under Brandt.  [Nickerson v. Stonebridge Life Ins. (2016) 63 Cal. 4th 363, 369]  In this circumstance a Court of Appeal case prior to 2016 held fees are not properly included in the ratio calculus.  In Amerigraphics Inc. v. Mercury Cas. (2010) 182 Cal. App. 4th 1538, 1565, the Court of Appeal concluded that it was proper to exclude Brandt fees in determining the compensatory damage-ratio calculation.  In Nickerson v. Stonebridge Life Ins. (2016) 63 Cal. 4th 363, 377, fn. 2, the California Supreme Court disapproved Amerigraphics Inc. v. Mercury Cas. and held:

“In sum, we find no reason to exclude the amount of Brandt fees from the constitutional calculus merely because they were determined, pursuant to the parties’ stipulation, by the trial court after the jury rendered its punitive damages verdict.”

In Nickerson, plaintiff sued a health insurer for wrongfully failing to pay for the entire hospitalization, finding that only part of hospitalization was “necessary treatment”.  The jury awarded plaintiff $31,500 unpaid policy benefits, $35,000 in damages for emotional distress and $19 million for punitive damages.  [Nickerson v. Stonebridge Life (2016) 63 Cal. 4th 363, 369, 373]  In post verdict, the trial court upon motion by defendant or reduction of punitive damages reduced the punitive damage amount to $350,000, 10 times the award of $35,000 for emotional distress damages.  Plaintiff on appeal contended that the reduction should have been to an amount equal to 10 times the $35,000 in damages plus $12,500 as Brandt fees, i.e. 10 times $47,500.  Reversing the trial court, the Supreme Court stated in part:

“… to exclude the fees from consideration would mean overlooking a substantial and mutually acknowledged component of the insured’s harm.”

References in bold are to Mr. Cornblum’s legal text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE (2015/2016 Edition), published by ThomsonReuters (1-800-344-5008 to order 3-Volume text).

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