The jury awarded the policyholder $36,000 in actual damages on the breach of contract claim, $150,000 in actual damages on the bad faith rescission claim, and $15 million in punitive damages deriving from the bad faith cause of action. The punitive damages award exceeded a single-digit ratio between punitive and compensatory damages
On appeal, the carrier argued the $15 million punitive damages award was so excessive as to violate its constitutional right to due process under the standards set forth in Gamble v. Stevenson, 305 S.C. 104, 406 S.E.2d 350 (1991) and BMW of North America v. Gore, 517 U.S. 559 (1996). The Court agreed with this conclusion, although its analysis differed substantially from that urged by the defendant.
In South Carolina, our jurisprudence has largely tracked the United States Supreme Court’s constitutional pronouncements, beginning with the Gamble opinion. In Gamble, the Court identified eight considerations that trial courts should apply in conducting a post-judgment due process review of any punitive damages award. These considerations are: (1) the defendant’s degree of culpability; (2) the duration of the conduct; (3) the defendant’s awareness or concealment; (4) the existence of similar past conduct; (5) the likelihood the award will deter the defendant or others from like conduct; (6) whether the award is reasonably related to the harm likely to result from such conduct; (7) the defendant’s ability to pay; and (8) any other factors deemed appropriate.
The South Carolina Supreme Court has said in past cases that trial courts must consider both the Gamble and the Gore factors. However, in the case at bar, the Court recognized “the considerations of judicial economy weigh in favor of a less burdensome and duplicative analysis.” Accordingly, the Court held that Gamble remains relevant to the post-judgment due process analysis, but only insofar as it adds substance to the Gore guideposts. The Gore guideposts require a reviewing court to consider: (1) the degree of reprehensibility of the defendant’s conduct; (2) the disparity between the actual and potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.
Applying Gore, the Court determined the insurance company’s conduct in this bad faith claim was “highly reprehensible and that the imposition of punitive damages was appropriate.” Therefore, the award of punitive damages stood as to the carrier.
However, with regard to the punitive damages award amount, the Court determined it was too high: “We find that a 13.9 to 1 ratio, in this particular case, exceeds due process limits.” The Court then set out to examine punitives awarded in comparable cases.
Examining South Carolina cases involving insurance company bad faith, as well as applying the tenets of State Farm v. Campbell, 538 U.S. 408, 416 (2003). (“Although the [United States] Supreme Court has “been reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award,” and has consistently declined to adopt a bright line ratio or simple mathematical test, the Court has remarked that “in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.”), the Court concluded “the conduct in this case was reprehensible enough to merit an award towards the outer limits of the single-digit ratio.” Consequently, the Court remitted the punitive damages award to $10 million, resulting in a ratio of 9.2 to 1. In so doing, the Court observed: “We believe a $10 million award in this case satisfies due process and comports with South Carolina law. We are also certain that a $10 million award will adequately vindicate the twin purposes of punishment and deterrence that support the imposition of punitive damages.”
The Supreme Court’s decision in Mitchell is significant because: (1) while it recognizes that Gamble remains good law in South Carolina, the federally-enunciated Gore analysis now appears to take priority in post-judgment punitive damages review in our state courts; and (2) our appellate entities have elected to not adopt a bright line ratio or simple mathematical test with regard to punitive damages awards. While the Supreme Court acknowledges the Campbell precept that few awards permit the exceeding of a single-digit ratio between punitive and compensatory damages, its explicit decision not to adopt a ratio or mathematical formula appears to connote that in circumstance where sufficient reprehensibility and comparable awards exist to support such an award, a reviewing court in South Carolina could uphold a double-digit award between punitive and compensatory damages.