Punitives Available Even When No Actual Damages: 4th Cir. Applying South Carolina law.shoke2013
The Federal Fourth Circuit Court of Appeals held, under South Carolina law, that a policyholder need not prove actual damages in order to recover bad faith punitive damages. When a jury finds a “willful or reckless invasion of a legal right,” punitive damages can be presumed. The policyholder was a window and door manufacturer facing five product liability actions. Its insurance policy with Liberty Mutual had $500,000 deductibles. Liberty settled all of the cases within the deductible over the policyholder’s objections that settling made it a target in future suits. When Liberty sought reimbursement for the deductible amounts from the policyholder, the policyholder counter-claimed for bad faith that Liberty unreasonably settled the cases. The jury awarded Liberty Mutual $894,416.01 in deductibles, but also found the insurer liable for actual and punitive damages on the bad faith claim, awarding the policyholder $684,416.01 and an additional $12,500,000 in punitive damages. The district court set aside the jury’s bad faith damages award on the grounds that the policyholder had experienced no actual damages because it had not paid the settlements itself. The Fourth Circuit affirmed the district court’s rulings on most issues, but vacated the ruling on punitive damages, reasoning that, “[w]here a jury finds a willful or reckless invasion of a legal right, a court presumes that nominal actual damages are merged into a punitive damage award.” However, instead of reinstating the $12,500,000 punitive damage award, it remanded the case to the District Court to determine whether the evidence supported a finding of willful, wanton, or reckless conduct by the insurer: “If the court finds the evidence sufficient, then nominal damages may be presumed, and the court must consider whether punitive damages are appropriate and whether the jury’s award was excessive.” Liberty Mut. Fire Ins. v. J.T. Walker Indus., No. 12-2256, 12-2350 (4th Cir. Feb. 10, 2014).