Earlier this year, the Supreme Court provided additional guidance on punitive damage awards in insurance bad faith actions. The decision, Thomas Nickerson v. Stonebridge Life Insurance Company (June 9, 2016) 63 Cal.4th 363, held that the ratio of punitive damages must include an award of Brandt attorneys’ fees in its calculation. Nickerson involved a denial of medical benefits under an indemnity policy. The insured was a paraplegic who broke his leg when he fell from his wheelchair. He was hospitalized for a total of 109 days, but his insurer only paid benefits for 18 days and denied coverage for the remainder without speaking with his doctors. The insured filed suit. At trial, he was awarded an additional $31,500 in benefits, $35,000 in emotional distress damages, and $19 million in punitive damages. The parties also stipulated to an award of Brandt attorneys’ fees in the amount of $12,500. The trial court then reduced the punitive damages award from $19 million to $350,000, reflecting a single-digit ratio based on the $35,000 emotional distress award only, citing State Farm Mutual Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408. The Supreme Court disagreed with the calculation. It held that the Brandt fee award must also be taken into account when calculating punitive damages because it is an item of compensatory damage.
The Nickerson decision highlights the importance of maximizing your compensatory damages, whether emotional distress damages or Brandt attorneys’ fees. Those amounts have a dramatic impact on the amount of punitive damages you will actually be able to recover at trial. If your disability claim has been denied, make sure you contact an Experienced Insurance Law Attorney who will not only protect your rights, but who can also maximize your recovery.