Drunk Driver Subject to Separate Trial on Punitive Damages

Insurance Information Admissible for Purpose of Assessing Punitive Damages

Nov 04, 2021

Factual History

This case arose out of a car accident in which plaintiff Tracey James was rear-ended by defendant Phillip Bertellotti. Bertellotti was driving a company truck belonging to his employer, AMS. At the time of the accident, Bertellotti allegedly was intoxicated. He has admitted simple negligence in causing the crash.

AMS filed a motion in limine asking this Court to exclude evidence on 29 topics, including “References to Insurance” and “References or Arguments to the Jury Regarding Punitive Damages During Plaintiff’s Case in Chief, ” and requesting a “Phased Trial.” The court ruled.

State Substantive Law

Because this case is proceeding in diversity, the applicable substantive law is that of the forum state, Mississippi. State law is determined by looking to the decisions of the state’s highest court.

Absent evidence to the contrary, the federal court presumes that the Mississippi courts would adopt the prevailing rule if called upon to do so. The Court is emphatically not permitted to do merely what it thinks best; the federal court must do that which it thinks the Mississippi Supreme Court would deem best.

Discussion

Defendants asked the Court to clarify and/or reconsider two rulings. First, they request the Court to clarify its ruling as to Topic I, “references to insurance,” which was granted in part and denied in part. To the extent that the Court’s ruling permits references to insurance during the punitive damages phase of trial, defendants allege that the Court erred. Second, defendants seek reconsideration on Topic XII, “phased trial and to exclude any references or arguments to the jury regarding punitive damages during plaintiff’s case in chief,” which was granted in part and denied in part as to the issue of alcohol consumption.

Request for a Phased Trial

The motion for a phased trial is consistent with Federal Rule of Civil Procedure 42(b) and the provisions of Mississippi’s punitive damages statute. Specifically, Mississippi Code § 11-1-65 mandates the bifurcation of liability and compensatory damages, from that of punitive damages. Federal Rule 42(b) authorizes the same. This Court agrees that a phased trial is appropriate and thus, this motion was granted.

Request to Exclude Reference to Alcohol Consumption During Liability/Compensatory Phase

In defendants’ motion in limine, they asked the Court to exclude any references or arguments to the jury regarding punitive damages during plaintiff’s case in chief. Specifically, they cited concerns over messaging that the defendants should be “punished,” or the jury be encouraged to “send a message with verdict(s),” and “keep[] the roads safer by entering a verdict against” defendants. Plaintiff conceded that she would not make comments of that nature during the liability or compensatory phase.

During the hearing, however, defendants abandoned the concerns mentioned (and resolved) above, and instead urged this Court to bar any references to Bertellotti being intoxicated at the time of the accident-again. The Court declined to do so.

Because Bertellotti has already admitted to simple negligence they claim liability is not contested, and the issue of intoxication is relevant only during the punitive damages phase.

Since the misdemeanor DUI charge and consumption of alcohol prior to the accident, intoxication is relevant during the liability phase. James is pursuing a gross negligence claim against Bertellotti. The consumption of alcohol may be central to whether Bertellotti was grossly negligent on that day. Evidence regarding Bertelloti’s use of alcohol is relevant to assessing Bertelloti’s credibility. Specifically, it goes to “whether or not defendant might be able to recall . . . the circumstances of what occurred on that particular day at that particular time.” Therefore, the motion was denied.

Request to Bar References to Insurance

James agreed not to reference insurance during the liability or compensatory damages phase. During the punitive damages phase, however, James stated her intention to introduce the limits of defendants’ liability coverage as an “other asset” available to pay a judgment. She conceded that she would do so without disclosing that the source of that asset is a liability insurance policy. Defendants argue that James’ proposal is contrary to Mississippi law.

The Court disagreed. Mississippi’s punitive damages statute instructs that the “primary purpose of punitive damages is to punish the wrongdoer and deter similar misconduct in the future by the defendant and others[.]” In assessing the amount of punitive damages to award, the fact-finder must consider the “defendant’s financial condition and net worth … and any other circumstances shown by the evidence that bear on determining a proper amount of punitive damages.” (Emphasis added.) The statute establishes that net worth is considered-not that it is solely considered-in determining the amount of punitive damages and it is used to calculate the statutory cap for punitive damages.

The trial court is tasked with scrutinizing any punitive damages award. It must ascertain whether the award is “reasonable” and “rationally related to the purpose to punish what occurred giving rise to the award and to deter its repetition by the defendant and others.” The trial court must also ensure that the award complies with the statutory cap for punitive damages.

Unlike the fact-finders’ considerations, the statutory cap for punitive damages is solely based on net worth, and in this instance, net worth must “be determined in accordance with Generally Accepted Accounting Principles.” This limitation on punitive damages shall not be disclosed to the trier of fact. In other words, the jury deliberates in the blind relative to the possibility that, under the law, the court may be required to reduce the award dependent on the net worth as determined in accordance with GAAP of the defendant.

The critical inquiry is whether the amount of insurance coverage available to defendants should be disclosed to the fact-finder as part of defendants’ “financial condition,” “net worth,” or “any other circumstance” of relevance. The Court concluded that it should.

Analysis

It is James W. Sessums Timber Co. v. McDaniel, 635 So.2d 875 (Miss. 1994) (“Sessums”), that answers this question in the affirmative. In Sessums, the Mississippi Supreme Court held that despite a failure to raise liability insurance policy during trial or in the appeal briefs, “[u]nder previous pronouncements of this Court, such coverage provides a source from which a punitive damage award may be paid.” The court goes on to state, that “proof of net worth of the two defendants was not fully developed . . . however, the net worth of the defendants combined with the insurance coverage carried by Sessums . . . supports the jury’s award.” (Emphasis added). The dissent, like defendants, laments the impact to the deterrence goal of punitive damages. But that argument was rejected by the majority and did not prevail.

All in all, the decisions of Mississippi’s highest court persuades the USDC that the use of “net worth,” “financial condition,” and “any other circumstances,” collectively, envision the fact-finder being presented with robust evidence, including liability insurance, to determine the defendant’s financial ability to pay the award.

To the extent that defendants believe that disclosure of the amount of liability insurance misrepresents Bertelloti’s personal finances, they may still limit any award prior to final judgment. To do so, they must merely present evidence of his net worth, in accordance with GAAP, prior to final judgment. This Court is required to follow GAAP’s definition of net worth at that juncture and limit any award accordingly. Defendants have indicated that Bertelloti’s accountant will come prepared to testify, as is appropriate.

ZALMA OPINION

This discussion of procedure is important because it ignores the fact that liability insurance cannot pay for intentional wrongful conduct that must be proved to allow for punitive damages to be assessed against an insured. If the plaintiff proves that Bertelloti’s conduct was so wrongful that punitive damages may be assessed it might be a Pyrrhic victory since it might cause the insurance company to refuse to pay compensatory damages as well as punitive damages. A liability policy is an asset – but only if it provides coverage to protect its insured.

I will be taking a short break from publishing my blog but I will be back.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

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and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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