Friday, September 25, 2009

Another Punitive Damages Case

The South Carolina Supreme Court decided Mitchell v. Fortis Insurance on September 14, 2009. This is another punitive damages case, coming shortly after Duncan v. Ford, so there has been quite a bit of activity on the punitive damages front here lately. A copy of the case can be found here. Also, my friend and colleague, Christian Stegmaier, has posted some good summary material on his blog concerning retail and hospitality law. You can find his post here.

In a nutshell, the decision seems to show a greater reliance on the punitive damages standards set forth in the United States Supreme Court decision of BMW of North America v. Gore, 517 U.S. 559 (1996). Though the court reduced the punitive damages award, it upheld an award toward outer limits of the single-digit ratio. At trial, plaintiffs had received $36,000 in actual damages for breach of contract, $150,000 in actual damages for the bad faith rescission claim, and $15 million in punitive damages from the bad faith claim. On appeal, the South Carolina Supreme Court reduced the punitive damages to $10 million.

An article about it appeared in the State here, and it is cut and pasted below.

SC man gets $10M after health insurance rejection
By JEFFREY COLLINS - Associated Press Writer

COLUMBIA, S.C. -- The South Carolina Supreme Court on Monday upheld a multimillion verdict against an insurer who the justices said revoked a man's health policy after he tested positive for HIV based solely on a nurse writing down the wrong year for the test.
The court in this conservative, often pro-business state called Fortis Insurance Company's actions "highly reprehensible," but did reduce punitive damages awarded to Jerome Mitchell Jr. from $15 million to $10 million.

Mitchell first found out he might have HIV when he tried to donate blood in April 2002. The Red Cross let him know his sample tested positive, and a trip to his personal physician confirmed the diagnosis.

Fortis said it revoked Mitchell's policy because he didn't reveal his diagnosis when he applied for insurance in May 2001 as the then 17-year-old from Florence prepared to head to college and could no longer be covered under his mother's policy. The company cited a note made by a nurse on Mitchell's chart that incorrectly gave the wrong year for the test confirming the HIV diagnosis, placing it one day before Mitchell's application for insurance, according to court records.

The committee that decides whether to revoke policies heard Mitchell's case and 45 others in a two-hour session. Court records showed the members were given a report from an underwriter that included the note: "Technically, we do not have the results of the HIV test. This is the only entry in the medical records regarding HIV status. Is it sufficient?"

Mitchell would later hire a lawyer who sent the company the original test results with the correct date. But a second committee also upheld revoking the insurance and Mitchell didn't have coverage for 20 months before Fortis changed its mind, according to trial testimony.
The company's "conduct involved repeated acts of deliberate indifference for more than two years," the justices wrote in their decision.

A phone listing for Mitchell could not be found, and his attorneys didn't return a phone call seeking comment. A spokesman for Fortis, which now does business as Assurant Health, said the company doesn't comment on pending lawsuits.

Fortis had appealed the case, saying the trial judge allowed improper evidence, the jury ruled on passion instead of the law and the $15 million in punitive damages was too much. The justices only budged on the damages, saying awarding Mitchell nearly 14 times the approximately $1.1 million it will cost to treat him during his life was excessive.

The justices also ruled the trial judge was correct to allow jurors to consider the value of the care Mitchell got at the free clinic when it considered how much money to give him.

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