Robert L. Kimble v. Land Concepts, Inc. , 353 Wis. 2d 377 ( 2014 )

2014 WI 21
SUPREME COURT OF WISCONSIN
CASE NO.: 2011AP1514
COMPLETE TITLE: Robert L. Kimble and Judith W. Kimble,
Plaintiffs,
v.
Land Concepts, Inc., John E. Stevenson and Jane
E.
Stevenson, Trustees of the John E. and Jane E.
Stevenson
Revocable Trust, Dorene E. Dempster and Mark F.
Herrell,
Defendants,
John E. Stevenson and Jane E. Stevenson,
Defendants-Respondents,
First American Title Insurance Company,
Defendant-Appellant-Petitioner.
REVIEW OF A DECISION OF THE COURT OF APPEALS
Reported at 345 Wis. 2d 60, 823 N.W.2d 839
(Ct. App. 2012 – Unpublished)
OPINION FILED: April 22, 2014
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: December 19, 2013
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Door
JUDGE: D. Todd Ehlers
JUSTICES:
CONCURRED:
DISSENTED: ABRAHAMSON, C.J., BRADLEY, J., dissent. (Opinion
filed.)
NOT PARTICIPATING: PROSSER, J., did not participate.
ATTORNEYS:
For the defendant-appellant-petitioner, there were briefs
by J. Bushnell Nielsen, Rebecca Leair, and Reinhart Boerner Van
Deuren S.C., Waukesha, and oral argument by J. Bushnell Nielsen.
For the defendants-respondents, there was a brief by David
H. Weber, T. Wickham Schmidt, and Conway, Olejniczak & Jerry,
S.C., Green Bay, and oral argument by David H. Weber.
An amicus curiae brief was filed by James A. Friedman,
Kerry L. Gabrielson, and Godfrey & Kahn, S.C., Madison, on
behalf of the Wisconsin Insurance Alliance, the Wisconsin Civil
Justice Council, Inc., and Wisconsin Manufacturers & Commerce.
2
2014 WI 21
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2011AP1514
(L.C. No. 2009CV188)
STATE OF WISCONSIN : IN SUPREME COURT
Robert L. Kimble and Judith W. Kimble,
Plaintiffs,
v.
Land Concepts, Inc., John E. Stevenson and Jane
E. Stevenson, Trustees of the John E. and Jane FILED
E. Stevenson Revocable Trust, Dorene E.
Dempster and Mark F. Herrell, APR 22, 2014
Defendants, Diane M. Fremgen
Clerk of Supreme Court
John E. Stevenson and Jane E. Stevenson,
Defendants-Respondents,
First American Title Insurance Company,
Defendant-Appellant-Petitioner.
REVIEW of a decision of the Court of Appeals. Reversed
and cause remanded.
¶1 ANNETTE KINGSLAND ZIEGLER, J. This is a review of an
unpublished decision of the court of appeals, Kimble v. Land
Concepts, Inc., No. 2011AP1514, unpublished slip op. (Wis. Ct.
No. 2011AP1514
App. Oct. 11, 2012), affirming the judgment of the Door County
Circuit Court,1 upholding a jury award of punitive damages
against First American Title Insurance Company ("First
American").
¶2 First American argues that the punitive damages award
against it was excessive and violated its right to due process
under the United States and Wisconsin constitutions.2
¶3 John E. and Jane E. Stevenson ("Stevensons")3 argue
that First American had no right to appeal the punitive damages
award because it filed its post-verdict motion late. The
Stevensons also argue that the award was reasonable in light of
First American's bad faith conduct, and the harm that they might
have suffered as a result of that bad faith. The Stevensons
further contend that punitive damages were appropriate because
First American's conduct needed to be deterred.
¶4 We conclude that the punitive damages award in this
case was excessive and deprived First American of its right to
due process. We therefore reverse the court of appeals'
1
The Honorable D. Todd Ehlers presided.
2
First American's petition for review addressed four
issues. We granted review, however, solely on the issue of
whether the punitive damages award was unconstitutionally
excessive.
3
The original plaintiffs in this action, Robert L. Kimble
and Judith W. Kimble, assigned their rights under their title
insurance policy, including any claims against First American,
to the Stevensons as part of a settlement agreement.
2
No. 2011AP1514
decision and remand this case to the circuit court for entry of
a judgment against First American in the amount of $239,738.49.
I. BACKGROUND FACTS
¶5 On October 26, 2004, Robert L. Kimble and Judith W.
Kimble ("Kimbles") purchased a lakefront lot located in the Town
of Nasewaupee in Door County ("Kimble Lot") from Dorene Dempster
("Dempster") and Mark Herrell ("Herrell").4 A private cut-off
road that crossed the property immediately to the west provided
access to the Kimble Lot. That property was owned by Land
Concepts, Inc. ("Land Concepts").
¶6 The deed executed by Dempster and Herrell conveying
the Kimble Lot to the Kimbles warranted that the property was
benefitted by two easements. One easement purported to grant
the Kimble Lot use of a private driveway connecting it to County
Highway M across property to the north ("North Easement"). That
private driveway had not been used in many years at the time of
the sale. The other easement purported to grant the Kimble Lot
access to County Highway M across Land Concepts' property ("West
Easement").5 It is undisputed that the cut-off road was not
within the boundaries of either of these easements.
¶7 On October 27, 2004, First American issued the Kimbles
a title insurance policy for the Kimble Lot. The policy
4
Dempster and Herrell had originally purchased the lot from
the Stevensons. All were initially defendants in the Kimbles'
lawsuit.
5
The West Easement traversed property belonging only to
Land Concepts, while the North Easement traversed property
belonging to both Land Concepts and other owners.
3
No. 2011AP1514
obligated First American to defend and indemnify the Kimbles for
any covered loss, including losses resulting from
"[u]nmarketability of the title" and "[l]ack of a right of
access to and from the land." The policy did not insure any
specific route of access.
¶8 In early 2008, the Kimbles listed their property for
sale with a real estate agent.6 On March 5, 2008, the Kimbles'
agent received a letter from Land Concepts stating that the
Kimbles "do not own——and cannot convey——any access rights to
County Highway M" from the Kimble Lot. The letter instructed
the agent to make prospective purchasers of the Kimble Lot aware
of lack of access rights "[i]n order to avoid possible future
misunderstandings and/or confusion." On March 17, 2008, the
Kimbles' attorney contacted the Kimbles' local insurance agent,
Marilyn DeNamur ("DeNamur"), about the dispute. DeNamur
forwarded the matter to Donald Schenker ("Schenker"), an
assistant vice president at First American.
¶9 On March 18, 2008, DeNamur provided Schenker with the
deeds and other recorded documents purportedly granting the
North and West Easements to the Kimbles' predecessors in title.
In a follow-up message to Schenker on March 28, DeNamur noted
that there appeared to be a problem with the deeds purporting to
grant and convey the North Easement. DeNamur asked Schenker
6
The precise date of the real estate listing is not a part
of the record.
4
No. 2011AP1514
whether she should "continue to dig for more documentation?"
Schenker never asked for more research.7
¶10 On March 31, 2008, Schenker, on behalf of First
American, sent the Kimbles a letter which addressed the access
issue. Schenker indicated in his letter that he believed the
West Easement was defective.8 Schenker asserted, however, that
the North Easement continued to provide the Kimble Lot access to
the highway, and because the title remained as insured, First
American had no duty to intervene in the dispute. In his
letter, Schenker described the chain of title he claimed
supported the North Easement, but made no mention of the
problems identified by DeNamur.
¶11 On May 27, 2008, the Kimbles forwarded Schenker a copy
of a letter they intended to send to Land Concepts asserting
their right to use the cut-off road. The Kimbles asked Schenker
whether the letter jeopardized their title insurance policy. On
May 28, 2008, Schenker assured the Kimbles that it did not,
again implicitly asserting that another right of access existed.
¶12 On June 13, 2008, the Kimbles received a response
letter from Land Concepts, wherein Land Concepts threatened to
"close the access over [its] property" if the dispute was not
7
The record is devoid of any direct response from Schenker
to DeNamur's March 28, 2008 e-mail message.
8
Specifically, Schenker wrote that the document recording
the easement failed to identify the property benefitted, and
thus failed to comply with Wis. Stat. § 706.02(1) (2009-10).
All subsequent references to the Wisconsin Statutes are to the
2009-10 version unless otherwise indicated.
5
No. 2011AP1514
"promptly resolved." On June 18, 2008, the Kimbles contacted
Schenker regarding the threatened closure. The Kimbles asked
Schenker whether First American would insure the North Easement
under the title policy if the Kimbles constructed a new driveway
following the route of that easement.
¶13 On June 25, 2008, Schenker reiterated to the Kimbles
that their title policy did not insure any particular route of
access. Schenker again asserted that the North Easement
provided access and stated, "[w]hether there is some legal
defense to prevent the Kimbles from using it, which falls under
some exclusion or exception in the policy, we do not know."
Schenker further recommended that the Kimbles have a survey of
the North Easement performed before constructing any driveway.
¶14 The Kimbles continued to market their property
throughout 2008, relying on Schenker's assurances that it had
good access to the highway. Land Concepts continued to dispute
the Kimbles' right of access, but did not follow through on its
threat to physically close the cut-off road.
¶15 On January 12, 2009, the Kimbles received a cash offer
to purchase their property. The sale was made contingent on the
access issue being resolved. Despite an extension on the
original 30-day time limit, the Kimbles were unable to negotiate
a resolution with Land Concepts and lost the sale.
II. PROCEDURAL POSTURE
¶16 On June 3, 2009, the Kimbles filed suit against Land
Concepts and the Stevensons. The Kimbles sought a declaration
that the North Easement was valid and sought a prescriptive
6
No. 2011AP1514
easement for their use of the cut-off road. The Kimbles also
claimed that Land Concepts, in recording the West Easement, had
slandered the title to the Kimbles' property.
¶17 On October 23, 2009, the Kimbles amended their
complaint adding breach of warranty claims against Dempster,
Herrell, and the Stevensons, and a breach of contract claim
against First American for failing to defend the title to their
property.
¶18 On July 21, 2010, the Kimbles settled their claims
against all the defendants except First American. As part of
the settlement, the Kimbles and the Stevensons paid Land
Concepts $40,000 to secure an easement over the route of the
existing cut-off road. The Stevensons paid an additional
$10,000 to the Kimbles for an assignment of the Kimbles' rights
under the title insurance policy, including any claims against
First American.
¶19 On August 6, 2010, the Stevensons filed a cross-claim
against First American, alleging breach of contract and breach
of fiduciary duty and bad faith in First American's refusal to
defend the title to the Kimble Lot.
¶20 On December 1, 2010, First American filed a motion for
declaratory and summary judgment, asking the court to dismiss
the Stevensons' cross-claim. First American argued that the
Stevensons were not "insureds," and thus had no rights under the
title policy. First American also contended that the Kimbles
were not permitted to settle their claims against other
7
No. 2011AP1514
defendants without the written consent of First American. First
American asserted that the title policy was void as a result.
¶21 The Stevensons argued that the Kimbles were permitted
to assign their rights under the title policy, and that the
partial settlement was proper under the terms of the insurance
contract. The Stevensons also asserted that, to the extent
summary judgment was warranted, it should be granted against
First American on the Stevensons' breach of contract claim.
¶22 On January 18, 2011, the circuit court denied First
American's motion for declaratory and summary judgment. The
court concluded that the assignment of rights from the Kimbles
to the Stevensons was proper and that there were issues of fact
to be tried regarding the Stevensons' breach of contract and
breach of fiduciary duty and bad faith claims.
¶23 On February 4, 2011, the Stevensons filed a motion in
limine which asked the court to exclude any evidence of the
monetary terms of the settlement agreements between the Kimbles
and the other defendants.
¶24 On February 21, 2011, First American filed a motion in
limine asking the court to exclude evidence that the Kimbles'
title was unmarketable as a result of the access problems.
First American argued that, while the access issues might have
impaired the value of the property, they did not constitute a
defect in the title.
¶25 On March 1, 2011, the circuit court granted the
Stevensons' motion in limine to exclude evidence of the terms of
the settlement between the Kimbles and the other defendants.
8
No. 2011AP1514
Additionally, the circuit court denied First American's motion
in limine to exclude evidence of unmarketability. In denying
First American's motion, the court determined that the issue of
marketability was a legal question to be determined by the court
prior to trial. The court concluded that title to the Kimble
Lot was rendered unmarketable by the access dispute. As a
result, the court concluded that coverage was triggered under
the title insurance policy. The court determined that it was
for the jury to decide whether First American's decision not to
defend the Kimbles under the policy constituted breach of
contract and breach of fiduciary duty and bad faith.
¶26 On March 2, 2011, the jury trial began. At trial, the
Stevensons presented evidence that First American was obligated
to defend the Kimbles' title and failed to do so. The
Stevensons further presented evidence that First American knew
the North Easement was defective and concealed that information
from the Kimbles. First American presented evidence that it had
a good faith belief that the North Easement provided access, and
that as a result, its failure to disclose the defect to the
Kimbles was merely a mistake.9
¶27 On March 3, 2011, the jury returned a verdict in favor
of the Stevensons. The jury found that First American breached
9
As we have granted review only on the legal issue of
whether the punitive damages award in this case was excessive,
this opinion does not provide a detailed description of the
arguments presented at trial. The evidence in the record is
assumed to be sufficient to support the jury's findings in all
respects except the size of the punitive damages award.
9
No. 2011AP1514
its contract and exercised bad faith in refusing to defend the
Kimbles' title. The jury awarded the Stevensons $50,000 in
compensatory damages for the breach of contract, and $1,000,000
in punitive damages to punish First American's bad faith.
¶28 On March 24, 2011, First American filed three motions
after the verdict with the circuit court.10 Initially, First
American asked the court, pursuant to Wis. Stat. § 805.14(5)(c),
to reduce the compensatory damages award. Next, First American
asked the court to change the jury's answer to the bad faith
question to "no" and delete the jury's punitive damages award.
First American asserted that there was insufficient evidence
supporting the findings. Finally, First American asked the
court, in the alternative, to set aside the punitive damages
award, which First American argued was excessive, and order a
new trial on damages.
¶29 The Stevensons opposed First American's post-verdict
motions. The Stevensons argued that the jury's award was
appropriate, and that First American's conduct justified
punitive damages. Further, the Stevensons argued that the
jury's punitive damages award was not excessive.
¶30 On June 14, 2011, the circuit court granted First
American's motion regarding the compensatory damages award,
reducing it to $29,738.49. The court denied First American's
10
The Stevensons argue that First American waived its right
to appeal the punitive damages award by filing its post-verdict
motions late. See Wis. Stat. § 805.16(1). We address this
argument in part IV(A) of this opinion.
10
No. 2011AP1514
other motions, however, allowing the bad faith finding and the
punitive damages award to stand. The court then entered
judgment against First American in the amount of $1,029,738.49.
¶31 On June 29, 2011, First American filed its notice of
appeal. On July 11, 2011, First American filed a motion with
the circuit court requesting the court stay the effect of the
judgment pending appeal. On August 3, 2011, the circuit court
granted First American's motion.
¶32 Before the court of appeals, First American made four
arguments. First, it argued that the Kimbles were not permitted
to assign their rights under the title insurance policy to the
Stevensons. Second, First American argued that the circuit
court improperly determined that coverage under the policy was
invoked prior to trial. Third, First American argued that there
was insufficient evidence to support the jury's finding of bad
faith. Finally, First American argued that the punitive damages
award was excessive.11
¶33 The Stevensons argued that the Kimbles' assignment of
their rights under the insurance policy was valid, and that the
circuit court properly found coverage under the title policy as
a matter of law. The Stevensons also contended that First
11
First American also argued that the compensatory damages
award should be further reduced. Because this argument was not
raised in First American's post-verdict motion, however, the
court of appeals declined to address the issue. Kimble v. Land
Concepts, Inc., No. 2011AP1514, unpublished slip op., ¶37 (Wis.
Ct. App. Oct. 11, 2012) (citing Segall v. Hurwitz, 114
Wis. 2d 471, 489, 339 N.W.2d 333 (Ct. App. 1983)).
11
No. 2011AP1514
American's conduct supported the jury's finding of bad faith,
and that the punitive damages award was not excessive.
¶34 On October 11, 2012, the court of appeals affirmed the
circuit court. Kimble, No. 2011AP1514, slip op., ¶1. First,
the court of appeals concluded that the Kimbles were permitted
to assign their rights under the title policy to the Stevensons,
and that they had not violated the terms of the policy in
agreeing to a partial settlement. Id., ¶¶16-17. Second, the
court of appeals affirmed the circuit court's determination
that, as a matter of law, there was coverage under the title
policy. Id., ¶¶24-28. Third, the court appeals affirmed the
circuit court's determination that the jury's finding of bad
faith was supported by sufficient evidence. Id., ¶¶33-35.
Finally, the court of appeals summarily affirmed the jury's
punitive damages award, finding First American's argument
regarding excessiveness of the award to be "insufficiently
developed." Id., ¶41.12
12
Given that the availability of "'meaningful and adequate
review by the trial court' and subsequent appellate review" of
punitive damages awards is necessary to ensure that such awards
are not imposed in an arbitrary manner, see Honda Motor Co.,
Ltd. v. Oberg, 512 U.S. 415, 420 (1994), the court of appeals'
lack of analysis is remarkable. We take this opportunity to
remind courts, both trial and appellate, of their obligation to
ensure that punitive damages awards comply with due process.
12
No. 2011AP1514
¶35 On December 28, 2012, First American petitioned this
court for review, which we granted on July 18, 2013.13
¶36 On September 3, 2013, the Stevensons filed a motion
for summary disposition in this court, arguing that by filing
its post-verdict motion late, First American had waived its
right to appellate review. See Wis. Stat. §§ 805.14(5) and
805.15(1). We held the motion in abeyance.14
III. STANDARD OF REVIEW
¶37 "[T]he constitutional issue of punitive damages merits
de novo review." Trinity Evangelical Lutheran Church & Sch.-
Freistadt v. Tower Ins. Co., 2003 WI 46, ¶47, 261 Wis. 2d 333,
661 N.W.2d 789 (citing Cooper Indus., Inc. v. Leatherman Tool
Grp., Inc., 532 U.S. 424, 431 (2001)). "[I]n determining
whether a jury's award [is] excessive, . . . the reviewing court
properly review[s] the entire record 'ab inito' . . . ." Id.,
¶48 (citing Mgmt. Computer Servs. v. Hawkins, Ash, Baptie & Co.,
206 Wis. 2d 158, 192 n.32, 557 N.W.2d 67 (1996)).
13
Because we granted review solely on the issue of whether
the punitive damages award was excessive, this opinion assumes,
without deciding, that the assignment was valid, that there was
coverage under the insurance policy, and that the jury's finding
of bad faith was supported by the evidence.
14
In response to the Stevensons' motion for summary
disposition, First American filed a motion to supplement the
record, purporting to show that its post-verdict motion was
filed timely, and a motion to strike the Stevensons' reply brief
on the motion for summary disposition. The motion for summary
disposition, as well as these additional motions are rendered
moot by our decision and thus are not addressed.
13
No. 2011AP1514
¶38 We recognize that our prior case law, particularly
Jacque v. Steenberg Homes, Inc., 209 Wis. 2d 605, 563 N.W.2d 154
(1997), has created confusion with respect to the standard of
review in punitive damages cases. Jacque, however, predates
both Cooper, wherein the United States Supreme Court clarified
that de novo is the appropriate standard of review, and Trinity,
wherein this court explicitly adopted that standard. While
judges "serve as gatekeepers before sending a question on
punitive damages to the jury," Strenke v. Hogner, 2005 WI 25,
¶40, 279 Wis. 2d 52, 694 N.W.2d 296,15 once the issue of punitive
damages is properly before the jury, its decision to award
punitive damages is accorded deference. The size of the award,
however, is subject to de novo review to ensure it accords with
the constitutional limits of due process. Trinity, 261
Wis. 2d 333, ¶¶47-49.
IV. ANALYSIS
A. Post-Verdict Motion
¶39 As an initial matter we address the argument, raised
by the Stevensons in their motion for summary disposition, that
First American lost its right to appeal the punitive damages
award when it failed to timely file its post-verdict motion
under Wis. Stat. § 805.16(1).
15
Strenke v. Hogner interpreted Wis. Stat. § 895.85(3)
(2001-02), the predecessor to the current punitive damages
statute. 2005 WI 25, ¶2, 279 Wis. 2d 52, 694 N.W.2d 296; see
also Wis. Stat. § 895.043(3).
14
No. 2011AP1514
¶40 Wisconsin Stat. § 805.16(1) provides that "[m]otions
after verdict shall be filed and served within 20 days after the
verdict is rendered, unless the court, within 20 days after the
verdict is rendered, sets a longer time by an order specifying
the dates for filing motions, briefs or other documents."
Further, a litigant's failure to comply with the statute causes
"the circuit court [to] 'los[e] competency to exercise its
jurisdiction.'" Hartford Ins. Co. v. Wales, 138 Wis. 2d 508,
513, 406 N.W.2d 426 (1987) (quoting Jos. P. Jansen v. Milwaukee
Area Dist. Bd., 105 Wis. 2d 1, 10, 312 N.W.2d 813 (1981)).
¶41 The circuit court's inability to consider a post-
verdict motion, however, does not deprive this court of
appellate jurisdiction. Failure to comply with Wis. Stat.
§ 805.16 "limit[s] the issues that may be asserted as a matter
of right on the appeal . . . ." Wales, 138 Wis. 2d at 510-511.
"A trial court's failure to conform with sec. 805.16, Stats.,
however, does not strip this court of its discretionary power[]"
to review the case. Brandner v. Allstate Ins. Co., 181
Wis. 2d 1058, 1071, 512 N.W.2d 753 (1994).
¶42 The merits issue in this case is of constitutional
dimension and has been fully briefed and argued by both parties.
We therefore exercise our discretion and address whether the
punitive damages award against First American was
unconstitutionally excessive.
B. Punitive Damages Award
¶43 Punitive damages are not intended to compensate the
plaintiff, but rather are awarded "to punish the wrongdoer, and
15
No. 2011AP1514
to deter the wrongdoer and others from similar conduct."
Trinity, 261 Wis. 2d 333, ¶50. "Punitive damages may properly
be imposed to further a State's legitimate interests in
punishing unlawful conduct and deterring its repetition." BMW
of N. Am., Inc. v. Gore, 517 U.S. 559, 568 (1996).16
¶44 In Wisconsin, punitive damages are authorized by
statute, see Wis. Stat. § 895.043, and may be awarded "if
evidence is submitted showing that the defendant acted
maliciously toward the plaintiff or in an intentional disregard
of the rights of the plaintiff." Wis. Stat. § 895.043(3). The
judge has the duty to act as the "gatekeeper" when determining
whether the issue of punitive damages is properly before the
jury. Strenke, 279 Wis. 2d 52, ¶40. Once the judge has
determined that the issue of punitive damages is properly before
the jury, whether to actually award punitive damages "in a
particular case is entirely within the discretion of the jury."
Jacque, 209 Wis. 2d at 626. Both the judicial determination
regarding whether punitive damages is a proper jury question and
the size of the jury's punitive damages award are subject to
review. The Due Process Clause of the Fourteenth Amendment
16
Because punitive damages serve the State's interests,
rather than serving to compensate a party, punitive damages
awards do not implicate a plaintiff's right to a remedy or to a
jury trial. See Wis. Const. art. I, §§ 5 and 9; compare Ferdon
ex rel. Petrucelli v. Wis. Patients Comp. Fund, 2005 WI 125,
¶69, 284 Wis. 2d 573, 701 N.W.2d 440 (suggesting that a
statutory cap on noneconomic compensatory damages might
implicate a plaintiff's right to a jury trial and to a remedy
under the Wisconsin Constitution).
16
No. 2011AP1514
"imposes substantive limits on the size of a punitive damages
award." Trinity, 261 Wis. 2d 333, ¶49 (citing Mgmt. Computer
Servs., 206 Wis. 2d at 193).17
¶45 A punitive damages award "is excessive, and therefore
violates due process, if it is more than necessary to serve the
purposes of punitive damages, or inflicts a penalty or burden on
the defendant that is disproportionate to the wrongdoing."
Trinity, 261 Wis. 2d 333, ¶50. "Elementary notions of fairness
enshrined in our constitutional jurisprudence dictate that a
person receive fair notice not only of the conduct that will
subject him to punishment, but also of the severity of the
penalty that a State may impose." BMW, 517 U.S. at 574; see
also Trinity, 261 Wis. 2d 333, ¶51.
¶46 The United States Supreme Court has applied a three-
part test to determine whether an award of punitive damages is
excessive. See BMW, 517 U.S. at 574-75; State Farm Mut. Auto
Ins. Co. v. Campbell, 538 U.S. 408 (2003). This test asks the
reviewing court to weigh: "(1) the degree of egregiousness or
reprehensibility of the conduct; (2) the disparity between the
17
We have previously stated that "the evidence must be
viewed in the light most favorable to the plaintiff, and a
jury's punitive damages award will not be disturbed, unless the
verdict is so clearly excessive as to indicate passion and
prejudice." Trinity, 261 Wis. 2d 333, ¶56; Jacque, 209
Wis. 2d at 626-27. Given that punitive damages awards mandate
de novo review, see Trinity, 261 Wis. 2d 333, ¶47, this language
should not be read to require deference to the amount of the
jury's award. Rather, stating that an award is "so clearly
excessive as to indicate passion and prejudice" is simply
another way of referring to an award that violates due process.
17
No. 2011AP1514
harm or the potential harm suffered and the punitive damages
award; and (3) the difference between the punitive damages and
the possible civil or criminal penalties imposed for the
conduct." Trinity, 261 Wis. 2d 333, ¶52 (citing BMW, 517
U.S. at 575).
¶47 Wisconsin case law calls on courts to apply a
substantively identical test applying six factors rather than
three:
1. The grievousness of the acts;
2. The degree of malicious intent;
3. Whether the award bears a reasonable
relationship to the award of compensatory damages;
4. The potential damage that might have been
caused by the acts;
5. The ratio of the award to civil or criminal
penalties that could be imposed for comparable
misconduct; and
6. The wealth of the wrongdoer.
Trinity, 261 Wis. 2d 333, ¶53; Mgmt. Computer Servs., 206
Wis. 2d at 194. Wisconsin courts are called upon to analyze
only "those factors which are most relevant to the case, in
order to determine whether a punitive damages award is
excessive."18 Id.
18
While Wisconsin courts are free to apply these six
factors flexibly, based upon their relevancy to a given case,
they should be analyzed in conjunction with the three
constitutional "guideposts" described by the Supreme Court in
BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575 (1996). The
factors are not intended to supplant the test mandated by the
Constitution.
18
No. 2011AP1514
1. Reprehensibility
¶48 "'[T]he most important indicium of the reasonableness
of a punitive damage[s] award is the degree of reprehensibility
of the defendant's conduct.'" Trinity, 261 Wis. 2d 333, ¶57
(quoting Jacque, 209 Wis. 2d at 628). "This principle reflects
the accepted view that some wrongs are more blameworthy than
others." BMW, 517 U.S. at 575.
¶49 In Campbell, the Supreme Court explained the standard
courts should apply in determining the reprehensibility of a
defendant's conduct:
We have instructed courts to determine the
reprehensibility of a defendant by considering
whether: the harm caused was physical as opposed to
economic; the tortious conduct evinced an indifference
to or a reckless disregard of the health or safety of
others; the target of the conduct had financial
vulnerability; the conduct involved repeated actions
or was an isolated incident; and the harm was the
result of intentional malice, trickery, or deceit, or
mere accident. The existence of any one of these
factors weighing in favor of a plaintiff may not be
sufficient to sustain a punitive damages award; and
the absence of all of them renders any award suspect.
538 U.S. at 419 (citation omitted); see also BMW, 517 U.S. at
576-77.
¶50 Turning to the case at issue, we must acknowledge that
First American's conduct in the case at issue is reprehensible.
First American knew that the North Easement did not provide
access to the Kimble Lot and that there was no reasonable
alternative access point, and yet refused to honor its
obligation to assist the Kimbles in defending their title.
First American further withheld the information it had in its
19
No. 2011AP1514
possession from the Kimbles, causing them to waste valuable time
and resources. These circumstances support an award of punitive
damages.19 The question, however, is whether the degree of
reprehensibility supports the punitive damages actually awarded.
¶51 In that regard, it is noteworthy that none of the
reprehensibility factors identified by the Supreme Court in
Campbell are present in this case. The damage suffered by the
Kimbles was indisputably economic, not physical. First
American's bad faith did not endanger the health or safety of
any person. There is no indication in the record that the
Kimbles were financially vulnerable.20 The conduct complained of
was an isolated incident. And while First American's conduct
indisputably involved deception, there is no indication of
intentional malice on the part of the company or its employees.
The punitive damages award against First American is therefore
suspect. Campbell, 538 U.S. at 419.
¶52 Further, the degree of reprehensibility in this case
falls short of that found in prior Wisconsin cases supporting
substantial punitive damages awards.
19
The failure of an insurer to diligently investigate
before denying a claim and concealing material information from
an insured clearly meet this standard. See, e.g., Trinity, 261
Wis. 2d 333, ¶62.
20
While Judith Kimble testified at trial that a dire
financial situation faced by her elderly parents caused the
Kimbles to reduce their asking price and be "more aggressive" in
selling their home, the record does not contain any indication
that the Kimbles themselves were in any financial trouble.
20
No. 2011AP1514
¶53 For example, in Trinity, the insurance company
defendant denied a claim based on an omission in coverage,
despite knowing that the omission in the policy was the result
of its own error. 261 Wis. 2d 333, ¶¶7-8. This court held that
the insurance carrier not only "engaged in prohibited conduct
while knowing or recklessly disregarding the lack of a
reasonable basis for denying the claim," but further was a
recidivist, having previously been the subject of a lawsuit
involving precisely the same kind of conduct. Id., ¶¶57-59.
These facts allowed the defendant to be subjected to a more
severe punitive damages award without offending due process:
$3,500,000 in a case where only $490,000 in harm or potential
harm had been established.21 Id.
¶54 Here, there is no indication from the record that
First American engaged in repeated conduct. Neither does the
record support any finding of malicious intent. First
American's conduct, while "sufficiently reprehensible to give
rise to tort liability, and even a modest award of exemplary
damages does not establish the high degree of culpability that
warrants a substantial punitive damages award." BMW, 517 U.S.
at 580.
2. Disparity
21
"'[O]ur holdings that a recidivist may be punished more
severely than a first offender recognize that repeated
misconduct is more reprehensible than an individual instance of
malfeasance.'" Trinity, 261 Wis. 2d 333, ¶58 (quoting Campbell,
538 U.S. at 423).
21
No. 2011AP1514
¶55 "When compensatory damages are awarded, the reviewing
court is to consider whether the [punitive damages] award bears
a reasonable relationship to the award of compensatory damages."
Trinity, 261 Wis. 2d 333, ¶63. "Wisconsin law expressly rejects
the use of a fixed multiplier, either a fixed ratio of
compensatory to punitive damages or of civil or criminal
penalties to punitive damages, to calculate the amount of
reasonable punitive damages." Id. (citations omitted).
"However, we have held that in the appropriate case, a
comparison of the compensatory damages and the punitive damages
award is important." Id. (citing Jacque, 209 Wis. 2d at 629).
¶56 In the case at issue, the compensatory damages
ultimately awarded were $29,738.49. Using the compensatory
damages award as a baseline thus represents a ratio of
approximately 33:1. Such a ratio is transparently problematic
under the United States Constitution.
¶57 The Supreme Court, however, has declared that
reviewing courts can consider not only the compensatory damages
award, but also "'the harm likely to result from the defendant's
conduct.'" BMW, 517 U.S. at 581 (quoting TXO Prod. Corp. v.
Alliance Res. Corp., 509 U.S. 443, 460 (1993)). Similarly,
where it is relevant and appropriate, our prior case law
supports consideration of "potential damage" that might have
been caused by a defendant's acts. Trinity, 261 Wis. 2d 333,
¶53.
¶58 The Stevensons argue that the appropriate figure to
use in assessing the disparity, in light of the sale the Kimbles
22
No. 2011AP1514
lost during the dispute, is the full $1,300,000 sale price of
the Kimbles' home. We disagree. The Stevensons can point to no
indication in the record that the full value of the Kimbles'
property was ever in danger.22 Case law does not support this
type of speculative "potential damage," particularly where it is
unsupported by the record.
¶59 For example, in TXO, the petitioner fraudulently
attempted to undermine the title to a tract of land in order to
avoid paying royalties for oil and gas extraction. 509 U.S. at
448-50. The respondent received a judgment for common law
slander of title in its favor, including $19,000 in compensatory
damages and $10,000,000 in punitive damages. Id. at 453.
Petitioner appealed, arguing that the 526:1 ratio of
compensatory to punitive damages rendered the award
unconstitutionally excessive. Id. A plurality of the Supreme
Court held that, in addition to the compensatory damages award,
it was appropriate to consider the "between $5 million and $8.3
million" in lost royalties that the respondent would have
suffered had petitioner's plan succeeded. Id. at 460-61.
¶60 Similarly, in Trinity, this court accepted that the
appropriate figure for comparison was not the $17,000
compensatory damages award, but rather was the $490,000 in
potential damages at risk in the underlying negligence suit.
22
On December 26, 2013, the Stevensons filed a motion to
supplement the record by judicial notice, asking this court to
take into account the eventual sale price of the Kimbles' home.
We deny that motion. The supplemental information was not part
of the record before the trial court.
23
No. 2011AP1514
¶61 Notably, the "potential harm" in both of these cases
is grounded in record and is not merely speculative. Had the
plaintiff in Trinity lost its case, $490,000 was the amount it
would have had to pay. Had the petitioner's scheme in TXO
succeeded, it was undisputed that the respondent would have been
deprived of millions of dollars in royalties. These analyses
were firmly rooted in fact, and the amounts in question were
derived from the record.
¶62 Here, the Stevensons invite this court to depart from
the facts of the record and speculate that, had the Kimbles
failed to discover First American's bad faith, they would have
been completely unable to sell their property, rendering it
valueless. We decline this invitation. Many factors enter into
a completed sale of real estate, and to attribute full
responsibility for the lost sale to First American is highly
speculative. There is no clear indication in the record of what
impact the access dispute had on the value of the Kimbles'
property.
¶63 We share Justice Kennedy's concern that, without a
meaningful standard, a court can end up "relying upon nothing
more than its own subjective reaction to a particular punitive
damages award in deciding whether the award violates the
Constitution." TXO, 509 U.S. at 466-67 (Kennedy, J.,
concurring).
¶64 Fortunately, there is no need to speculate about
potential harm, or to rely on subjective reactions, in order to
appropriately assess the disparity in this case. The record
24
No. 2011AP1514
reveals that the Kimbles spent $40,000 to purchase the access to
their property that their title policy was supposed to insure.23
Given that the compensatory damages award merely accounted for
legal expenses, it is appropriate to add the compensatory
damages together with the cost of purchasing the access for
purposes of assessing the disparity of the punitive damages
award. This $69,738.49 figure, however, still represents a
problematic ratio of approximately 14:1.
¶65 "[I]n practice, few awards exceeding a single-digit
ratio between punitive and compensatory damages, to a
significant degree, will satisfy due process." Campbell, 538
U.S. at 425. Even a punitive damages award of just four times
compensatory damages can come "'close to the line'" of violating
due process. BMW, 517 U.S. at 581 (quoting Pac. Mut. Life Ins.
Co. v. Haslip, 499 U.S. 1, 23 (1991)).24
¶66 In the case at issue, there are no special
circumstances calling for a high ratio punitive damages award.
This becomes especially apparent when the conduct here is
23
Although this evidence was not before the jury at trial,
it was before the circuit court and was made a part of the
record on appeal. We may, therefore, properly consider it in
"review[ing] the entire record 'ab inito' . . . ." Trinity, 261
Wis. 2d 333, ¶48.
24
Additionally, the Wisconsin Legislature recently enacted
a law limiting punitive damages awards. See 2011 Wis. Act 2
§ 23m. The new statute caps punitive damage awards at a 2:1
ratio of compensatory damages or $200,000, whichever is greater.
Wis. Stat. § 895.043(6) (2011-12). While the statute is not
applicable to this case, it is nonetheless appropriate to
consider the legislature's judgment of a reasonable disparity of
punitive to compensatory damages.
25
No. 2011AP1514
compared to other cases where courts have upheld high ratio
awards. See, e.g., Trinity, 261 Wis. 2d 333; J.K. v. Peters,
2011 WI App 149, 337 Wis. 2d 504, 808 N.W.2d 141 (upholding a
high ratio punitive damages award against a social worker who
sexually assaulted his minor client); Strenke v. Hogner, 2005 WI
App 194, 287 Wis. 2d 135, 704 N.W.2d 309 (upholding a high ratio
punitive damages award against a drunk driver who caused
substantial injuries to another motorist).25 These prior cases
involve the kind of especially egregious conduct identified by
the Supreme Court in Campbell, including "physical as opposed to
economic" harm, and "indifference to or a reckless disregard of
the health or safety of others." 538 U.S. at 419. As we have
discussed, the case at issue does not involve such conduct.
¶67 In sum, the award in this case does not bear a
"reasonable relationship" to either the compensatory damages
award or the potential harm faced by the Kimbles. We conclude,
therefore, that the award does not comport with due process.
3. Civil or Criminal Penalties
¶68 Finally, "we engage in a comparison of the punitive
damages award and the civil or criminal penalties that could be
imposed for comparable misconduct." Trinity, 261 Wis. 2d 333,
¶66 (citing Jacque, 209 Wis. 2d at 630). In this case, as in
Trinity, First American could be subject to a criminal penalty,
25
The court of appeals upheld the damages award in Strenke
on remand from this court. This court was equally divided on
the question of whether the award of punitive damages was
excessive. See Strenke, 279 Wis. 2d 52, ¶58.
26
No. 2011AP1514
including a fine of up to $10,000, for the violation of "any
insurance statute or rule of this state." Wis. Stat.
§ 601.64(4). The Stevensons argue that First American violated
Wis. Admin. Code § Ins. 6.11(3)(a), which prohibits unfair
settlement practices.
¶69 In this case we conclude, as we did in Trinity, that
"a criminal penalty has 'less utility' when used to determine
the dollar amount of the punitive damages award." 261
Wis. 2d 333, ¶68 (citing Campbell, 538 U.S. at 428). We
nonetheless note that "[t]he existence of a criminal penalty
does have bearing on the seriousness with which a State views
the wrongful action." Id., ¶66 (quoting Campbell, 538 U.S. at
428).
4. Application
¶70 Applying the relevant factors to the case at issue, we
conclude that the punitive damages award against First American
is excessive. First, First American's conduct "is sufficiently
reprehensible to give rise to tort liability, and even a modest
award of exemplary damages does not establish the high degree of
culpability that warrants a substantial punitive damages award."
BMW, 517 U.S. at 580. Second, there is no especially egregious
conduct supporting a high ratio punitive damages award. Absent
such egregious conduct, even the 7:1 ratio imposed in Trinity
would be unconstitutionally excessive. Finally, the existence
of an additional civil or criminal penalty has "limited utility"
27
No. 2011AP1514
in determining the reasonableness of the punitive damages
award.26 See Trinity, 261 Wis. 2d 333, ¶68.
¶71 We conclude, in consideration of the case law, that
the appropriate amount of punitive damages in this case is
$210,000. Comparing the amount of this award to the $69,738.49
amount of compensatory and potential damages results in a ratio
of approximately 3:1, below the ratio we upheld in Trinity, and
just below the constitutional "line" mentioned by the Supreme
Court in BMW, 517 U.S. at 581, and Haslip, 499 U.S. at 23.
Because "[t]he precise award in any case, of course, must be
based upon the facts and circumstances of the defendant's
conduct and the harm to the plaintiff," Campbell, 538 U.S. at
425, we conclude that this amount effectively punishes First
American's misconduct, while acknowledging that its conduct did
not rise to level of egregiousness found in prior punitive
damages cases.
V. CONCLUSION
¶72 We conclude that the punitive damages award in this
case was excessive and deprived First American of its right to
26
We note here, as we did in Trinity that "[t]he factors
discussed are the ones most relevant in this case . . . [and]
there are other factors that may be relevant given the nature of
the case at hand." 261 Wis. 2d 333, ¶69. In particular, we
note that while the "[d]efendant's wealth is oftentimes a
significant factor," id., it is not significant in this case.
The record indicates First American would likely be able to pay
the amount specified by the jury. Standing alone, however, the
"wealth of a defendant cannot justify an otherwise
unconstitutional punitive damages award." State Farm Mut. Auto
Ins. Co. v. Campbell, 538 U.S. 408, 427 (2003) (citing BMW, 517
U.S. at 585).
28
No. 2011AP1514
due process. We therefore reverse the court of appeals'
decision and remand this case to the circuit court for entry of
judgment against First American in the amount of $239,738.49.
By the Court.—The decision of the court of appeals is
reversed, and the cause is remanded to the circuit court.
¶73 DAVID T. PROSSER, J., did not participate.
29
No. 2011AP1514.ssa
¶74 SHIRLEY S. ABRAHAMSON, C.J. (dissenting). The
majority opinion reaches a shocking result: It makes First
American's wrongdoing an efficient way of doing business. For
all its reprehensible conduct, First American in fact pays less
by acting in bad faith and wrongfully refusing to pay the
Kimbles' claim than it would have paid had it honored the claim
in good faith after discovering its error. Under the majority
opinion, the combined punitive and compensatory damages amount
to $239,738.49——a sum smaller than the title insurance policy
limit of $370,000. This result directly contravenes the entire
purpose of punitive damages——making wrongdoers pay and deterring
future wrongful conduct.
¶75 Trinity Evangelical Lutheran Church & School-Freistadt
v. Tower Insurance Co., 2003 WI 46, 261 Wis. 2d 333, 661
N.W.2d 789, is the leading case for determining whether punitive
damages are unconstitutionally excessive as a violation of due
process. The majority opinion dutifully recites the Trinity
factors.1 Yet the majority opinion jettisons Trinity, turning
the test on its head in favor of the reasoning set forth in
Trinity's dissent.
¶76 The majority opinion achieves a result in which the
wrongdoer was enriched by its wrongdoing. This result, in my
opinion, cannot stand.
¶77 The test in Trinity applies six factors to assess
whether a punitive damages amount is justified:
1. The grievousness of the acts;
1
Majority op., ¶48.
1
No. 2011AP1514.ssa
2. The degree of malicious intent;
3. Whether the award bears a reasonable relationship
to the award of compensatory damages;
4. The potential damage that might have been caused by
the acts;
5. The ratio of the award to civil or criminal
penalties that could be imposed for comparable
conduct; and
6. The wealth of the wrongdoer.
Majority op., ¶48; Trinity, 261 Wis. 2d 333, ¶53.
¶78 It is perverse not to apply the Trinity test to the
instant case. The instant case is on all fours with Trinity.
In both cases an insurance company refused to pay the insured's
claim (breach of contract); the court found that the insurance
company breached the insurance contract; the insurance company
was found to have acted in bad faith; and the fact-finder found
that the misconduct justified a punitive damage award.2
2
Here are the facts of Trinity: An employee of Trinity
Church, the insured, was in a motor vehicle accident, and
Trinity Church was liable for damages of $490,000.
An agent of Tower Insurance erred by not providing Trinity
Church the coverage that Trinity Church requested.
Tower Insurance refused to reform the policy to cover
Trinity Church (as the law required it to do) and to pay
$490,000 on behalf of Trinity Church. Trinity Church sued Tower
Insurance for breach of contract, bad faith, and punitive
damages.
Tower Insurance paid $490,000 on Trinity Church's behalf.
2
No. 2011AP1514.ssa
¶79 In Trinity, the court held that due process was
satisfied by a punitive damages amount of $3,500,000 based on a
potential harm of $490,000, a 7:1 ratio.
¶80 Because the majority opinion fails to apply Trinity
properly, I dissent.
I
¶81 The first factor of the Trinity test is the
grievousness of the acts. The insurance company's misconduct
was substantially the same in Trinity and in the present case:
• In each case, an insurance company was sued by its
insured (or someone standing in the insured's shoes);
• In each case, the insurance company had failed to pay
the claim of its own insured;
• In each case, the insurance company was given repeated
opportunities to pay the claim and refused to do so,
The Trinity court used the $490,000 figure as harm to
Trinity Church to calculate the punitive damages. Had Tower
Insurance's misconduct not been discovered, Trinity Church would
have had to pay the full $490,000 from its own funds; Tower
Insurance would have received a net gain of $490,000. In
calculating the harm to Trinity Church, the Trinity court did
not take into account that Tower Insurance's agent might
ultimately be responsible for paying the $490,000.
Here are the facts in the instant case: First American
erred in not providing the Kimbles with their policy limits of
$370,000 when First American discovered that the Kimbles' title
was not marketable. Had First American's misconduct not been
discovered, the Kimbles could not have sold their property,
leaving them with a loss of both the $1.3 million sale price of
the property and the $370,000 policy limits of the First
American title insurance policy. First American would have
received a net gain of $370,000.
3
No. 2011AP1514.ssa
despite knowing the facts justifying payment of the
claim;
• In each case, the insurance company was found to have
acted in bad faith; and
• In each case, a jury awarded over $1 million in
punitive damages.
¶82 The Trinity court held that the insurance company's
misconduct constituted a "continuing, egregious, and flagrant
pattern of disregard toward [the insurance company's] duty owed
to its insured," which justified the punitive damages in that
case.3
¶83 The majority opinion in the present case characterizes
First American's conduct as not as reprehensible as that of the
insurance company in Trinity. Majority op., ¶¶53-55, 71.
¶84 The majority opinion's conclusion does not square with
the facts of the two cases.
¶85 First, as in Trinity, the legislature has made the
insurance company's misconduct a crime, demonstrating the public
policy of this state regarding the misconduct's
reprehensibility. See majority op., ¶69; accord Trinity, 261
Wis. 2d 333, ¶57.
¶86 Second, as in Trinity, First American's misconduct was
repeated; First American was a recidivist.4 In Trinity, the
3
Trinity, 261 Wis. 2d 333, ¶62.
4
Majority op., ¶53 n.20 (quoting Trinity, 261 Wis. 2d 333,
¶58: "'[O]ur holdings that a recidivist may be punished more
severely than a first offender recognize that repeated
misconduct is more reprehensible than an individual instance of
malfeasance.'") (internal citation omitted).
4
No. 2011AP1514.ssa
court noted that the insurance company's agent "made a series of
decisions that illustrate bad faith" and chastised the insurance
company's repeated misconduct and failure to investigate.5
¶87 The majority opinion erroneously states that First
American's misconduct was "an isolated incident," and that
"there is no indication from the record that First American
engaged in repeated conduct." Majority op., ¶51. On the
contrary, First American in the instant case demonstrates a
pattern of repeated misconduct. After discovering its initial
error, First American had many opportunities to remedy its
misconduct and instead continued to act improperly:
• When the Kimbles first inquired about their road
access, First American asserted that an easement gave
them access, when it in fact knew that the easement
granted to the Kimbles was invalid.6
• When the Kimbles inquired whether they could assert a
claim to the easement, First American assured them
that they had road access.7
• At trial, First American's agent admitted that it
discovered the deed that rendered the Kimbles'
easement invalid, and chose never to inform the
Kimbles about the deed.8
5
Trinity, 261 Wis. 2d 333, ¶60.
6
Majority op., ¶9.
7
Majority op., ¶10.
8
The trial yielded the following testimony:
5
No. 2011AP1514.ssa
• At trial, First American's agent admitted that it
deliberately failed to investigate the alleged title
defect.9
• Each time the Kimbles inquired as to their access,
First American insisted that the Kimbles could access
the road, variously stating that the Kimbles could go
across a 25-foot strip to which they had no access,10
[KIMBLES' COUNSEL]: Now, at your——at your deposition,
I asked you whether you made any mention of the Cofrin
deed [which rendered the easement invalid] to [the
Kimbles' agent] in March of 2008. Do you recall that?
[FIRST AMERICAN'S AGENT]: Yes.
[KIMBLES' COUNSEL]: And we talked about your letters
that you sent back and forth with him, correct?
[FIRST AMERICAN'S AGENT]: Yes.
[KIMBLES' COUNSEL]: And you acknowledge that it's true
that you never told [the Kimbles' agent] about the
Cofrin deed at any time in any of your conversations
or in any of your letters?
[FIRST AMERICAN'S AGENT]: That is correct.
9
At trial, an investigator employed by First American
testified that she asked First American's agent whether she
should investigate further. The investigator suggested problems
with the validity of the deed, and asked, "What does all of this
mean for us?" and "Do you want me to dig for more
documentation?" The investigator testified that she never
received a response.
10
The access to the south depended on an easement across a
25-foot strip of property. First American testified at trial
that "Land Concepts [which does not want to give access] owns
the fee simple interest to the 25-foot strip."
6
No. 2011AP1514.ssa
through a wetland that was barred from road
construction,11 and confusingly, "by water."12
¶88 The majority opinion maintains that the repeated
misconduct here is less reprehensible than the repeated
11
See court of appeals brief of defendant-appellant at 21.
The access to the south also needed to cross lands marked as
wetlands. The trial record reflects the following exchange:
[KIMBLES' COUNSEL]: And did you take the position
that the [Kimbles] had a right of access to their
property to the south?
[FIRST AMERICAN'S AGENT]: Yes.
[KIMBLES' COUNSEL]: Through an area of forest and
wetlands, correct?
[FIRST AMERICAN'S AGENT]: Yes.
Yet, government regulations prohibited development on the
forest and wetlands, as the defendant's agent testified:
[KIMBLES' COUNSEL]: And you know from reading [the
government official's] deposition that the area that
you've described is defined as wetlands according to
Door County Planning, right?
[FIRST AMERICAN'S AGENT]: That's correct.
[KIMBLES' COUNSEL]: And that, in fact, Door County
Planning has indicated that that area could not be
developed into any road or opened or cleared, true?
[FIRST AMERICAN'S AGENT]: That is correct.
12
The trial record reflects the following exchange:
[KIMBLES' COUNSEL]: Well, you recall testifying at
that court trial regarding whether the company was, in
fact, at that time on Tuesday going to assert that the
Kimbles enjoyed a right of access by water. Do you
recall that testimony?
[FIRST AMERICAN'S AGENT]: It came up. I recall it
coming up.
7
No. 2011AP1514.ssa
misconduct in Trinity because the insurance company in Trinity
had committed similar misconduct in another case 30 years
previously. Majority op., ¶53.
¶89 Yet the key factor for the reprehensibility of the
insurance company's misconduct in Trinity was not that a 30-
year-old prior court case existed or that the insurance company
knew about it, but rather that the insurance company's
"decisions, acts, and omissions . . . illustrate a continuing,
egregious, and flagrant pattern of disregard toward [the
insurance company's] duty owed to its insured . . . ." Trinity,
261 Wis. 2d 333, ¶62.
¶90 The record in the present case demonstrates that First
American exhibited a similar continuing, egregious, and flagrant
pattern of misconduct.
II
¶91 The second factor is whether there was "intentional
malice."
¶92 The majority opinion in the present case states that
"there is no indication of intentional malice on the part of the
First American or its employees." Majority op., ¶52.
Similarly, the Trinity court concluded that there was no
indication of intentional malice in that case either. Indeed
Trinity does not require malice in order for punitive damages to
be awarded. Rather, Trinity justified the amount of the
punitive damages award on the insurance company's "intentional
disregard of its duty to investigate diligently to ascertain and
8
No. 2011AP1514.ssa
evaluate the facts and circumstances . . . ." Trinity, 261
Wis. 2d 333, ¶59.
¶93 The jury in the instant case found sufficient grounds
to justify a finding that punitive damages should be awarded,
based on the evidence presented and the jury instructions. The
jury instructions stated that the jury should award punitive
damages if it found that "the defendant acted maliciously toward
the plaintiff or in an intentional disregard for the rights of
the plaintiff."13 With a $1 million jury award of punitive
13
Wis JI——Civil 1707.1, which was given to the jury, reads
in relevant part:
Punitive damages may be awarded, in addition to
compensatory damages, if you find that the defendant
acted maliciously toward the plaintiff or in an
intentional disregard of the rights of the plaintiff.
A person's acts are malicious when they are the result
of hatred, ill will, desire for revenge, or inflicted
under circumstances where insult or injury is
intended.
A person acts in an intentional disregard of the
rights of the plaintiff if the person acts with the
purpose to disregard the plaintiff's rights, or is
aware that his or her acts are substantially certain
to result in the plaintiff's rights being disregarded.
Before you can find an intentional disregard of the
rights of the plaintiff, you must be satisfied that
the defendant's act or course of conduct was:
(1) deliberate;
(2) an actual disregard of the plaintiff's right to
safety, health, or life, a property right, or some
other right; and
(3) sufficiently aggravated to warrant punishment by
punitive damages.
. . . .
9
No. 2011AP1514.ssa
damages, the jury found the "high degree of culpability" that
could justify a punitive damages award.14 Credible evidence
supports the jury's finding of either malicious intent or
intentional disregard of the rights of the insured. The
majority opinion does not state that the evidence was
insufficient for the jury to make such a finding. The jury
finding is sufficient to satisfy Trinity.
III
¶94 The Trinity test's third factor (ratio of compensatory
damages to punitive damages) and fourth factor (potential damage
to the plaintiff) are linked.
¶95 Trinity examined the ratio between potential harm and
punitive damages to determine the appropriateness of the award.
Trinity, 261 Wis. 2d 333, ¶65. "Wisconsin law expressly rejects
the use of a fixed multiplier . . . ." Trinity, 261
Wis. 2d 333, ¶63.
Factors you should consider in answering Question No.
6 [awarding the amount of punitive damages] include:
1. the grievousness of the defendant's acts,
2. the degree of malice involved,
3. the potential damage which might have been done by
such acts as well as the actual damage, and
4. the defendant's ability to pay. You may consider
the defendant's wealth in determining what sum of
punitive damages will be enough to punish the
defendant and deter the defendant and others from the
same conduct in the future.
See also Wis. Stat. § 895.043(3).
14
Majority op., ¶54.
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¶96 Despite the lack of a fixed multiplier, Trinity
provides a benchmark for the court. If a 7:1 ratio of punitive
damages to potential harm ($3,500,000 punitive; $450,000
potential harm) and a 200:1 ratio of punitive damages to actual
damages ($3,500,000 punitive; $17,570 actual damages) were
permissible in Trinity, the instant case, so similar in facts,
also supports an identical or similar ratio.
¶97 The amount of potential harm is calculated by
analyzing "'the harm likely to result from the defendant's
conduct as well as the harm that actually has occurred.'" TXO
Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 460,
(1993) (quoted source omitted).
¶98 In the instant case, the Kimbles were harmed. They
had an offer to buy their property for $1.3 million. They
wanted to sell. They chose to reduce the asking price to secure
the sale because they needed to care for aging parents who had
lost their home. The Kimbles introduced evidence that the sale
failed because of the lack of road access, a defect in
marketable title that had been insured by First American.
¶99 The Kimbles had purchased title insurance to protect
them from damages arising out of the unmarketability of their
title. The policy limit was $370,000. The value of the
property with marketable title was about three times the policy
limit.
¶100 The majority opinion erroneously asserts that a
consideration of the loss of value of Kimbles' home would force
the court "to depart from the facts of the record and speculate
11
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that, had the Kimbles failed to discover First American's bad
faith, they would have been completely unable to sell their
property, rendering it valueless." Majority op., ¶62.
¶101 Yet this potential harm is borne by the record. The
lack of access constituted "unmarketability of the title."15 The
policy itself defines "unmarketability of the title" as "an
alleged or apparent matter affecting the title to the
land . . . which would entitle a purchaser of the estate [or the
Kimbles] to be released from the obligation to purchase by
virtue of a contractual condition requiring the delivery of
marketable title." As First American's agent stated in a
deposition entered into evidence at trial, the risk of wrongly
denying the claim was that the Kimbles "would have had a real
big claim on the policy . . . ."
¶102 In Trinity, the facts were similar. The insured in
Trinity would have incurred a potential loss of up to $490,000
(damages in the auto accident case), had the insurance company
successfully continued to deny Trinity Church's claim. The
majority opinion in Trinity used the $490,000 figure for
evaluating the punitive damages award.
¶103 In the instant case, the Kimbles would have
potentially incurred a loss of up to $1.3 million, the sale
price of the property if they had marketable title, and would
15
"[E]ven if the policy does not expressly cover lack of a
right of access, if it insures against unmarketability of the
title, the title insurer will be liable if no legal access to
the land exists. The majority rule is that lack of access makes
title unmarketable." 1 Joyce D. Palomar, Title Insurance Law
§ 5:8 (West 2013-2014).
12
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not have recovered First American's title policy limits
($370,000), had First American successfully denied the Kimbles'
claim.
¶104 The majority opinion refuses to use the $1.3 million
sale price or $370,000 policy limit figures to calculate
punitive damages. Instead the majority opinion adopts the
reasoning of the dissent in Trinity.
¶105 Justice Sykes' dissent in Trinity argues that the
insured "was never at risk for the auto accident damages,
because either the agent (that is, his error and omissions
carrier) or [the insurance company] was responsible for the
mistake in the insurance application. The actual compensatory
damages in the bad faith claim consisted of the attorneys' fees
Trinity [Church] incurred in the coverage dispute, not the
personal injury damages in the underlying lawsuit, which Trinity
[Church] would not and did not have to pay." Trinity, 261
Wis. 2d 333, ¶106.
¶106 The majority opinion in the present case follows
Justice Sykes' approach by severely limiting what is actual and
potential harm, rather than employing the correct Trinity
majority opinion approach of using "the harm that is likely to
result."16
¶107 When title is not marketable, the significantly
reduced value of the property and the inability of an insured to
collect from the title insurance company are exactly "the
16
TXO Production Corp. v. Alliance Resources Corp., 509
U.S. 443, 460 (1993).
13
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harm[s] that [are] likely to have occurred" when a title
insurance company fails to pay a worthy claim. Thus, the proper
potential harm is at least the policy limits of $370,000, if not
the lost sale of the house ($1.3 million), or both, rather than
the mere $40,000 used by the majority opinion.
¶108 As to the proper ratio here, the majority opinion
relies upon its mistaken "reprehensibility of conduct" analysis
to justify a lower ratio than the Trinity 7:1 ratio of punitive
damages to potential harm and the 200:1 ratio of punitive
damages to actual damages that this court held constitutional.
Trinity, 261 Wis. 2d 333, ¶¶65, 68, 105; majority op., ¶66.
¶109 Even though the misconduct of First American here is
essentially analogous to the misconduct in Trinity and may even
be more egregious, the majority opinion applies only one guiding
principle: High numbers for compensatory and punitive damages
are bad; low numbers are good.
¶110 The majority settles on its 3:1 ratio for no
ostensible reason other than that it is lower than the 7:1 and
200:1 ratios in Trinity and the 4:1 ratio in Pacific Mutual Life
Insurance Co. v. Haslip, 499 U.S. 1, 23-24 (1996). Yet in
Pacific Mutual Life Insurance Co., the United States Supreme
Court held that the 4:1 ratio was "close to the line," not over
it.
¶111 The majority opinion also looks to a newly adopted
state statute, which fixes $200,000 or a 2:1 ratio of punitive
damages to compensatory damages as the limits for punitive
damages awards. Majority op., ¶66 n.23. The statute is
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irrelevant. The majority opinion deliberately defies the
legislative direction that the statute does not apply to the
present case. Furthermore, the constitutional due process
doctrine that we must apply in the present case rejects a fixed
amount for punitive damages or a fixed multiplier. "Excessive"
for due process purposes is a "fluid concept" that takes
"substantive content from the particular context[] in which the
standard[] [is] being assessed."17
¶112 What was good enough for the Trinity court seems to no
longer be good enough for the majority opinion in the present
case.
IV
¶113 The fifth Trinity factor is "a comparison of the
punitive damages award and the civil or criminal penalties that
could be imposed for comparable misconduct." Trinity, 261
Wis. 2d 333, ¶66. I agree with the majority opinion that the
imposition of criminal or civil fines does not directly impact
the amount of punitive damages in the instant case, for the same
reasoning we used in Trinity. See majority op., ¶69.
¶114 Nevertheless, the prohibited conduct's punishment by
criminal sanctions under Wis. Stat. § 601.64(4) evinces the
legislative determination of the reprehensibility of First
American's misconduct.
V
17
Cooperman Indus., Inc. v. Leatherman Tool Group, Inc.,
532 U.S. 424, 436 (2001).
15
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¶115 The sixth Trinity factor is the wealth of the
wrongdoer. The United States Supreme Court has also recognized
the wealth of the wrongdoer as a factor to be considered in
gauging the constitutionality of a punitive damage award.18
¶116 The purpose behind the wealth factor is to punish
wrongdoers and make the penalty for wrongdoing sufficiently high
for wealthy wrongdoers that they are deterred from engaging in
future misconduct.19
18
The wealth and financial position of the defendant are
examined to assess the excessiveness of the punitive damages
award. See, e.g., TXO Production Corp., 509 U.S. 443, 462
(1993); Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 23-24
(1996).
19
The majority opinion states the purpose of punitive
damages as follows:
[Punitive damages] are awarded "to punish the
wrongdoer, and to deter the wrongdoer and others from
similar conduct." Trinity, 261 Wis. 2d 333, ¶50.
"Punitive damages may properly be imposed to further a
State's legitimate interests in punishing unlawful
conduct and deterring its repetition." BMW of N. Am.,
Inc. v. Gore, 517 U.S. 559, 568 (1996).
Majority op., ¶43.
Justice Steinmetz articulated the reasoning behind
considering the wealth of the parties in his dissent in Brown v.
Maxey, 124 Wis. 2d 426, 452, 369 N.W.2d 677 (1985) (Steinmetz,
J., dissenting). He stated:
The policy justifications for punitive damages are
generally considered to be: punish the wrongdoer and
specifically deter him and generally deter others from
engaging in similar conduct. . . . It is almost
universally accepted that money talks. By tailoring
the amount of punitive damages to the relative wealth
of the individual, every wrongdoer is more or less
equally affected by the sanction.
16
No. 2011AP1514.ssa
¶117 In the instant case, the record demonstrates that in
2010, First American had revenues over $2 billion and net
profits of $65 million. First American easily had the ability
to pay the $1 million the jury awarded as punitive damages and
then some.
¶118 Yet in the instant case, the majority opinion's
result, as I noted previously, creates a final combined punitive
and compensatory damages amount of $239,738.49——a sum smaller
than the title insurance policy limit of $370,000. The majority
opinion makes First American's wrongdoing an efficient course of
business. First American in fact pays less by acting in bad
faith and wrongfully refusing to pay the Kimbles' claim than it
would have paid had it honored the claim in good faith after
discovering its error. This result directly contravenes the
entire purpose of punitive damages, let alone the purpose of
awarding punitive damages against a wealthy defendant.20
¶119 The majority opinion again strays from Trinity.
Trinity held, contrary to the majority opinion in the instant
case, that evidence of the insurance company's wealth and
ability to pay the full amount was "sufficient to justify the
size of the punitive damages award." Trinity, ¶69. In Trinity,
20
This rationale was echoed by the court in Jacque v.
Steenberg Homes, 209 Wis. 2d 605, 631, 563 N.W.2d 154 (1997),
which explained the need to eliminate the profit motive for
wrongdoing:
Punitive damages, by removing the profit from illegal
activity, can help to deter such conduct. In order to
effectively do this, punitive damages must be in
excess of the profit created by the misconduct so that
the defendant recognizes a loss.
17
No. 2011AP1514.ssa
the company would have had to liquidate assets to pay the
award.21 First American has no similar concern here.
¶120 The majority opinion dismisses the wealth factor in
the present case in a footnote, flouting Trinity and the United
States Supreme Court cases. The majority opinion states simply
that "it is not significant in this case." Majority op., ¶70
n.25. Why is the wealth of First American not significant in
this case? The majority opinion does not explain, other than to
cryptically state that "[t]he record indicates that First
American would likely be able to pay the amount specified by the
jury." Id. Is the majority opinion implying that First
American's ability to pay means the punitive damages were too
low or that the punitive damages can never be high enough to
deter First American's misconduct in the future? Is First
American too big, too well-to-do to punish?
* * * *
¶121 The majority opinion has ignored and misapplied the
Trinity test to substantially similar facts in the present case
and reaches an outcome contrary to Trinity.
¶122 The majority opinion achieves a result in which the
wrongdoer is enriched by its wrongdoing. First American ends up
paying less in damages for acting improperly than it would have
paid had it acted properly and paid the claim. This result, in
my opinion, cannot stand.
¶123 For the foregoing reasons, I dissent.
21
Trinity, 261 Wis. 2d 333, ¶69 n.8.
18
No. 2011AP1514.ssa
¶124 I am authorized to state that Justice ANN WALSH
BRADLEY joins this dissent.
19
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