Opinion
No. WD66791
January 8, 2008
Appeal from the Circuit Court of Jackson County, Missouri, The Honorable Charles E. Atwell, Judge.
James P. Frickleton Leawood, KS, Michael C. Rader, Co-Counsel, Leawood, KS, Attorneys for Respondents.
Dale Lee Beckerman Kansas City, MO, Mimi E. Doherty, Co-Counsel, Kansas City, MO, Attorneys for Appellants.
Before: Howard, C.J., and Breckenridge and Ellis, JJ.
Breckenridge, J., was a member of this court at the time the case was argued and submitted. She was subsequently appointed a judge of the Supreme Court of Missouri but has been reassigned to this court as a special judge for the purpose of disposition of this case.
Introduction
State Farm Mutual Automobile Insurance Company (State Farm) appeals the judgment of the trial court in favor of the Plaintiffs, Jennie Hampton and Marvin Vail. The jury returned a verdict in favor of Hampton on her breach of contract claim based on her insurance policy and in favor of both Plaintiffs for malicious prosecution and punitive damages. State Farm alleges that the trial court erred in submitting both the malicious prosecution and punitive damages claims to the jury, that the jury was improperly instructed on the malicious prosecution and contract claims, that there was insufficient evidence to support the malicious prosecution verdict, and that the punitive damages award was excessive. For the reasons stated below, we affirm the trial court's judgment.
Factual Background
This case began approximately 10 years ago. It is a very factually contested case. This factual background is merely a skeleton of all the facts presented during the trial. Additional facts will be discussed in the remainder of the opinion where applicable.
On December 22, 1997, Jennie Hampton reported her 1990 Toyota 4Runner as stolen to the Olathe, Kansas, Police Department. Later that day, she filed a claim with her insurance company, State Farm. On December 26, the Miami County Sheriff's Department recovered the burned 4Runner from a field in Kansas.
State Farm investigated and denied the claim filed by Hampton. They alleged that Hampton had provided false information to them by saying that the engine was in "excellent" condition when in fact the 4Runner had engine failure. The theory was that Hampton, along with the help of her boyfriend's brother, Marvin Vail, had towed the car to Miami County and burned it to collect the insurance money.
State Farm based this conclusion on the findings of Carter Enterprises. Carter Enterprises is a mechanical expert witness firm hired by State Farm to inspect vehicles when a claim is made. A detailed discussion of Hampton and Vail's case against Carter can be found in Hampton v. Carter, No. WD 66706, 2007 WL 2362575 (Mo.App.W.D. Aug. 21, 2007).
Vail, along with Hampton, worked for Santa Fe Tow. Vail was a tow truck driver and Hampton was a salesperson.
At the time, Hampton had a company car that she used frequently. State Farm also alleged that Hampton was having financial difficulty; however, Hampton never missed a payment on the 4Runner, even after she no longer had the vehicle.
In January of 1999, Hampton filed a civil suit in Kansas against State Farm for breach of contract based on its failure to pay her claim. During the pendency of the civil suit, in August of 1999, State Farm contacted the National Insurance Crime Bureau (NICB). Paul Yonally, the local NICB agent, testified that Chris Pool, the State Farm investigator handling Hampton's claim, told him that they had a case he might be interested in. On September 2, 1999, Pool sent the file to Yonally and requested that he refer the case to the Johnson County District Attorney for charging.
NICB investigates alleged crimes against insurers for potential referral to local prosecutors. Hampton and Vail also brought a malicious prosecution claim against NICB.
On December 21, 1999, the day before the statute of limitations was to run on any charges, Yonally met with Richard Guinn, the Johnson County Assistant District Attorney. On that same day, Guinn filed charges against Hampton, Vail, and Michael Storm, Hampton's boyfriend. Hampton was charged with insurance fraud for listing the engine in "excellent" condition, and all three were charged with conspiracy to commit insurance fraud. Hampton and Vail went to trial in May 2001, and the jury found both not guilty.
The charges against Storm were later dropped.
Hampton subsequently dismissed her civil case in Johnson County, which had been stayed during the criminal case, and filed this suit in Jackson County. Hampton alleged breach of contract against State Farm, and both Hampton and Vail alleged malicious prosecution. After a trial that lasted almost two weeks, the jury returned a verdict in the Plaintiffs favor on all counts. The jury awarded Hampton $10,300 on her breach of contract claim and awarded both Hampton and Vail $400,000 plus legal fees for their malicious prosecution claims. The trial court then awarded four million dollars to each plaintiff for punitive damages. State Farm now appeals this judgment.
As previously mentioned, there were other defendants to this suit. However, only State Farm is appealing the trial court's judgment.
In accordance with Kansas's law, for which there was no dispute that it applied in this case, the trial court reduced the jury's non-economic damages to $250,000.
As will be discussed more fully below, Kansas has a bifurcated process: the jury determines whether the judge should award punitive damages and then the judge determines the amount. K.S.A. § 60-3702(a).
Introduction to Discussion
State Farm raises six alleged errors on appeal. State Farm's arguments can be divided into three categories: (1) instructional error, (2) error regarding the malicious prosecution claims, and (3) error regarding the punitive damages claims.
Instructional Error
"Whether a jury is properly instructed is a matter of law subject to de novo review by this court." Syn, Inc. v. Beebe, 200 S.W.3d 122, 128 (Mo.App.W.D. 2006). In challenging an instruction, State Farm "must show that the instruction misled, misdirected, or confused the jury, and that prejudice resulted from the error." Id. (citing Dhyne v. State Farm Fire Cas. Co., 188 S.W.3d 454, 459 (Mo. banc 2006)). We will reverse based on instructional error if the error substantially prejudiced State Farm. Id.
State Farm first alleges that the trial court erred in giving Instruction 7 as opposed to its offered Instruction B. However, this issue has not been preserved for our review. During the instruction conference, when Instruction 7 was being discussed, State Farm objected to it, stating:
[Attorney for State Farm]: I have an instruction that references, based on the case law, reasonable grounds means reasonable grounds for suspicion. I think the lack of the reference to the word suspicion is a [sic] error, and I will submit that instruction.
. . . .
The Court:. . . . In essence, I'm going to mark this as potentially instruction B. But, in essence, you have borrowed from [the Kansas instruction] and defined reasonable grounds in [the Kansas instruction] language using the pattern instructions from Kansas; is that true?
[Attorney for State Farm]: That's accurate, plus based on Missouri case law requiring reasonable grounds for suspicion.
. . . .
The Court: I'll show it as instruction B offered and rejected by the Court.
The discussion then turned to the next offered instruction.
In State Farm's first point relied on, it alleges:
The Circuit Court erred to the prejudice of Defendant in giving Instruction No. 7 and refusing Instruction B because Instruction No. 7 did not correctly define reasonable grounds under Kansas Law, in that, under Kansas law, only facts and circumstances that were apparent to State Farm when the prosecution was commenced are to be considered in determining whether there were reasonable grounds to prosecute Plaintiffs, and Instruction 7 failed to give the jury guidance on that issue whereas Instruction B correctly guided the jury on that issue.
In essence, State Farm is alleging on appeal that Instruction 7 did not correctly instruct the jury regarding what evidence to consider. However, during the trial, State Farm objected to the fact that the word "suspicion" was not included in the instruction. These are two different alleged errors.
In accordance with Rule 70.03, "[a] party must make specific objections at the jury instruction conference and in their motion for new trial in order to preserve a matter for appellate review." Doe v. Alpha Therapeutic Corp., 3 S.W.3d 404, 419 (Mo.App.E.D. 1999). "The theory of the point on appeal must be the same as that of the trial objection." Syn, Inc., 200 S.W.3d at 135. "Where an alleged error relating to an instruction differs from the objections made to the trial court, the error may not be reviewed on appeal." Seidel v. Gordon A. Gundaker Real Estate Co., 904 S.W.2d 357, 364 (Mo.App.E.D. 1995). State Farm's first point on appeal has not been preserved and is, therefore, denied.
All rule references are to the Missouri Supreme Court Rules (2007) unless otherwise noted.
State Farm next alleges that the trial court erred in giving Instruction 9 as opposed to its offered Instruction C. Instruction 9 provides that:
On plaintiff Jennie Hampton's claim for damages based on Breach of Insurance Contract against defendant State Farm, your verdict must be for plaintiff Jennie Hampton and against defendant State Farm if you believe:
First, defendant State Farm issued its policy to plaintiff on the Toyota Four Runner covering loss due to fire, and
Second such property was damaged by fire, and
Third, the policy was in force on the date of such loss, unless you believe plaintiff is not entitled to recover by reason of Instruction Number 10.
Instruction 10 reads:
Your verdict must be for Defendant State Farm on Plaintiff Jennie Hampton's claim for Breach of Insurance Contract if you believe:
Either:
Plaintiff Jennie Hampton knew that the Toyota Four Runner at issue had significant engine problems at or prior to the date of the claimed theft or loss, or
Plaintiff Jennie Hampton was involved, whether directly or at her request or procurement, with the taking and burning of the Toyota Four Runner at issue, or
Plaintiff Jennie Hampton had actual knowledge, whether before or after the date of the taking and burning of the Toyota Four Runner at issue, regarding the identity of the individual or individuals involved in the taking and burning of the Toyota Four Runner, and made material misrepresentations to State Farm regarding such knowledge.
Instruction C provides:
On plaintiff Jennie Hampton's claim for damages based on Breach of Insurance Contract against defendant State Farm, your verdict must be for plaintiff Jennie Hampton and against defendant State Farm if you believe:
First, defendant State Farm issued its policy to plaintiff on the Toyota Four Runner covering an accidental loss, and
Second, such property was damaged due to an accidental loss, and
Third, the policy was in force on the date of such accidental loss, unless you believe plaintiff is not entitled to recover by reason of Instruction Number ____.
In comparing these two instructions, the only difference is the use of language involving "fire" in Instruction 9 as opposed to "accidental loss" in Instruction C.
State Farm alleges that Instruction 9 relieved Hampton from having to prove that the loss of the vehicle was "accidental." Hampton argues that when all the instructions are read together, and in accordance with the Missouri Approved Instructions (MAI), there was no error in giving Instruction 9. We agree.
"[I]n a case tried under Kansas law in this State, the form of an instruction is a procedural matter governed by the law of Missouri." Banning v. Webb, 625 S.W.2d 187, 189 (Mo.App.W.D. 1981). When, as here, the Missouri substantive law and the Kansas substantive law are the same, "[i]f the Missouri Approved Instructions include an instruction which correctly states the substantive law of Kansas, the approved instruction must be given." Hicks v. Graves Truck Lines, Inc., 707 S.W.2d 439, 446 (Mo.App.W.D. 1986).
Supreme Court Rule 70.02(b) directs the exclusive use of the Missouri Approved Instructions whenever an approved instruction is applicable to the case. The law is well-settled that where an MAI instruction applies to the case, the use of such instruction is mandatory. In insisting that the appropriate MAI be followed, the Supreme Court of Missouri has explained that use of the MAI is key to the integrity of the court system. MAI instructions, promulgated and approved by the Supreme Court, are authoritative if applicable to the factual situation . . . this court, as well as the trial court, is bound by them as surely as it is bound by Supreme Court cases and rules.
Syn, Inc., 200 S.W.3d at 128 (internal citations omitted). Instruction 9 is based on MAI 31.09. MAI 31.09 reads as follows:
Your verdict must be for plaintiff if you believe:
First, defendant issued its policy to plaintiff on ( here describe property) covering loss due to ( here describe applicable coverage, e.g., fire, collision, or windstorm), and
Second, such property was damaged by ( here insert applicable coverage), and
Third, the policy was in force on the date of such loss,
[unless you believe plaintiff is not entitled to recover by reason of Instruction Number __ ( here insert number of affirmative defense instruction)].
Instruction 9 correctly follows MAI 31.09. Therefore, the trial court did not error in submitting Instruction 9.
Even if the giving of Instruction 9 as opposed to Instruction C was error, which we do not find, the alleged error was not prejudicial. "To determine whether the burden of proof was impermissibly shifted, we review all of the instructions." Petry Roofing Supply, Inc. v. Sutton, 839 S.W.2d 337, 342 (Mo.App.E.D. 1992). "When the instructions are considered as a whole and there is no misdirection, any error, is not prejudicial." Ahrens McCarron, Inc. v. Mullenix Corp., 793 S.W.2d 534, 541 (Mo.App.E.D. 1990). "In evaluating whether a jury has been misled an appellate court may assume that the jury is composed of reasonably intelligent people with an average understanding of the English language." Heartland Stores, Inc. v. Royal Ins. Co., 815 S.W.2d 39, 41 (Mo.App.W.D. 1991).
When Instruction 9 and 10 are read together, it is clear that the jury could not find in favor of Hampton if they believed she had anything to do with the burning of the vehicle. The entire trial revolved around whether or not the Plaintiffs were involved in the burning of the vehicle. Any reasonably intelligent person would understand, based on the instructions, that Hampton could not recover under the breach of contract claim if she had participated in the burning of the 4Runner. State Farm offered Instruction 10, so it cannot now argue that it was improperly given. Anglim v. Mo. Pac. R.R. Co., 832 S.W.2d 298, 308 (Mo. banc 1992). State Farm's point on appeal is denied.
However, the court did make changes to paragraph three of the instruction. State Farm did not object to the alteration or propose an alternative instruction. Counsel for State Farm stated, "What we ended up is [sic] essentially tracked what I proposed."
Malicious Prosecution Claims
State Farm alleges that the Plaintiffs failed to make a submissible claim for malicious prosecution. It also alleges that the verdict for the Plaintiffs in regard to malicious prosecution was against the weight of the evidence. We do not review this second contention because it preserves nothing for appeal.
State Farm's sixth point on appeal alleges:
The circuit court abused its discretion in denying the motion of State Farm for new trial on the claim of each plaintiff for malicious prosecution because State Farm was entitled to a new trial on each such claim in that each verdict for malicious prosecution was against the weight of the evidence.
It has long been the law in Missouri that "[i]t is trite to repeat again that simply declaring the verdict is against the weight of the evidence preserves nothing for appellate review because appellate courts, unlike trial courts, do not weigh the evidence in jury tried cases." Robinson v. St. John's Med. Ctr., Joplin, 508 S.W.2d 7, 11 (Mo.App. 1974) (citing State ex rel. State Highway Comm'n v. Twin Lakes Golf Club, Inc., 470 S.W.2d 313, 315 (Mo. 1971). Furthermore, as stated in Rule 84.04(d)(4), "[a]bstract statements of law, standing alone, do not comply with this rule." Merely stating that the verdict "was against the weight of the evidence" is nothing more than an abstract statement of law and preserves nothing for us to review. State Farm's sixth point on appeal is denied.
As to the submissibility of the malicious prosecution claims, as stated in Ryan v. Maddox:
The standard of review of a trial court's denial of motions for directed verdict and judgment notwithstanding the verdict is whether the plaintiff has made a submissible case. To make a submissible case, a plaintiff must present "substantial evidence that tends to prove the facts essential to plaintiff's recovery." Substantial evidence is evidence that, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide a case.
An appellate court determines whether a plaintiff makes a submissible case by viewing the evidence and all reasonable inferences therefrom in the light most favorable to the prevailing party. The prevailing party's evidence is presumed true and any of the non-prevailing party's evidence that does not support the prevailing party's case is disregarded. An appellate court will not supply missing evidence or give the prevailing party the benefit of unreasonable, speculative or forced inferences. A jury verdict will not be overturned unless there is a complete absence of probative facts to support it. Where reasonable minds can differ on the question before the jury, a court may not disturb the jury's verdict. The jury determines the credibility of the witnesses.
112 S.W.3d 476, 480-81 (Mo.App.W.D. 2003) (internal citations omitted).
To establish a claim for malicious prosecution, the Plaintiffs had to show:
(a) That the defendant initiated, continued, or procured [criminal] procedures against the plaintiff.
(b) That the defendant in so doing acted without probable cause.
(c) That the defendant acted with malice, that is he acted primarily for a purpose other than that of securing the proper adjudication of the claim upon which the proceedings are based.
(d) That the proceeding terminated in favor of the plaintiff.
(e) That the plaintiff sustained damages.
Nelson v. Miller, 607 P.2d 438, 443 (Kan. 1980). In its appeal, State Farm claims that the Plaintiffs failed to produce substantial evidence that (1) State Farm initiated a prosecution against Hampton and/or Vail or caused them to be prosecuted; (2) there was no reasonable grounds to prosecute the Plaintiffs; and (3) State Farm acted with malice. We hold that there was substantial evidence to submit the malicious prosecution claims to the jury.
Under Kansas law:
In an action for malicious prosecution, where the facts with respect thereto are not in dispute, questions relating to malice, probable cause, or whether the evidence discloses a legal defense to the action, are primarily for decision by the court but if the facts tending to establish the existence or want of existence of any or all of such questions are in dispute it is the duty of the trial court to submit such question, or questions, to the jury with appropriate instructions defining the law applicable to the rights of the parties under the evidence of record.
Messinger v. Fulton, 252 P.2d 904, 907 (Kan. 1953). Clearly, in this case, almost every fact with respect to the malicious prosecution claims was in dispute. Accordingly, the trial court was correct to submit the claims to the jury to determine whether the Plaintiffs had established malicious prosecution by State Farm. We also find that there was substantial evidence, viewing all evidence and inferences in favor of the Plaintiffs and disregarding the contrary evidence, that State Farm initiated or caused the Plaintiffs to be prosecuted, that there were no reasonable grounds to prosecute the Plaintiffs, and that State Farm acted with malice.
We first look at the evidence tending to prove that State Farm initiated or caused the Plaintiffs to be prosecuted. "To establish that the defendant initiated the criminal proceeding, Kansas case law is clear that the defendant must have acted affirmatively in instigating or participating in the prosecution." Wright v. Montgomery Ward Co., 814 F.Supp. 986, 990 (D. Kan. 1993) (citing Barnes v. Danner, 216 P.2d 804, 807 (Kan. 1950)). In this case, the Plaintiffs presented substantial evidence to show that State Farm initiated or caused the prosecution against them.
Although it is true that State Farm itself did not ask the Johnson County District Attorney to prosecute the Plaintiffs, it did set in motion the prosecution by asking Yonally of the NICB to refer the case to Johnson County. The Plaintiffs presented evidence that not only did State Farm, through its investigator Pool, request that Yonally take the case to Johnson County, they also presented evidence that State Farm did not give NICB their entire file. For instance, the file given to NICB did not reference the potentially exculpatory evidence of broken glass with blood on it found by Carter, the mechanical expert witness firm hired by State Farm to inspect the burned 4Runner. The Plaintiffs also presented evidence from which the jury could have inferred that State Farm knew by going through Yonally, a former Kansas Bureau of Investigation employee, that the Johnson County District Attorney was more likely to file charges, as the prosecutor himself admitted. This is but a sampling of the evidence put on by the Plaintiffs. There was substantial evidence from which the jury could reasonably find that State Farm initiated the prosecution.
Guinn testified that he would have been suspicious if State Farm, as opposed to Yonally, had presented him with the information.
Second, State Farm claims that there was insufficient evidence proving that there were no reasonable grounds to prosecute the Plaintiffs. Again, as discussed above, there were disputed facts surrounding whether State Farm had probable cause. "If the facts are undisputed, the question of whether probable cause existed is one for the court to decide as a matter of law, but where the facts tending to establish the existence or want of existence of probable cause are in dispute, the trial court has the duty to submit the question to the jury." Bergstrom v. Noah, 974 P.2d 520, 526 (Kan. 1999). Therefore, the trial judge was correct in submitting the issue to the jury.
"Probable cause for instituting a proceeding exists when there is a reasonable ground for suspicion supported by circumstances sufficiently strong in themselves to warrant a cautious or prudent person in the belief that the party committed the act of which he or she is complaining." Id. Again, viewing all evidence in the light most favorable to the Plaintiffs and disregarding any contrary evidence, there was substantial evidence produced by the Plaintiffs from which a jury could reasonably find that State Farm did not have reasonable grounds to initiate the prosecution.
One of the most significant issues in this case is the evidence presented by the Plaintiffs regarding the possible falsification of the reports by Carter regarding the status of the engine. Not only did State Farm have statements that Hampton had been driving the 4Runner the evening before the theft, which would have been impossible if, as Carter reported, it was in total engine failure, but also that the circumstances surrounding Carter's report were suspicious, from which a jury could draw a negative inference.
This claim was based on Carter declaring the 4Runner inoperable prior to dismantling it and State Farm's Investigator telling them they needed to "enhance the physical evidence" regarding the engine's condition. The 4 Runner was recovered on December 29th. On December 30th, having traveled to Louisburg, Kansas, that day, Carter reported to State Farm that the engine was inoperable prior to the fire. As State Farm's investigator admitted, the fact that Carter gave this opinion so quickly and without dismantling the engine was "a problem."
State Farm argues that it relied on the statements of three supposed witnesses to the Plaintiffs discussing the various engine problems with the 4Runner and the possibility that they had been involved in the burning of the vehicle. However, as demonstrated during the trial, all of these witnesses had credibility issues, and it is a function of the jury to determine the credibility of a witness regarding whether State Farm's reliance on these statements was reasonable. See Miller v. Levering Reg'l Health Care Ctr., LLC, 202 S.W.3d 614, 617 (Mo.App.E.D. 2006). The Plaintiffs presented evidence, such as inconsistencies in statements that State Farm would have been aware of at the time of initiating the prosecution, that would have called into doubt whether there were reasonable grounds to go forward.
Again, this is but a sampling of the evidence presented during the two-week trial regarding whether State Farm had reasonable grounds to initiate prosecution. The trial court did not err in submitting the issue to the jury.
Finally, State Farm alleges that the Plaintiffs failed to produce substantial evidence that it acted with malice.
[M]alice is not restricted to personal hatred, spite, or revenge. It is enough if the prosecution was instituted from any wrongful or improper motive. The law contemplates that criminal prosecutions shall only be brought to punish crime and to bring criminals to justice. When a proceeding is intentionally instituted to further a private or wrongful purpose, it is, in law, a malicious prosecution.
Foltz v. Buck, 131 P. 587, 588 (Kan. 1913). "The existence of malice or wrongful purpose is ordinarily a question of fact for the jury." Nelson v. Miller, 607 P.2d 438, 445 (Kan. 1980). Once again, the trial court did not error in submitting this issue to the jury. Hampton's claim in regard to the 4Runner was denied in April of 1998. Hampton filed her civil suit in January of 1999. It was only after this that State Farm contacted NICB regarding submitting the case to the Johnson County prosecutors. As argued by the Plaintiffs, it is reasonable for the jury to infer that State Farm initiated the criminal proceedings against them in order to put pressure on Hampton regarding her original civil suit.
Malice is further discussed below in regard to the punitive damages claim.
The Plaintiffs presented substantial evidence regarding all the elements of malicious prosecution. The trial court did not error in submitting the case to the jury. State Farm's point is denied.
Punitive Damages Claims
State Farm's final two alleged errors center on the submissibility of the punitive damages claims and the amount of punitive damages awarded. Kansas has a very specific statute regarding punitive damages. Section 60-3702 provides a bifurcated procedure for the award of punitive damages. First, it is up to the jury to determine whether punitive damages should be awarded. § 60-3702(a). Once a jury determines that punitive damages are warranted, it then is up to the judge to determine the amount of punitive damages to be awarded. Id. Section 60-3702(b) sets forth factors a court may consider in determining the amount of damages to award:
All statutory references are the to the Kansas Statutes Annotated.
Since no argument was made on appeal regarding the applicability of this statute, we make no findings regarding whether it was proper for the trial court to apply this procedural statute.
(1) The likelihood at the time of the alleged misconduct that serious harm would arise from the defendant's misconduct;
(2) the degree of the defendant's awareness of that likelihood;
(3) the profitability of the defendant's misconduct;
(4) the duration of the misconduct and any intentional concealment of it;
(5) the attitude and conduct of the defendant upon discovery of the misconduct;
(6) the financial condition of the defendant; and
(7) the total deterrent effect of other damages and punishment imposed upon the defendant as a result of the misconduct, including, but not limited to, compensatory, exemplary and punitive damage awards to persons in situations similar to those of the claimant and the severity of the criminal penalties to which the defendant has been or may be subjected.
Furthermore, punitive damages cannot be assessed against "[a] principal or employer for the acts of an agent or employee unless the questioned conduct was authorized or ratified by a person expressly empowered to do so on behalf of the principal or employer." § 60-3702(d)(1). As applied to this case, section 60-3702 limits the amount the judge can award to five million dollars. § 60-3702(e)(2).
First, we consider the submissibility of the punitive damages award. In order to have a submissible case for punitive damages, the Plaintiffs had the burden of proving, by clear and convincing evidence, that State Farm acted toward them with malice. See § 60-3702(c). State Farm alleges that the Plaintiffs failed to show that they acted in a malicious manner. "Malicious" was defined for the jury as "a state of mind characterized by an intent to do a harmful act without a reasonable justification or excuse."
Viewing the evidence in a light most favorable to the Plaintiffs and disregarding any evidence to the contrary, the Plaintiffs presented substantial evidence that would allow the jury to find that State Farm acted maliciously. Examples of this evidence include that State Farm did not provide NICB and, therefore, the prosecutor with its complete files. This included omitting the evidence regarding glass fragments with blood on them found in the car, which would tend to show someone had broken into the vehicle as opposed to the Plaintiffs being involved. The file also did not include the Miami County police report that made no mention of dual tire marks in the area where the 4Runner was found. Dual tire tracks would have been present if it had been towed to the scene of the fire by Vail, as State Farm's theory of the case required.
Other examples include the alleged encouragement of the falsification of Carter's report of the engine. There were also accusations that State Farm's attorney told Hampton's uncle, who was serving as her attorney at the time, that she needed to be careful about pursuing her insurance claim because criminal charges could still be brought. Hampton's uncle also testified that one of State Farm's attorneys told him that there were plaster casts of tire tracks found near the burned 4Runner that matched Vail's tow truck. However, no such plaster casts exist.
Again, this claim was based on Carter declaring the 4Runner inoperable prior to dismantling it and State Farm's Investigator telling them they needed to "enhance the physical evidence" regarding the engine's condition. The 4Runner was recovered on December 29th. On December 30th, having traveled to Louisburg, Kansas, that day, Carter reported to State Farm that the engine was inoperable prior to the fire. As State Farm's investigator admitted, the fact that Carter gave this opinion so quickly and without dismantling the engine was "a problem."
Finally, there was also evidence presented that Pool considered contacting one witness's diversion officer after the witness had changed his testimony in such a way that would not have been useful to State Farm. Although there was no evidence that Pool or anyone else ever spoke to the diversion officer, there was evidence presented that one of State Farm's attorneys may have threatened the witness with perjury.
This, along with other evidence presented by the Plaintiffs, provided substantial evidence to support the determination that State Farm acted maliciously. Therefore, the trial court did not err in submitting the issue to the jury.
We now turn to the amount of punitive damages awarded by the trial court. State Farm alleges that the four-million dollars punitive damage award to each plaintiff, totaling an eight-million dollar award, violates its rights under the United States Constitution and under the Kansas punitive damage statute. State Farm argues that the trial court should have declined to award punitive damages, or in the alternative, that the amount of punitive damages awarded was excessive.
Our standard of review when determining the excessiveness of punitive damages is complicated. We review de novo whether the trial court correctly applied the Supreme Court precedent and the Kansas statute. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418 (2003). However, we defer to the trial court's findings of fact unless they are clearly erroneous. Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 440 n. 14 (2001).
In announcing the award of punitive damages, the trial court focused on the following facts:
• A lawyer for State Farm represented to Hampton's attorney that there were plaster cast of tire tracks showing that Vail's tow truck was near where the 4Runner was found when in fact none existed;
• A lawyer for State Farm telling Hampton's uncle, who was serving as her attorney, that Hampton had to be careful because criminal charges could still be brought;
• The exclusion of exculpatory evidence from the report given to NICB and the prosecutor;
• A lawyer for State Farm threatening a witness with perjury after he changed his story;
• Pool contemplating contacting a witness's diversion officer to encourage him to tell the truth;
• Use of an expert who rendered an opinion on the status of the engine prior to fully examining it;
• Without first consulting the prosecutor, State Farm's preparation of Carter to testify at the criminal trial; and
• Failing to investigate and fully develop exculpatory evidence, including log records of Vail's tow truck and distances traveled and the statement of an independent witness that had seen Hampton driving the 4Runner prior to the theft.
"In Kansas, punitive damages are awarded to punish the wrongdoer for malicious, vindictive, or willful and wanton invasion of another's rights, with the ultimate purpose being to restrain and deter others from the commission of similar wrongs." Cerretti v. Flint Hills Rural Elec. Co-op. Ass'n, 837 P.2d 330, 344 (Kan. 1992). The United States Supreme Court has established a test for whether punitive damages violate the due process clause of the Constitution. In BMW of North America, Inc. v. Gore, the Court announced three factors that are to be considered in determining whether punitive damages are excessive: "1) the degree of reprehensibility; 2) the disparity between the harm suffered and the punitive damages award; and 3) the difference between the award and the civil penalties authorized or imposed in similar cases." Miller v. Levering Reg'l Health Care Ctr., LLC, 202 S.W.3d 614, 619 (Mo.App.E.D. 2006) (citing BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 582 (1996). State Farm alleges that this punitive damages award fails the test set out in BMW.
"Perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct." BMW, 517 U.S. at 575. "[I]nfliction of economic injury, especially when done intentionally through affirmative acts of misconduct, or when the target is financially vulnerable, can warrant a substantial penalty." Id. at 576 (citation omitted). In this case, it is clear that the Plaintiffs were financially vulnerable, especially considered in relation to State Farm. State Farm's misconduct, including relying on a questionable expert, excluding exculpatory evidence, and making representations about nonexistent plaster casts, is clearly reprehensible.
State Farm alleges that the ratio of punitive damages to compensatory damages exceeds what is permissible. The Supreme Court has stated that they are "reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award." State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 424 (2003). The Court has stated that single-digit ratios are more likely to comport with due process. Id. at 425. However, greater ratios are more likely to be upheld when "a particularly egregious act has resulted in only a small amount of economic damages." Id. (citation omitted). "In sum, courts must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered." Id. at 426. The jury returned verdicts on the malicious prosecution claims for both and Vail as $400,000 plus legal fees. Both Hampton and Vail were awarded $4 million in punitive damages. In this case, based on the egregious acts committed by State Farm, as set out by the trial court in making its judgment, the amount of punitive damages was reasonable.
The Kansas punitive damages statute has partially dealt with the issue of the difference between the award and the civil penalties authorized or imposed in similar cases by limiting the amount of punitive damages to be awarded, as applied in this case, to five million dollars. § 60-3702(e)(2). Although the only other civil penalty cited by either of the parties is a five-hundred dollar fine for the violation of the Kansas Insurance Code, section 40-254, based on the limitation found in the Kansas punitive damages statute, along with the numerous wrongful acts by State Farm, we find that the award of four-million dollars to each plaintiff was permissible.
State Farm also argues that the compensatory damage award adequately compensated the Plaintiffs and, therefore, the punitive damages award was improper. "It should be presumed a plaintiff has been made whole for his injuries by compensatory damages, so punitive damages should only be awarded if the defendant's culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence." Campbell, 538 U.S. at 419. "`Punitive damages are not given upon any theory that the plaintiff has any just right to recover them but are given only upon the theory that the defendant deserves punishment for his or her wrongful acts and that it is proper for the public to impose them upon the defendant.'" Hayes Sight Sound, Inc. v. ONEOK, Inc., 136 P.3d 428, 452 (Kan. 2006) (quoting Smith v. Printup, 938 P.2d 1261, 1273-74 (Kan. 1997)). Whether or not Plaintiffs were adequately compensated by the compensatory damages does not play a part of determining the amount of punitive damages. Instead, the punitive damages are meant as a punishment and deterrence so that State Farm will not act again as they did in this case.
State Farm also alleges that the award impermissibly punishes State Farm for conduct toward a non-party. State Farm is correct in that a punitive damages award is only to be awarded based on acts done by the defendant to the plaintiffs. See Campbell, 538 U.S. at 423. However, State Farm has mischaracterized the factual findings of the trial court. Although it is true that the trial court made findings about the actions of State Farm in threatening perjury toward a witness, the award of punitive damages was not for the actions actually taken against him. Instead, it was the fact that State Farm would use such tactics in the handling Hampton's claim and the eventual prosecution of the Plaintiffs. Therefore, the consideration of State Farm's actions involving non-parties was permissible. Furthermore, the court is allowed to consider harm to third parties in assessing the reprehensibility of State Farm's conduct in regard to the first factor in the BMW analysis. See Philip Morris USA v. Williams, 127 S.Ct. 1057, 1063-64 (2007).
State Farm's final argument is based on the Kansas statute's prohibition of awarding punitive damages against "[a] principal or employer for the acts of an agent or employee unless the questioned conduct was authorized or ratified by a person expressly empowered to do so on behalf of the principal or employer." § 60-3702(d)(1). State Farm argues that the comments by its attorney regarding plaster casts of the tow truck tires and that Hampton should "back off" from the civil claim because criminal charges could still be filed should not be considered because the Plaintiffs have failed to prove that State Farm authorized or ratified these actions.
[A]uthorization . . . may be either express or implied and generally is accomplished before or during the employee's questioned conduct. It may be based on an express grant of authority or on a course of conduct indicating that the employee was empowered or given the right or authority to engage in the questioned conduct. Ratification . . . may be either express or implied and may be accomplished before, during, or after the employee's questioned conduct. It may be based on an express ratification or based on a course of conduct indicating the approval, sanctioning, or confirmation of the questioned conduct.
Smith v. Printup, 866 P.2d 985, 1003 (Kan. 1993).
An agent has implied authority if "it appears from the statements and conduct of the parties and other relevant circumstances that the intention was to clothe the agent with such an appearance of authority that when the agency was exercised it would normally and naturally lead others to rely on the person's acts as being authorized by the principal."
Id. at 1002 (citation omitted).
"An attorney-client relationship is an agency relationship." Robinson v. Dir. of Revenue, 32 S.W.3d 148, 154 (Mo.App.S.D. 2000). "Implied authority flows from the express authority, and encompasses the power to act in ways reasonably necessary to accomplish the purpose for which express authority was granted." Rosenblum v. Jacks or Better of Am. W. Inc., 745 S.W.2d 754, 760 (Mo.App.E.D. 1988). Here, there was ample evidence from which it could be inferred that State Farm authorized or ratified the statements made by its attorneys. For instance, State Farm's attorney threatened criminal charges against Hampton, and later, criminal charges were in fact filed, which the jury found had been instigated by State Farm. Furthermore, the acts of State Farm's attorneys were not the only facts supporting the punitive damages award.
The trial court's award of punitive damages is affirmed.
Conclusion
For the foregoing reasons, the judgement of the trial court is affirmed.
Breckenridge and Ellis, JJ., concur.
State Farm Mutual Automobile Insurance Company appeals the judgment of the trial court in favor of the Plaintiffs, Jennie Hampton and Marvin Vail. The jury returned a verdict in favor of Hampton on her breach of contract claim based on her insurance policy and in favor of both Plaintiffs for malicious prosecution and punitive damages. State Farm alleges that the trial court erred in submitting both the malicious prosecution and punitive damages claims to the jury, that the jury was improperly instructed on the malicious prosecution and contract claims, that there was insufficient evidence to support the malicious prosecution verdict, and that the punitive damages award was excessive.
The judgment of the trial court is affirmed. The trial court did not err in submitting the claims to the jury because the Plaintiffs presented substantial evidence regarding all the elements of malicious prosecution and for the award of punitive damages. The contract claim instruction was properly given in that it correctly followed the Missouri Approved Instructions. Based on our review of the record and the applicable law, the punitive damages award was not excessive. Finally, the remaining claimed errors were not preserved for our review.
Judgment affirmed.