MARCH 2006 BAD FAITH CASES COURT REDUCES PUNITIVES FROM $20MILLION TO $4.5MILLION, BUT REJECTS REQUEST FOR DUE PROCESS HEARING AND FOR SPECIFICATION OF JURY’S FACTUAL FINDINGS (Western District)

In Gallatin Fuels, Inc. v. Westchester Fire Insurance Company, the U.S. District Court for the Western District of Pennsylvania granted in part and denied in part defendant’s motion for review of the jury’s punitive damages award, which included a request for a due process hearing and specification of the jury’s factual findings on which the court’s legal finding on fortuitous loss was based.  Because the carrier cited no authority suggesting the court was required to conduct a due process hearing in connection with its punitive damages review, the court found it unnecessary and decided it would only further delay resolution.  Defendant’s request for additional briefing on the punitive damages issue was likewise denied, as such request directly contravened the timely objectives of a previous order.  However, the court determined, considering the totality of the circumstances, that the jury’s punitive damages award of $20 Million was out of proportion to the reprehensibility of defendant’s conduct.  Instead, the court found that a more modest punishment, in the amount of $4.5 million, would have satisfied the State’s legitimate objectives.  The court reasoned (1) that the jury’s award of $20 million was much higher than the ratio that the United States Supreme Court cites as typically appropriate, and (2) was also disproportionate under the facts and circumstances in the case.

Date of Decision:  March 28, 2006

Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., United States District Court for the Western District of PA, Civil Action No. 02-2116, 2006 U.S. Dist. LEXIS 13577 (W.D. Pa. Mar. 28, 2006) (Ambrose, C.J.)