Artie's Auto Body Inc. v. The Hartford Fire Insurance Co.
A court may consider whether the defendant's conduct was intentional, whether an injunction will serve as a substantial deterrent, the number of plaintiffs and the defendant's net worth when it awards punitive damages in a class-action, unfair trade practices suit. Previously, auto body repair shops sued the Hartford Fire Insurance in a class-action suit, alleging that the defendant wrongly steered its insureds and other claimants to certain auto body shops and encouraged independent appraisers to approve an artificially low rate for auto body work. A jury awarded $14.7 million. The plaintiffs requested punitive damages of $59 million, or four times the award of compensatory damages. The court found, by a preponderance of the evidence, that the defendant knowingly engaged in conduct in willful or reckless disregard of the rights of its licensed motor-vehicle damages appraisers, under their Code of Ethics, to conduct their independent appraisals in a neutral, objective way. Although an award of punitive damages is merited, pursuant to the Connecticut Unfair Trade Practices Act, "[f]our times compensatory," wrote the court, "is clearly excessive, and comes close to being unconstitutionally high." The large net worth of the defendant, which was about $12 to $13 billion in 2008 and 2009, qualifies as an aggravating factor. The size of the plaintiff class of approximately 1,500 auto body shops constitutes another aggravating factor. The alleged conduct of "seriously" compromising the neutrality and independence of appraisers in violation of public policy also constitutes an aggravating factor. The Hartford's alleged conduct took place over a period of years and was intentional, as opposed to an isolated incident. On the other hand, the defendant did not violate the appraiser's Code of Ethics, because the Code of Ethics is directed solely at the appraisers. An injunction against The Hartford that will probably require it to pay a higher rate than competitors serves as a substantial deterrent and qualifies as a mitigating factor. Mitigating factors were greater than aggravating factors. The court awarded the plaintiffs punitive damages in the amount of $20 million, which is approximately 1.35 times the amount of compensatory damages awarded by the jury.