# Petition for Writ of Certiorari — InterContinental Life Insurance v. Lindblom > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1019%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1991 - **Citation:** 499 U.S. 956 ## Text FIL FEB 1 4 1991 \ocruce oF THe CER _ al Iu the Supreme Court of the United States OCTOBER TERM, 1990 ® , 90-1284+ INTERCONTINENTAL LIFE INSURANCE COMPANY, PETITIONER Vv. Lou R. LINDBLOM, RESPONDENT Petition for a Writ of Certiorari to the Supreme Court of Alabama PETITION FOR A WRIT OF CERTIORARI ANDREW L. FREY Counsel of Record THEODORE A. FLERON Vice President & > General Counsel InterContinental Life Insurance Company 601 Walnut Street Philadelphia, Pa. 19106 (215) 351-2953 ANDREW J. PINCUS KATHERINE J. HENRY Mayer, Brown & Platt 2000 Pennsylvania Ave., N.W. Washington, D.C. 20006 (202) 778-0602 JAMES C. BARTON MICHAEL L. HALL HOLLINGER F’. BARNARD Johnston, Barton, Proctor, Swedlaw & Naff 1100 Park Place Tower Birmingham, Alabama 35203 (205) 322-0616 Counsel for Petitioner InterContinental Life Insurance Company Ta TNE WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001 A/¢ QUESTIONS PRESENTED 1. Whether the punitive damages award in this case violates the Due Process Clause because the jury instructions failed to provide any meaningful stand- ards to be employed in setting the amount of the punitive exaction and instead left calculation of the penalty to the jury’s unguided discretion. 2. Whether the amount of punitive damages in this case is excessive and disproportionate in viola- tion of the Due Process Clause because it is not ra- tionally related to the purposes of fairly punishing any misconduct that occurred and appropriately de- terring such misconduct in the future. (I) II RULE 29.1 STATEMENT Petitioner InterContinental Life Insurance Com- pany’s (‘InterContinental’) parent corporation is Standard Life Insurance Company, whose parent cor- poration is InterContinental Life Corporation (“ILCG”’). ILCO is controlled by Financial Indus- tries Corporation (“FIC’’), through FIC’s ownership of 40.4°. of ILCO’s outstanding common stock and FIC’s option to purchase approximately 16.5° of ILCO’s common stock. InterContinental has no sub- sidiaries other than wholly owned subsidiaries. TABLE OF CONTENTS Page QUESTIONS PRESENTED. .....................00...00.20.0.222...-. ; I eee See MORMON 2... II oe) i | ES EE Se Pre ORAL e 1 acct caiesercencheci-yuhemisncbeteisnmeamoniesnsnses 2 CONSTITUTIONAL PROVISION INVOLVED ........... 2 SE BE NE as case nnccscnsennaisesscsanccnenseneons 3 a ee HOOOOW .............0000.0......0.......-20...0.. REASONS FOR GRANTING THE PETITION ......... x I. THE JURY WAS NOT GIVEN ANY MEAN- INGFUL GUIDANCE REGARDING THE STANDARDS TO APPLY IN FIXING THE AMOUNT OF THE PUNITIVE DAMAGES EEE SEES a 8 Il. THE PUNITIVE DAMAGES AWARD IS EX- CESSIVE AND DISPROPORTIONATE IN VIOLATION OF THE DUE _ PROCESS Er seni 10 a eicahanacabdirehiaxnnntndcnnakinckawaseansdesxsacusasconsnsnens 14 (m1) IV TABLE OF AUTHORITIES Cases: Page Browning-Ferris Industries of Vermont, Inc. V. Kelco Disposal, Inc., 109 S. Ct. 2909 (1989) ....... 1l Maxey V. Freightliner Corp., 665 F.2d 1367 (5th 5 ER ERA oc Ee ele ee A RR es I ae 12 Pacific Mutual Life Insurance Co. Vv. Haslip, No. - 89-1279 (argued Oct. 3, 1990) 000000... passim Solem v. Helm, 463 U.S. 277 (1988) ......000.0 oe. 11 Constitution and Statutes: is I I, Mg Bcc secre ciccececencsonsie 2 ee Sy | nae PANS ID pO Rite ee 2 a cailmuidlemdondouaaiichn 11 Miscellaneous: ABA Special Comm. on Punitive Damages, Puni- tive Damages: A Constructive Examination SIE sisstdicnic calansoectenaptahatiannicersdeisonadiienenablnedioneene: 12 In the Supreme Court of the United States OCTOBER TERM, 1990 No. INTERCONTINENTAL LIFE INSURANCE COMPANY, PETITIONER Vv. Lou R. LINDBLOM, RESPONDENT Petition for a Writ of Certiorari to the Supreme Court of Alabama PETITION FOR A WRIT OF CERTIORARI ~ N InterContinental Life Insurance Company respect- fully petitions this Court for a writ of certiorari to review the judgment of the Alabama Supreme Court in this case. OPINIONS BELOW The opinion of the Alabama Supreme Court (App., infra, la-19a) is not yet reported.’ The order of the circuit court (App., infra, 20a-26a) is unre- ported. 1 The opinion reprinted in Appendix A is that issued by the Alabama Supreme Court on November 16, 1990. As far as we can determine, that opinion is identical to the original opinion issued on September 28, 1990 and then withdrawn by the Alabama Supreme Court, except for the addition of a deadline for accepting the remittitur (App., infra, 16a). f oon i JURISDICTION The judgment of the Alabama Supreme Court was entered on November 16, 1990. On December 14, 1990, Justice Kennedy issued an order staying the issuance of the Alabama Supreme Court’s certificate of judgment pending the timely filing and disposition of a petition for a writ of certiorari. This Court’s jurisdiction rests on 28 U.S.C. § 1257(a). CONSTITUTIONAL PROVISION ENVOLVED Section 1 of the Fourteenth Amendment to the United States Constitution provides in pertinent part: [N]or shall any State deprive any person of life, liberty, or property, without due process of law * * * STATEMENT The plaintiff in this breach of contract action pre- vailed on her contention that petitioner InterConti- nental Life Insurance Company (“InterContinental”) failed in bad faith to pay a claim on an insurance policy. As in Pacific Mutual Life Insurance Co. v. Haslip, No. 89-1279 (argued Oct. 3, 1990), the state court jury’s award to the plaintiff included a tremen- dous helping of punitive damages: the jury supple- mented the compensatory award of approximately $10,000 (plus more than $2,000 in interest) with $3,000,000 in punitive damages. The Alabama Su- preme Court subsequently ordered a remittitur to $1,000,000. This certiorari petition seeks vacation of the pen- alty imposed on petition on two of the federal con- stitutional grounds that are now pending before the Court in Pacific Mutual—(1) that the jury instruc- 3 tions failed to afford due process because they did not in any way confine or structure the jury’s discretion in fixing the amount of the penalty, and (2) that the $1,000,000 award is unconstitutionally excessive be- cause it bears no rational relationship to the purposes for which punitive damages are imposed under Ala- bama law. A. Factual Background. On December 1, 1980, InterContinental issued a $10,000 life insurance policy to Tommie L. Rodden- berry, designating Roddenberry’s daughter, Lou R. Lindblom, the respondent herein, as the beneficiary. App., infra, 2a. Under the payment plan that was selected, payments were due on a quarterly basis, with the first payment due on December 1, 1980. Ibid. However, the policy expressly granted a 31-day grace period for late premium payments. /bid. In addition, as a voluntary, non-contractual benefit to its policyholders, InterContinental treated as timely payments that arrived during a further two-week grace period, known as the ‘‘courtesy period.” Jd. at 2a-3a, 6a. (Courtesy periods are common in the in- surance industry. Tr. 312.) If the courtesy period ended on a weekend or holiday, InterContinental ex- tended the period to the next business day. /d. at 3a. Once the courtesy period ended without receipt of the premium, however, the policy was deemed lapsed. Tr. 212, 374-375. InterContinental’s policyholders were not apprised of the existence of the courtesy period. App., infra, 3a-6a.° 2 InterContinental used a computer system to track pre- mium payments. Payments accompanied by premi'm notices were posted in the computer system within seven tc ten days of receipt. Tr. 551, 553. Payments might not be posted until 4 “ On January 1, 1984, Lindblom (who handled the payments on Roddenberry’s policy) wrote to Inter- Continental asking it to switch the payment schedule from quarterly to monthly, as the policy permitted. App., infra, 3a. Together with that request, Lind- blom included_a payment specifically designated for the December 1983 premium; she asked that Inter- Continental bill her for the January 1984 premium. Ibid. InterContinental applied the payment to the December 1°83 premium (Tr. 416) and changed the payment schedule as Lindblom requested. However, InterContinental apparently did not bill Lindblom for the January premium (there is no suggestion in the record that she was entitled to demand such billing), and Lindblom never sent a check designated for the January premium. The next payment received by InterContinental was a check dated February 2, 1984 (Tr. 103), which Lindblom testified was intended to cover the payment due February 1 (Tr. 155). (Noth- ing in the record indicates that Lindblom instructed InterContinental to apply this payment to the Feb- ruary premium.) Because Lindblom had not paid the January premium, InterContinental applied her check to that past-due premium. App., infra, 3a. Lindblom continued to pay premiums monthly, and InterContinental continued to apply each payment to later if received without premium notices, with the wrong payment amount, on weekends, or with a request to change the payment schedule. Tr. 554. Several times a month, Inter- Continental’s computer system generated printouts reporting the status of the premium payments. Tr. 474, 520. One printout (“the final notice run sheet’’) listed all policies with past-due premiums for which the 31-day grace period had not yet expired. Another printout (‘the lapse listing’) listed all policies that had lapsed for failure to pay the premiums be- fore the end of the courtesy period. Tr. 470. 5 the previous menth’s past-due premium. App., infra, 3a-4a. The payments that Lindblom made, beginning with the payment for December 1983, arrived at InterContinental after the end of the 3l-day grace period but before the expiration of the courtesy pe- riod. Jd. at 3a. This pattern continued for a year and a half, with Lindbiom receiving credit for prem- ium payments through July 1985. The courtesy period for the payment due August 1, 1985, expired on September 15. Lindblom sent a pay- ment by check dated September 15, 1985, which was not posted until after both the grace and courtesy periods had ended. Tr. 166, 216, 435. InterContinen- tal’s computer system flagged the policy as lapsed (Tr. 472, 499-500) and credited the payment to an escrow account pending review of the policy. Tr. 258-259, 505-506. After determining that the policy had lapsed, InterContinental notified Lindblom of that fact. App., infra, 4a.* At Lindblom’s request, Inter- 3’ Respondent has suggested that other payments had been received by InterContinental after expiration of the courtesy period but had not caused it to lapse the policy. But the rec- ord does not support that suggestion. InterContinental! posted three payments after the date of expiration, but it appareniy had received each of those payments (unlike the payment dated September 15, 1985) before the courtesy period ended. Tr. 409-410, 528. Thus, InterContinental posted the Decem- ber 1, 1983 payment on January 17 after it completed the paperwork switching the payment from quarterly to monthly and well after it received the payment. Tr. 212, 264, 410, 464-466, 468, 491. InterContinental posted the March pay- ment on April 16th, which was within the courtesy period because April 15, 1984 fell on a Sunday. Tr. 214, 264-265, 410, 493. InterContinental also posted the July 1984 payment (dated August 10, 1984) outside of the courtesy period, on 6 Continental reviewed its records and confirmed that the policy had lapsed because Lindblom had not paid the premium prior to the end of the courtesy periou. Tr. 414-415, 582. InterContinental eventually re- funded the payment it held in the escrow account. App., infra, 5a. . Roddenberry died on October 23, 1985. App., in- fra, 4a. On November 8, 1985, Lindblom filed a claim with InterContinental for the policy’s benefits. Tr. 133-134, 379. (There is no suggestion that Inter- Continental was aware of Roddenberry’s illness prior to the time it terminated the policy. Tr. 216-217, 221, 269, 430.) Because the policy had lapsed almost two months before Roddenberry died, InterContinen- tal denied Lindblom’s claim. App., infra, 5a. B. The Proceedings Below. Lindblom subsequently commenced this action against InterContinental in Alabama state court. She sought $10,000 in compensatory damages (the face value of the policy), interest, and punitive damages. Following a trial, the jury awarded $3,012,400 in compensatory and punitive damages against Inter- Continental for bad faith failure to pay insurance benefits, breach of contract, misrepresentation, and September 7, 1984. Tr. 215-216, 235, 422-423, 494. Because InterContinental posted the payment after the courtesy period expired, InterContinental’s computer system generated a lapse notice. The lapse notice was never mailed because InterContinental determined that Lindblom had timely paid the’July premium, apparently on the basis of the date on the check or the fact that the payment arrived unaccompanied by a premium notice. Tr. 235, 266-267, 270, 482, 512, 513-514, 594-595. 7 fraud.‘ The trial court denied InterContinental’s mo- tion to set aside the award of punitive damages. App., infra, 25a. It specifically rejected InterContinental’s claim grounded in the Due Process Clause of the Four- teenth Amendment. /d. at 24a-25a. The Alabama Supreme Court affirmed. App., infra, la-19a. It refused to recognize InterContinental’s courtesy period because “it is not part of the written contract and never became part of the contract. The ‘extended grace period’ argument, under the facts of this case, appears to be merely a convenient way for InterContinental to justify its acceptance of premium payments outside of the 31-day grace period, insure continued payments, and keep the policy in force, all without the knowledge of the insured or the bene- ficiary.” Jd. at 7a. Characterizing the courtes, pe- riod as a “practice” of “‘continuously” applying late payments to previously-due premiums, the court held that InterContinental could not “arbitrarily cease this practice and treat the policy as lapsed in August 1985 by claiming that payment was not made within the 31-day grace period.” Jbid.° The court consequently held that InterContinental waived its right to lapse the policy by not doing so when Lindblom failed to make the January payment before the 3l-day grace period expired and by accepting payments past the 31-day grace period. [bid. *Lindblom also had sued the insurance agency that had sold the policy to Roddenberry. The jury found the agency not liable. App., infra, 5a-6a. 5 Of course, InterContinental did not lapse policies on the basis of the 3l-day grace period. By holding invalid and then ignoring the courtesy period, the court fundamentally recast the ground relied on by InterContinental in determining that the policy had lapsed. 8 For these reasons, the court concluded that Inter- Continental had no right to declare the policy lapsed on the basis of the lateness of the August 1985 pay- ment. It further held that the jury could properly find that InterContinental’s failure to pay Lindblom’s claim constituted a bad faith refusal under Alabama law. App., infra, 14a. The court specifically considered and rejected In- terContinental’s challenge to the punitive damages award under the federal Constitution. Relying on its prior decision in Pacific Mutual, the court held that “the award is not unconstitutional.” App., infra, 16a. Finally, turning to InterContinental’s claim that the penalty was excessive as a matter of Alabama law, the court concluded that the award “is excessive and should be reduced by $2,012,400.” App., infra, 16a. I: therefore affirmed the trial court’s judgment. conditioned on Lindblom’s acceptance of a remittitur in that amount (which Lindblom has accepted). REASONS FOR GRANTING THE PETITION The questions presented in this case are essentially identical to those now pending before the Court in Pacific Mutual Life Insurance Co. v. Haslip, No. 89- 1279 (argued Oct. 3, 1990). Accordingly, the Court should hold the petition in this case and dispose of it as appropriate in light of its decision in Pacific Mu- tual. I. THE JURY WAS NOT GIVEN ANY MEANINGFUL GUIDANCE REGARDING THE STANDARDS TO APPLY IN FIXING THE AMOUNT OF THE PUNI- TIVE DAMAGES AWARD. One of the questions before this Court in Pacific Mutual is whether “Alabama Law * * * violates Due Process by allowing [a] jury to award punitive dam- anieanaa 9 ages as a matter of ‘moral discretion,’ without ade- quate standards as to the amount necessary to punish and deter and without a necessary relationship to the amount of actual harm caused.” 89-1279 Pet. i. Pre- cisely the same question is presented in this case. The jury instruction in this case provided no mean- ingful standards for the jury to apply in selecting the amount of the penalty: I mention punitive damages, meaning punish- ment damages. The purpose of awarding or making an example out of somebody is to allow money recovery to the plaintiff by a way of pun- ishment to the defendant and for the added pur- pose of protecting the public and others from doing such wrong in the future. The imposition of punitive damages is entirely discretionary by the jury. Should you award, you must take into con- sideration the characterization and degree of the wrong as shown by the evidence in the case. And the necessity of preventing similar wrongs. You ean only award punitive damages if you have found the defendant guilty of [or?] one or-more _of them to be guilty of those things that I just read to you which would authorize you to award. Tr. 833-834. This instruction is virtually identical to the instruction challenged in Pacific Mutual. See 89- 1279 Pet. Br. 7-8. The Alabama Supreme Court, relying on its prior decision in Pacific Mutual, rejected InterContinental’s federal due process claim that the jury instruction was “vague, arbitrary, and imposes no standards or-lim- its.” App., infra, 15a. Justice Maddox of that court, who dissented in Pacific Mutual, recognized that the federal constitutional question in this case is the same as the one presented in Pacific Mutual: 10 [T]he issue raised in this case is the same as that presented in [Pacific Mutual]. Therefore, if the Supreme Court of the United States re- verses this Court’s judgment in [Pacific Mutual], then the judgment in this case should also be re- versed. I must await, as everyone else must, the decision of the Supreme Court of the United States in Pacific Mutual * * *. App., infra, 18a. In sum, there can be no doubt that this case turns on the very procedural due process issue now before this Court in Pacific Mutual. Indeed, Justice Kennedy implicitly recognized this identity of issues when he granted a stay of the Alabama Supreme Court’s judg- ment in this case. Accordingly, the petition for a writ of certiorari should be held pending the Court’s deci- sion in Pacific Mutual. If for any reason the issue is not resolved in that case, the Court may wish to grant plenary review here to address the issue. II. THE PUNITIVE DAMAGES AWARD IS EXCES- SIVE AND DISPROPORTIONATE IN VIOLATION OF THE DUE PROCESS CLAUSE. Another question before this Court in Pacific Mu- tual is whether “the amount of punitive damages in this case was excessive, in violation of [the insurance company’s] Due Process right to be free of grossly excessive, disproportionate damages awards.” 89-1279 Pet. i. The same constitutional claim is presented here. To begin with, InterContinental squarely raised this argument, below. See, e.g., InterContinental Ala. Sup. Ct. Br. 59-73; InterContinental Ala. Sup. Ct. Reply Br. 28. The Alabama Supreme Court rejected the contention, holding that “the evidence of Inter- continental’s conduct warranted the punitive award 11 here and that that award is not unconstitutional.” App., infra, 16a. Moreover, the penalty of nearly $1,000,000 in this case is demonstrably more disproportionate and irra- tional than the penalty at issue in Pacific Mutual.” The relevant factors in assessing the constitutional- ity of a punitive damages award under the Due Process Clause are (1) the relationship between the punitive exaction and comparable statutory penalties prescribed by the legislature; and (2) the relation- ship between the punitive award and the gravity of the defendant’s conduct, including the nature of that conduct, the injury caused by the defendant, and the actual or potential gain to the defendant. Cf. Browning-Ferris Industries of Vermont, Ine. v. Kelco Disposal, Inc., 109 S. Ct. 2909, 2933-2934 (1989) (O’Connor, J., concurring and dissenting) ; Solem v. Helm, 463 U.S. 277, 290-300 (1983). So measured, the award here violates due process. The penalty in this case is much greater than the criminal and civil fines enacted by the Alabama leg- islature. See Am. Br. for The Business Roundtable, et al. 21-22, Pacific Mutual Life Insurance Co. v. Haslip, No. 89-1279. The legislatively-prescribed sanction for a corporation convicted of an analogous offense—violation of insurance regulations—is a fine of $10,000. Ala. Code § 27-29-10. Indeed, the high- est fine for any offense is $50,000. 6 As this Court is aware from the Pacific Mutual litigation, Alabama law permits a jury to lump compensatory and puni- tive damages together in one award. The $3,012,400 awarded in this case unquestionably represented the $10,000 policy benefit, plus interest, and $3,900,000 in puntive damages. The remitted award accordingly must be deemed to be $12,400 in compensatory damages and $987,600 in punitive damages. 12 In addition, the penalty bears no reasonable rela- tionship whatever to InterContinental’s alleged mis- conduct. First, it is nearly 80 times the compensa- tory damages awarded to Lindblom. See note 4, supra. Courts and commentators have repeatedly suggested a ratio of three times compensatory dam- ages as a rule of thumb for assessing the proportion- ality of an award of punitive damages. See, e.., Maxey v. Freightliner Corp., 665 F.2d 1367, 1377- 1378 (5th Cir. 1982) (en banc); ABA Special Comm. on Punitive Damages, Punitive Damages: A Constructive Examination 6-10 to 6-12 (1986). Whether or not there is any specific or fixed ratio required by due process, the presence of a ratio as high as 80:1 is a clear warning sign that the award is likely to be irrationally excessive. Second, the extraordinary award here is not re- motely justified by the nature of InterContinental’s conduct. Although the Alabama Supreme Court had the authority to determine that the failure to pay Lindblom’s claim constituted “bad faith” as a matter of Alabama law, the enormous penalty imposed on InterContinental cannot rationally serve the pur- poses of deterrence or punishment in the circum- stances of this case. The state court’s ruling rests on its conclusion that the company’s practice of allowing policyholders an additional two-week courtesy period is legally irrelevant because the practice was not set forth in writing. Insofar as we are able to deter- mine, that ruling constituted a new and unprece- dented statement of Alabama law, as evidenced by the fact that no cases were cited to support the prop- osition. InterContinental’s violation of a legal rule that did not exist at the time the company refused to pay Lindblom’s claim is grounds for lessening rather than increasing the level of punishment. For the 13 same reason, a severe punishment cannot be justified on a deterrence rationale. Significantly, there is no evidence that Inter- Continental’s conduct was designed to obtain some improper benefit at the expense of its policyholders generally or Lindblom in particular. The company did not know of Roddenberry’s illness and therefore cannot be deemed to have lapsed the policy in order to avoid paying the death benefit. Moreover, even if InterContinental could be found to have acted in order to avoid paying the death benefit, the nearly $1 million nenalty is grossly disproportionate to the size of that benefit. This is not a case of fraud, breach of trust, or concealed misconduct likely to go undetected and therefore requiring a larger penalty to accomplish appropriate deterrence. Nor does the record support any finding of repeated misconduct threatening in- jury to significant numbers of people. At worst, one beneficiary may have been unintentionally lulled into a false sense of security in believing the coverage was being maintained despite her failure to pay timely a premium due under the policy. Granting that Alabama possesses the constitutional power to impose punitive damages in such circumstances. the punishment inflicted here is grossly disproportionate to any harm done or to the culpability of the conduct and therefore, is entirely irrational. In sum, the punitive award in this case is exces- sive and disproportionate, in violation of the Due Process Clause. If this Court in Pacific Mutual holds that the Due Process Clause bars excessive and dis- proportionate punitive damages awards, the judg- 14 ment below cannot stand.‘ If the due process exces- siveness issue remains open in the wake of Pacific Mutual, this case would provide an excellent oppor- tunity to address it. CONCLUSION The petition for a writ of certiorari should be held and disposed of as appropriate in light of this Court’s decision in Pacific Mutual Life Insurance Co. v. Has- lip, No. 89-1279 (argued Oct. 3, 1990). Respectfully submitted. THEODORE A. FLERON ANDREW L. FREY Vice President & Counsel of Record General Counsel ANDREW J. PINCUS InterContinental Life KATHERINE J. HENRY Insurance Company Mayer, Brown & Platt 601 Walnut Street 2000 Pennsylvania Ave., N.W. Philadelphia, Pa. 19106 Washington, D.C. 20006 (215) 351-2953 (202) 778-0602 JAMFS C. BARTON MICHAEL L. HALL HOLLINGER F.. BARNARD Johnston, Barton, Proctor, Swedlaw & Naff 1100 Park Place Tower \ Birmingham, Alabama 35203 (205) 322-0616 Counsel for Petitioner InterContinental Life FEBRUARY 1991 Insurance Company 7 The foregoing analysis is not affected by the Alabama Su- preme Court’s conclusion that the $3 million punitive award was excessive as a matter of state law. The court provided no explanation at all for its conclusion that a penalty of nearly $1 million would not be excessive. As we have argued above, such a penalty does violate the Due Process Clause’s require- ment of rationality. APPENDICES la APPENDIX A SUPREME COURT OF ALABAMA OCTOBER TERM, 1990-91 89-14 INTERCONTINENTAL LIFE INSURANCE COMPANY Vv. Lou RODENBERRY LINBLOM Appeal from Jefferson Circuit Court (CV-86-7156) ON APPLICATION FOR REHEARING [Filed Nov. 16, 1990] . ADAMS, JUSTICE. Our opinion of September 28, 1990, is withdrawn and the following is substituted therefor. This is an appeal from a jury verdict awarding $3,012,400 to the plaintiff, Ms. Lou R. Lindblom, against the defendant, Intercontinental Life Insurance Company (hereinafter “Intercontinental’’), for bad faith failure to pay insurance benefits, breach of contract, misrepresenta- tion, and fraud. We affirm. 2a The appellant has raised many issues on appeal deal- ing with the denial of its post-trial motions and with questions regarding the constitutionality of the award of punitive damages. The record reveals the following facts relevant to this appeal: In November 1980 Ms. Tommie Rodenberry applied for a life insurance policy with Intercontinental. Larry Culver of the Culver Agency submitted the application to Intercontinental. On December 1, 1980, Interconti- nental issued a term life insurance policy (number 178427) to Tommie Rodenberry. The policy designated Ms. Lou R. Lindblom as the beneficiary of the policy, with $10,000 in benefits. The premium payments were originally due and payable quarterly beginning in Decem- ber 1980. The policy provided in its relevant parts as follows: “PAYMENT OF PREMIUMS—The first premium is due on or before the Policy Date. You may choose to pay your premium at 12, 6, 3, or 1 month in- tervals. Each payment is due on or before the first day of the payment period.... “The policy shall lapse if premiums are not paid in full when due. Please refer to the ‘Grace Period’ provision. “GRACE PERIOD—a grace period of 31 days after the due date will be allowed for payment of each premium after the first, without interest, during which period the policy shall continue in full force. If the insured dies during the grace period, any pro rata premium due and unpaid will be deducted from the amount payable under this policy. This policy will lapse without value at the end of the grace period.” Intercontinental introduced evidence at trial that in ad- dition to the written 31-day grace period, it voluntarily granted an extended two-week (14-day) grace period at the end of the 31-day period, making the total grace 3a period 45 days. This “extra” grace period was not in- cluded in the insurance contract, nor was Ms. Lindblom ever informed of its existence. Intercontinental intro- duced further evidence that if the end of the grace period fell on a weekend or holiday, the period was extended to the next business day. From December 1980 through November 1983, Ms. Lindblom made the quarterly payments on the policy. Sometime in December 1983 or January 1984, she de- cided that she desired to convert the payment plan from the quarterly plan to a monthly plan. On January 1, 1984, she wrote to Intercontinental, informing it of her desire to pay the premiums monthly from then on and enclosing the monthly premium payment specifically des- ignated for December 1983 ($32.06). This letter also stated that she would remit the payment for January 1984 as soon as she received notice from Intercontinental. At that time, the December 1983 payment was 31 days past due. It appeared from the evidence at trial that Intercontinental made no reply to Ms. Lindblom’s letter. Ms. Lindblom’s next premium payment was made on February 2, 1984. Intercontinental decided to back-apply this payment to cover the January 1984, payment which was then unpaid and 32 days past due, outside the writ- ten 3l-day grace period but within the unwritten ex- tended grace period. Ms. Lindblom continued to remit payments each month from February 1984 through Oc- tober 1985 to Intercontinental. Intercontinental accepted each of these payments. Evidence offered at trial showed that while Ms. Lind- blom made each payment in the early part of each month from February 1984 through October 1985, because of Intercontinental’s decision to continuously back-apply these payments to cover the missed January 1984 pay- ment, virtually all of these payments were received out- side the 3l-day grace period. During this time Inter- continental contacted Ms. Lindblom on at least two oc- 4a casions to inform her of premium increases. At no time did Intercontinental inform her of the fact that she had missed the January 1984 payment or of the fact that her payments were continuously received outside the 31- day grace period. Intercontinental continued its practice of back applying Ms. Lindblom’s payments through August 1985, when problems began to develop. When Intercontinental re- ceived a check dated August 5, 1985, it applied it to- ward the July 1985 premium, which had not been paid. The next check Intercontinental received was dated Sep- tember 15, 1985. Again, Intercontinental treated this check as the payment of the August 1985 premium. When this check was entered into the computer system, the computer designated the policy “terminated” and showed “no premium applied.” Upon subsequent review of all such computer entries by Intercontinental, em- ployees discovered that the check had not been applied to this policy because the policy had lapsed. Ms. Lind- blom, who was at that time unaware of the problem, sent in her payment for October. On October 11, 1985, Intercontinental wrote Ms. Lindblom and informed her of the lapse. Ms. Lindblom, who believed she was cur- rent on the policy and could not understand how it had lapsed, contacted Mr. Culver at the Culver Agency about the problem. Ms. Lindblom presented Mr. Culver with copies of the cancelled checks for the August and Sep- tember 1985 premium payments. Mr. Culver told Ms. Lindblom that he would take care of it. Mr. Culver in- structed Ms. Lindblom to send him a copy of the can- celled October 1985 premium check when she received it from her bank. Later, when Mr. Culver received this check and spoke with Ms. Lindblom, he informed her that the policy was still in force. On October 23, 1985, Tommie Rodenberry died. On November 8, 1985, Ms. Lindblom filed a claim with In- tercontinental for the death benefits under the policy. 5a After Intercontinental personnel examined the claim and the policy, they informed Ms. Lindblom, through the Culver Agency, that the benefits could not be paid be cause the policy had lapsed as of August 1, 1985, due to nonpayment of premiums. At this point Intercontinental did not refund any premiums paid after the alleged lapse. The Culver Agency contacted Intercontinental on ¢ eral occasions and sent Intercontinental copies of +’. can- celled checks for Ms. Lindblom’s August, September, and October payments. The Culver Agency apparently be- lieved that the policy should not have lapsed and sought to assist Ms. Lindblom. On each occasion Intercontinental confirmed that the policy had lapsed effective August 1, 1985, and refused to pay the benefits. Intercontinental eventually refunded the amount of two payments re- ceived after the alleged lapse. On November 19, 1986, Ms. Lindblom sued Intercon- tinental, the Culver Agency, and Mr. Culver, alleging wrongful refusal to pay the benefits under the policy and seeking $10,000 compensatory damages and $1,000,000 punitive damages. Upon Intercontinental’s petition, the case was removed to a federal district court. The federal district court, however, found removal inappropriate and remanded the case to the Circuit Court of Jefferson County. After remand, Ms. Lindblom amended her complaint to allege that the Culver defendants had been guilty of misrepresentation and concealment while acting as agents of Intercontinental. Ms. Lindblom’s complaint, in its final form, alleged: breach of contract, bad faith failure to pay on the insurance contract, misrepresentation, fraud- ulent suppression, outrage, and conversion. Interconti- nental moved for summary judgment on all claims. The trial court granted the motion as to the claims of out- rage and conversion, but denied it as to the other claims. At the end of the plaintiff’s case-in-chief and again at the end of the presentation of all the evidence, Intercon- 6a tinental moved for a directed verdict, which was denied. After closing arguments, Intercontinental requested a special verdict and requested that the jury be given ver- dict forms to differentiate compensatory damages from punitive damages. The trial judge denied these requests and submitted the case to the jury. The jury returned a verdict exonerating the Culver defendants from any liability but assessing damages against Intercontinental in the amount of $3,012,400. In- tercontinental timely filed alternative motions for a judg- ment notwithstancing the verdict, a remittitur, or a new trial. These post-trial motions were denied by the trial court. Because one of the issues raised in the post-trial motions was an alleged excessiveness of the verdict, the trial judge, pursuant to Hammond v. City of Gadsden, 493 So. 2d 1374 (Ala. 1986), conducted a hearing on that issue ane found no excessiveness. As noted, Intercontinental has raised several issues for our review on this appeal. At the outset however, we must address the nature of the insurance policy issued by Intercontinental and the actions of the parties in- volved. An examination of these factors will effectively dispose of the issues raised by Intercontinental, requiring only minimal review. Our consideration of these areas re- quires a two-step analysis: (1) an examination of the in- surance contract itself and (2) an examination of the conduct of the parties. With respect to the insurance contract, the primary area of concern is with the grace period. As set out above, the insurance contract contains a 31-day grace period for the receipt of insurance premiums. Intercon- tinental maintains that it voluntarily grants an addi- tional grace period of two weeks (14 days) at the end of the 31-day grace period, making the total grace period 45 days. This additional extended grace period is not mentioned anywhere in the policy, nor was it ever re- vealed to Ms. Lindblom. In our review of this case and Ta of the insurance contract, we cannot give any validity to this extended, unwritten grace period, as it is not part of the written contract and never became part of the contract. The “extended grace period” argument, under the facts of this case, appears to be merely a convenient way for Intercontinental to justify its acceptance of premium payments outside of the 31-day grace period, insure continued payments, and keep the policy in force, all without the knowledge of the insured or the bene- ficiary. Because Intercontinental set up a practice whereby it continuously back-applied some 20 or more payments it received outside the 31-day grace period and made no attempt to treat the policy as lapsed, it could not ar- bitrarily cease this practice and treat the policy as lapsed in August 1985 by claiming that payment was not made within the 31-day grace period. This Court will not allow Intercontinental to establish such a practice and then to suddenly change it. Allowing such a practice gives Intercontinental virtually absolute power over the contract and leaves persons such as Ms. Lindblom help- less. Moreover, a plausible alternative reading of the evi- dence could indicate that the policy actually lapsed in January 1984 when Ms. Lindblom informed Intercon- tinental that she would remit the January payment as soon as she received notice. Because Intercontinental never notified her as to the change in payment plans, her next check was dated February 2, 1984, and Ms. Lind- blom made each subsequent payment on time, including the August and September 1984 payments. We conclude that Intercontinental waived its right to lapse the policy by not doing so when the January payment was overdue and by accepting payments past the 31-day grace period. Because it impliedly agreed to accept payments made outside the grace period for approximately two years, 8a Intercontinental could not arbitrarily stop this practice in August 1984. Furthermore, Intercontinental ignored the missed January 1984 payment and back-applied all subse- quent payments. With respect to the specific issues Inter- continental now raises on appeal, we have consolidated several issues for clarity and briefly address them below, in light of the foregoing. Intercontinental raises five issues in this appeal: (1) Whether a judgment notwithstanding the verdict should have been granted for Intercontinental on any of the plaintiff’s claims; (2) whether a new trial should have been granted for Intercontinental on the ground that the jury returned a general verdict and at least one of the claims against Intercontinental was insufficient; (3) whether a remittitur or a new trial should have been granted for Intercontinental on the ground that the jury’s verdict was necessarily the result of bias, passion, or other improper motive and was otherwise excessive; (4) whether the verdict is unconstitutional under the due process clause of the United States Constitution; and (5) whether a remittitur or a new trial should be ordered by this Court on appeal. Intercontinental first argues that a judgment notwith- standing the verdict should have been granted in its favor with respect to the plaintiff’s claims of breach of con- tract, bad faith, and misrepresentation. We disagree. Our discussion of Intercontinental’s right to a J.N.O.V. will bring into focus our view of Intercontinental’s other claims. We begin by stating the standard of review ap- plicable to a denial of a judgment notwithstanding the verdict, as set out by this Court in Elrod v. Ford, 489 So. 2d 534 (Ala. 1986) : “To be entitled to either a directed verdict or J.N.O.V., Defendant must have proved to the trial judge that, from the evidence before the court at the time each motion was made, there was ‘a complete 9a absence of proof on a material issue or [that there were] no controverted questions of fact on which reasonable people could differ,’ and that Defendant was entitled to judgment as a matter of law. Deaton, Inc. v. Burroughs, 456 Sc. 2d 771, 773 (Ala. 1984). Stated conversely, the motions for directed verdict and J.N.O.V. should not have been granted if reason- able inferences in favor of Plaintiff’s claims could have been drawn from the evidence or if there was any conflict in the evidence for resolution by a jury. O’Donohue v. Citizens Bank, 350 So. 2d 1049 (Ala. Civ. App. 1977) .” 489 So. 2d at 537. With regard to each of these claims, the plaintiff has clearly met the burden set out in Elrod. Contrary to Intercontinental’s argument, the plaintiff presented sufficient evidence to warrant submission of her claims to the jury. Intercontinental first attacks the plaintiff’s breach of contract claim. Intercontinental contends that its actions of accepting payments did not constitute a waiver, be- cause, it says, the company policy was to grant an addi- tional 14-day grace period. We have dealt with this grace period above and only need point out here that the ex- tended grace period has no validity. As for Intercon- tinentai’s actions in accepting payments outside the 31- day period, the plaintiff’s evidence raised reasonable in- ferences supporting the argument that Intercontinental did waive any right to “lapse” the policy due to late payments and thereby breached the contract by lapsing the policy and refusing to pay benefits. Furthermore, the evidence could have supported a finding that the policy actually lapsed in January 1984, and that all subsequent payments were made on time, and that because Inter- continental did nothing in January it waived any right to lapse the policy in August. This claim was, thus, properly submitted to the jury. 10a The second claim Intercontinental attacks is the bad faith claim. Intercontinental argues that even if it was not entitled to a judgment notwithstanding the verdict on the breach of contract claim, it was entitled to one the bad faith claim, because, it argues, the plaintiff’s proof in support of her contract claim does not rise to the level entitling the plaintiff to a directed verdict. National Sav- ings Life Insurance Co. v. Dutton, 419 So. 2d 1357 (Ala. 1982). In Dutton, as Intercontinental correctly points out, Justice Shores stated: “In the normal case in order for a plaintiff to make out a prima facie case of bad faith refusal to pay an insurance claim, the proof offered must show that the plaintiff is entitled to a directed verdict on the con- tract claim.” Dutton, 419 So. 2d at 1362 (citing National Security Fire & Casualty Co. v. Bowen, 417 So. 2d 179 (Ala. 1982)). While both parties acknowledge that the plain- tiff did not move for a directed verdict, in reviewing the evidence we have come to the conclusion that the plaintiff would have been entitled to a directed verdict; thus the Dutton requirement was satisfied. The evidence in sup- port of that claim is overwhelming. Because Interconti- nental had no legal justification for refusing to pay the claim, no matter how the evidence is construed, the only reasonable conclusion is that Intercontinental breached the contract when it refused to pay the benefits. Assuming, arguendo, that the plaintiff would not suc- ceed on a motion for directed verdict, Intercontinental’s contention still fails. This Court has addressed this issue on numerous occasions. We have consistently noted that there will be many cases that do not meet the qualification of “normal” or “ordinary” spoken of in Dutton, and that in such cases the “directed verdict on the contract claim’”’ test should not apply. See National Savings Life Insur- ance Co. v. Dutton, 419 So. 2d 1357 (Ala. 1982) (Jones J., concurring). See also Thomas v. Principal Financial aa ~ lla Group, [Ms. 88-834, August 3, 1990] —— So. 2d —— (Ala. 1990) (wherein Justice Houston undertook an ex- haustive analysis of the development of the “directed verdict on the contract claim” test). The case now before this Court is just such a case. The two elements of a bad faith claim were set out in Chavers v. National Security Fire & Cas. Co., 405 So. 2d 1 (Ala. 1981): “TAjn actionable tort arises for an insurer’s inten- tional refusal to settle a direct claim where there is either ‘(1) no lawful basis for the refusal coupled with actual knowledge of that fact or (2) intentional failure to determine whether or not there was any lawful basis for such refusal.’ ” Chavers, 405 So. 2d at 7 (quoting Vincent v. Blue Cross- Blue Shield of Alabama, 373 So. 2d 1054 (Ala. 1979) ). As mentioned above, Dutton established the “great” bur- den that is on the plaintiff in proving a bad faith claim. Dutton, however, qualified the rule regarding this burden so as to prevent the insurer from avoiding liability in certain extreme situations. After Dutton, we found it necessary on several occasions to restrict the application of this great burden. First, in Continental Assurance Co. v. Kountz, 461 So. 2d 802, 806 (Ala. 1984), we stated: ‘Second, even if Continental could defeat Kountz’s directed verdict on the contract claim, this case is not the ‘normal’ or ‘ordinary’ case described in Dut- ton; in an extraordinary case like this the directed verdict standard is inapplicable. Aetna Life & Cas. Insurance Company v. Lavoie, 470 So. 2d 1060 (Ala. 1984).” In Kountz we noted that proof of an intentional failure to determine whether there was a lawful basis for deny'ng payment could be used to establish that the irsur r hac ls 12a no legitimate reason to deny the payment. Kountz, 461 So. 2d at 807. This Court in Kountz held that the evi- dence showed that the insurer had intentionally failed to determine whether there was a lawful basis for denying the claim, and that that showing supported an inference of bad faith. Jd. at 808. See also Aetna Life & Casualty Insurance Co. v. Lavoie, 470 So. 2d 1060 (Ala. 1984) (extraordinary evidence of “‘reckless indifference” toward insured in breach of duty of good faith and fair dealing properly submitted to jury). In Jones v. Alabama Farm Bureau Mutual Casualty Co., 507 So. 2d 396 (Ala. 1986), the only basis of denial rested on the resolution of the single factual issue of what the insured had told the insurance adjuster. In Jones we stated: “Although the plaintiff’s burden of proof in a bad faith action is great, it should not be insurmountable. Precluding a plaintiff’s bad faith action by applica- tion of the ‘directed verdict on the contract claim’ test when the disputed factual issue arises solely from a contradicted oral conversation between the insurer and the insured .. . puts too onerous a bur- den on the plaintiff. Moreover, it would frustrate the purpose of the bad faith action by allowing an in- surer simply to misrepresent the content of an oral conversation to avoid liability.” Jones, 507 So. 2d at 401. Jones held that it was error to grant a partial summary judgment because there was a disputed factual issue to be decided by the jury. Jd. See also United American Insurance Co. v. Brumley, 542 So. 2d 1231 (Ala. 1989) (it would frustrate the purpose of the bad faith action to allow an insurer to prevent a bad faith claim from going to the jury by misrepresent- ing the content of oral or written communications). The case now before us presents an analogous “extraordinary” situation. Intercontinental, over the course of nearly two years, accepted and back-applied payments outside of the VX 13a grace period and made no effort to investigate Ms. Lind- blom’s payment history or to inform her of possible lapses. Moreover, there was conflicting testimony as to whether any “pre-lapse” notices were sent to Ms. Lindblom. At trial, Intercontinental employees testified that such no- tices were sent, while Ms. Lindblom denied ever receiving them. Under the facts of this case, the existence or non- existence of these notices raises a presumption in favor of the plaintiff’s argument that Intercontinental inten- tionally ignored late payments in order to keep the policy in force, to guarantee continued payments, and failed to determine if there was any valid reason for denying the claim. Finally, we note that the evidence tended to show that Intercontinental employees, upon reviewing the denial of the claim, merely consulted a computer or other employees and reported that the policy had lapsed due to nonpayment of premiums. This effort by Intercontinental is wholly insufficient to amount to an investigation into the basis for the denial of payments. Intercontinental has not only intentionally failed to investigate whether there was a valid reason to deny the claim, but has also failed to investigate any part of the policy at any time. Under Kountz and Aetna, this intentional failure to in- vestigate whether there was a valid reason to deny the claim amounts to an intentional failure to determine whether there was any lawful basis for denying the claim and creates the inference of bad faith. Furthermore, considering Jones and Brumley, we note that the action of bad faith would be frustrated by per- mitting Intercontinental to avoid liability merely by mis- representing the existence or the content of pre-lapse notices. The resolution of the issue whether these notices were sent to Ms. Lindblom, is partly determinative of Intercontinental’s investigation practices throughout the existence of this policy. These facts illustrate why this case is anything but ordinary or normal. The facts pre- sented a question whether Intercontinental investigated to determine if there was a valid reason to deny payment l4a of benefits, and that question was properly submitted to the jury for resolution. We hold, therefore, that the Dutton “directed verdict on the contract claim” test does not apply here and that the trial judge properly sub- mitted the bad faith claim to the jury. Intercontinental also attacks the denial of a judgment notwithstanding the verdict on the misrepresentation claim. Here again, Intercontinental argues that the plain- tiff made no skowing of any misrepresentation. Contrary to Intercontinental’s interpretation of the facts, the rec- ord contains numerous examples of misrepresentations to Ms. Lindblom. The actions of Intercontinental in con- tinuously accepting late payments and its taking no steps to advise Ms. Lindblom of this fact or to advise her of its so-called extended grace period, as well as the actions of the Culver Agency, all create reasonable inferences to support the plaintiff’s claim of misrepresentation. Thus, we hold that the trial judge properly submitted this claim to the jury for resolution. The next issue raised by Intercontinental is whether a new trial should have been granted in its favor on the ground that the jury returned a general verdict and at least one claim against Intercontinental was insufficient. Intercontinental argues that if it was entitled to a directed verdict on any cne or more of the plaintiff’s five claims submitted to the jury, then the verdict must be set aside and a new trial ordered. In short, we are of the opinion that Intercontinental was not entitled toa directed ver- dict on any of the five claims. The plaintiff’s evidence presented differing interpretations and raised reasonable presumptions in her favor. The trial judge properly de- nied Intercontinental’s motion for a directed verdict and submitted the claims to the jury. Furthermore, we see no error in the general form of the jury verdict. Intercontinental next argues that a new trial or a remittitur should have been granted for Intercontinental because, it says, the jury verdict was necessarily the 15a result of bias, passion, or other improper motive and was otherwise excessive. We disagree with both of its argu- ments. After the jury returned the verdict, the trial judge entered his findings regarding questions of alleged ex- cessiveness of the verdict, pursuant to Hammond v. City of Gadsden, 493 So. 2d 1374 (Ala. 1986). After care- fully reviewing the evidence before the jury, the trial judge concluded that the evidence clearly established that Intercontinental’s conduct warranted the punitive award. As for a motive for the jury to give an excessive verdict, Intercontinental maintains that the conduct of the plaintiff at trial in, among other things, testifying as to the nature of Ms. Rodenberry’s illness, the presence of Ms. Lindblom’s retarded son, and testifying that Ms. Lindblom remained at home to care for Ms. Rodenberry caused the jury to disregard the legal requirements ap- plicable to Ms. Lindblom’s claim and to decide the case out of passion and pity for Ms. Lindblom’s situation. This argument is unpersuasive. Much of the testimony that Intercontinental now cites as error was either elicited by counsel for Intercontinental or was notobjected to at the time the testimony was given. Furthermbne much of what Intercontinental claims caused the jury * abandon its duty to decide the case on legal grounds d not, as we see it, rise to a level that could have affected the jury in the manner Intercontinental contends. This i& an extreme case. Much of the testimony Intercontinental now attacks is relevant and was properly put before the jury in order for it to make an informed decision. Intercontinental next attacks the jury verdict as un- constitutional. Specifically, Intercontinental argues that the law of punitive damages lacks fundamental fairness because it is vague, arbitrary, and imposes no standards or limits. However, as Intercontinental correctly points out, the Supreme Court of the United States held in Browning-Ferris Industries of Vermont, Inc. v. Kelco l6a Disposal, Inc., U.S. ' , 109 S.Ct. 2909, 2916 (1989), that the excessive fines clause of the eighth amendment does not apply to punitive damages awards in cases between private parties. This Court has, in line with Browning-Ferris, consistently declined to hold that the award of punitive damages is unconstitutional. See HealthAmerica v. Menton, 551 So. 2d 235 (Ala. 1989), cert. denied, U.S. ——, 110 S. Ct. 1166 (1990) ; Olympia Spa v. Johnson, 547 So. 2d 80 (Ala. 1989) ; Pacific Mutual Life Insurance Co. v. Haslip, 553 So. 2d 537 (Ala. 1989), cert. granted, US. ——, 110S. Ct. 1780 (1990). Also, the trial judge carefully reviewed the evidence presented and the constitutional arguments raised and concluded that the award did not violate the Constitution. We agree with the trial court that the evidence of Intercontinental’s conduct warranted the puni- tive award here and that that award is not unconstitu- tional. Last, Intercontinental renews its argument before this Court that the award of $3,012,400.00 is excessive and urges this Court to order a remittitur pursuant to Ala. Code 1975, § 12-22-71. The trial court followed the Ham- mond guidelines and found no reason to disturb the jury verdict. However, this Court still has the responsibility to consider whether the award is excessive, because we must assure some degree of uniformity in the area of punitive awards. After a thorough examination of the record in this case and a comparison of verdicts in similar cases that have come before this Court, we conclude that the award of $3,012,400 is excessive and should be reduced by $2,012,400. We therefore affirm the judgment of the trial court, conditioned upon the acceptance of a remittitur of $2,012,400 by Ms. Lindblom, within 28 days of the date of this substituted opinion, which will result in a judj- ment in her favor of $1,000,000. ‘rennin 17a ORIGINAL OPINION WITHDRAWN; OPINION SUBSTITUTED; AFFIRMED CONDITIONALLY; AP- PLICATION OVERRULED. Hornsby, C. J., and Jones, Almon, Shores, Houston, and Steagall, JJ., concur. Maddox, J., concurs specially. Kennedy, J., concurs in part and dissents in part. 18a MADDOX, JUSTICE (concurring specially). I agree that under this Court’s present case law the punitive damages award, as remitted, must be affirmed. However, I must point out that I dissented in Pacific Mutual Life Ins. Co. v. Haslip, 553 So. 2d 537 (Ala. 1989), cert. granted, USS. ; S.ct. —— (1990), and that the issue raised in this case is the same as that presented in Haslip. Therefore, if the Supreme Court of the United States reverses this Court’s judg- ment in Haslip, then the judgment in this case should also be reversed. I must await, as everyone else must, the decision of the Supreme Court of the United States in Pacific Mutual Life Ins. Co. v. Haslip. i... 19a KENNEDY, JUSTICE (concurring in part and dis- senting in part). The jury returned a verdict favoring Ms. Lindblom, and the trial court entered a judgment on that verdict. The trial court denied Intercontinental’s motion for judgment notwithstanding the verdict and conducted a hearing, pursuant to Hammond v. City of Gadsden, 493 So.2d 1374 (Ala. 1986), in which it determined that the verdict was not excessive. A jury’s verdict is pre- sumed correct and will not be disturbed unless plainly it is erroneous or manifestly unjust. United American In- surance Co. v. Brumley, 542 So.2d 1231, 1233 (Ala. 1989); Pate v. Sunset Funeral Home, 465 So.2d 347 (Ala. 1984). That presumption of correctness is strengthened when a motion for new trial is denied by the trial court. Brumley, at 1233; Hill Air of Gadsden, Inc. v. Marshall, 526 So.2d 15, 17 (Ala. 1988). A re- mittitur is proper only when the record establishes that the award is excessive as a matter of law or that the verdict is based upon bias, passion, corruption, or other improper motive. Hammond, at 1379. The record does not indicate that the jury’s verdict was in any way improper. To apply properly the pre- sumption of correctness that attends the jury’s verdict requires that the judgment of the trial court in regard to liability be affirmed; the majority does affirm in that regard. I concur in the portion of the opinion that af- firms the judgment as to liability. However, the record does not establish that the award was either excessive or based upon bias, passion, corruption, or any other im- proper motive; the trial court did not err in denying a remittitur. Accordingly, I dissent from the portion of the opinion that orders a remittitur. 20a APPENDIX B IN THE CIRCUIT COURT FOR JEFFERSON COUNTY, ALABAMA Civil Action No. CV86-7156 Lou R. LINDBLOM, Plaintiff v. INTERCONTINENTAL LIFE INSURANCE COMPANY, et al., Defendant ORDER ON MOTION FOR JUDGMENT NOTHWITHSTANDING VERDICT OR, ALTERNATIVELY, MOTION FOR NEW TRIAL 1. The defendant’s Motion For Judgment Notwith- standing Verdict Or, Alternatively, Motion For New Trial, is denied and overruled. The defendant’s request for remittitur is denied and overruled. 2. One of the grounds of defendant’s motion is that the verdict was excessive. The trial court is commande? by Hammond v. City of Gadsden, 493 So2d 1374 (1986) ; Jawad v. Granade, 497 So2d 471 (1986) and succeeding cases to conduct a hearing on the factors considered in either granting or denying a Motion For New Trial al- leging excessiveness, or with respect to remittitur. The Court has carefully studied the body of Alabama law re- garding damages and remittitur: “The trial court may not substitute its own judg- ment for that of the jury in determining whether to grant a remittitur. 21a “The authority to disturb a jury verdict on the ground of excessive damages is one which should be exercised with great caution. “A remittitur may be ordered in those cases where the court can clearly see that the verdict has been reached because of bias, passion, prejudice, corrup- tion or other improper motives. “The right to a trial by jury is a fundamental, con- stitutionally guaranteed right, Article 1, Section 2, Constitution of 1901, and, therefore, a jury verdict may not be set aside unless the verdict is flawed, thereby losing its constitutional protection. “A jury verdict may be constitutionally flawed be- cause it results, not from the evidence and applicable law, but from bias, passion, prejudice, corruption, or other improper motives. “The cases have consistently held that in deciding whether a jury verdict is excessive because it is the result of passion, bias, corruption, or other improper motive, a trial judge may not substitute his judg- ment for that of the jury. “Only where the record establishes that the award is excessive as a matter of law, or where it is es- tablished and reflected in the record that the verdict is based upon bias, passion, corruption, or other im- proper motive, may a trial court order a new trial or remittitur. “Alabama Courts do not favor setting aside jury verdicts unless justice demands it, and the Supreme Court has warned repeatedly that the authority vested in courts to disturb a jury’s verdict on the ground of excessiveness should be exercised in great caution. “To permit a trial judge to substitute his judgment on the facts for that of the jury, or to give undue 22a presumption to the action of the trial judge in deal- ing with verdicts, would minimize the jury system (and render) juries advisors of the trial judge rather than a positive force in the administration of justice. “Whether remittitur of a new trial should be granted on the grounds of excessiveness, the Ala- bama Supreme Court has said that neither remittitur nor a new trial is appropriate unless the verdict re- sults from bias, passion, prejudice, or corruption or other improper motive. This strict standard, when the courts adhere to it, discourages judges from un- necessarily tampering with jury verdicts and thereby minimizes the potency of the argument that re- mittitur merely substitutes judicial opinion for jury opinion.” 3. This Court carefully conducted the voir dire ex- amination and observed the parties and their respective counsel along with the jury’s reaction during the trial. The trial of the case was conducted on a highly profes- sional level by competent, seasoned advocates for both sides. Frivoiity was not present at the trial of this case. The jury recognized the seriousness of the issues that were being presented for their determination. At no time did it seem or appear to the Court that any part in this case received less than a fair, impartial trial be fore the jury. 4. This was a case stating actions in contract, fraud and tort of bad faith. Testimony from defendant’s own employees that it accepted premium payments outside of the written thirty-day grace period contained in the pol- icy of insurance involved in excess of twenty times. The court noted the reaction of the jury to the evasive and inconsistent testimony of defendant’s corporate represen- tative, James Grace, and its employee, Mary Newman. The Court observed the expert, and uncontradicted testi- mony presented on behalf of the plaintiff by Ed Trow- 23a bridge of Metropolitan Life. He testified that there was no legitimate basis for denying the claim involved in this case and that defendant’s actions in reviewing and re- fusing to pay the claim at issue were in violation of ac- cepted procedures and practices in the insurance indus- try. This court also heard inconsistent testimony from defendant’s employees and representatives regarding whether defendant ever established or followed a policy of sending written “pre-lapse notices” to customers, in- cluding the plaintiff, prior to the date the claim involved was denied. Defendant failed to produce any documen- tation or proof to support the testimony of its employee, Mary Newman, that such “pre-lapse notices” were sent to the plaintiff at any time. At no point during the trial of this case did Intercontinental nor any of its corporate officers admit any wrongdoing. From the facts, this court is reasonably satisfied that the insurance company de- liberately or recklessly suppressed material facts from the plaintiff prior to the death of Tommie Rodenberry; and, this court is reasonably satisfied that the insurance company had no legitimate basis for denying the claim made the basis of this suit and/or failed to properly in- vestigate the Lindblom claim and subject the results of the investigation to cognitive evaluation and review. 5. The amount of a civil fine or exemplary damages is largely left to the discretion of the jury. Alabama Law allows juries to fix punitive damages. ‘his court knows of no reason why there should be any judicial invasion into the function of the jury under the facts in this case. The court finds nowhere in the record where it is estab- lished that the award is excessive because it is based upon bias, passion, corruption or other improper motive. 6. In addition to the above, the court has also con- sidered those factors listed by the Supreme Court in Hammond, supra, as being appropriate for the trial court to consider. With regard to the culpability of the defendant’s conduct, the evidence clearly established that 24a the conduct of the defendant justified a punitive award. The evidence presented was also sufficient to establish that defendant’s actions or inactions were against recog- nized and accepted insurance industry standards. The insurance industry should be discouraged from placing their interests above that of their customers when processing claims and adjusting insurance policies. In- surance companies are in a position to have knowledge and information which the lay person does not have. The defendant has argued that the verdict in this case will adversely impact the insurance company. Any verdict for any party will have an adverse impact to some extent. The court does not find that this verdict on the defendant is such that would require a reversal of the jury’s deci- sion as to damages. In line with that same reasoning, the court does not find that the impact on innocent third parties is of such significance or consequence so as to reverse the jury’s determination of damages. 7. The defendant raised Federal constitutional ques- tions, in every possible and conceivable way and manner, during the trial of the case and on all post-judgment motions. In substance, defendant claims the award of damages in this case violates the due process clause of the United States Constitution in that a. the award of punitive damages was committed solely to the authority and standardless discretion of the jury, Bankers Life & Casualty Co. v. Crenshaw, 486 U.S. 77, 78-79 (1988) (O’Connor, J., concur- ring) ; b. the standardless discretion of the jury in award- ing punitive damages constitutes arbitrary action of the government, which is forbidden by the due process clause of the United States Constitution, Browning- Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc., 57 U.S.L.W. 4985, 4991-92 (U.S. June 26, 1989) (Brennan, J., concurring) ; and ee ee a 25a ce. the unbridled discretion of the jury in award- ing punitive damages in this case amounts to un- constitutional vagueness and procedural due process violation, Jd. at 4992 (O’Connor, J., concurring). The court considered the constitutional issues when raised by defendant, both during the trial of the case and during the post-judgment arguments. This Court holds that the award by this jury of punitive damages did not violate the due process clause of the United States Constitution. 8. On post-judgment motion defendant submitted a sparse affidavit which says by implication that the verdict against the defendant would adversely impact the insur- ance company because its net income has been reduced. Yet, plaintiff, in post-judgment hearing, introduced an- nual statements of defendant filed with State of Alabama Department of Insurance showing that the defendant has millions and millions of dollars in assets. Therefore, this court finds that Green Oil Co. v. Hornsby, 539 So2d 218, does not apply. In Green Oil the trial judge on post- judgment Hammond motion had evidence of the company’s and partners’ worth and he found the punitive damages award was excessive because of its effect upon Green Oil and the partners. In the Supreme Court’s words: “The Green Oil Company overcome the presumption of correct- ness that attached to the jury’s award of punitive dam- ages.” This court finds that this defendant did not overcome said presumption of correctness and the trial verdict stands. 9. It is therefore ORDERED, ADJUDGED AND DE- CREED that defendant’s Motion For Judgment Notwith- standing The Verdict Or, In The Alternative, For A Remittitur Or New Trial is denied and overruled. All court costs taxed against said defendant. 26a DONE AND ORDERED this the 1st day of September, 1989. /s/ Josh Mullins JOSH MULLINS Circuit Judge ec: All counsel of record --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1019%3A1. Public record. Not legal advice.