# Petition for Writ of Certiorari — Allstate Insurance v. Hawkins > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_2314%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1987 - **Citation:** 484 U.S. 874 ## Text > caluitalelds acces seacgunnensd ne sd ademas dove eomncs 21 Ariz. Rev. Stat. Ann. § 18-2202 (1978) _........ 21 I, UN, I i caclcsacnnmeomcesmmiewens 7 I, FN, Te TE oie sacveisisvecccsactccscornnes 7, 10 Other States: Act of the State of Alabama, H. 27, §1 (June i NR i sahitcuiin idanccciedini cendbbieeindaenndlces 26 : Alas. Stat. § 09.17.020 (Supp. 1986) _............ 26 Colo. Rev. Stat. Ann. § 13-25-127(2\Supp. RR RR eT RENE eae WA ot RO 26 Fla. Stat. Ann. § 768.73 (Supp. 1987) _......... 26 Minn. Stat. Ann. § 549.20 (Supp. 1987) _...... 26 Mont. Code Ann. § 27-1-221(2K1986) ......0..0... 26 Okla. Stat. Ann., Title 23, §9 (1987) ......... 26 Ore. Rev. Stat. Ann. § 30.925 (1983) ........ 26 IN THE Supreme Court of the GAnited States OCTOBER TERM, 1987 No. 87- ALLSTATE INSURANCE CoO., Petitioner, Ve JACK RANDY HAWKINS and CYNTHIA HAWKINS, Respondents. PETITION FOR WRIT OF CERTIORARI TO THE SUPREME COURT OF ARIZONA Allstate Insurance Company petitions the Court to issue a Writ of Certiorari to the Supreme Court of Arizona to review four questions raised by that court’s reinstatement of a $3,500,000 punitive damage award against petitioner. One of those questions is presently sub judice in this Court in Bankers Life and Casualty Co. v. Crenshaw, No. 85-1765 (prob. juris. noted Mar. 9, 1987), 107 S. Ct. 1867 (1987). Petitioner seeks review of three additional questions not presented in Bankers Life which also impact broadly on the man- ner in which punitive damage awards designed to fulfill the classic objectives of the criminal law—pun- ishment and deterrence—are imposed in civil litigation throughout the United States. OPINIONS BELOW The February 26, 1987 opinion of the Supreme Court of Arizona, with dissenting opinion, is reprinted in the Appendix, App. 1a-33a, and is reported at 733 P.2d 1073 (1987). The opinion of the Court of Appeals of Arizona, Division One, of August 13, 1985 is re- printed infra, App. 34a-47a, and is unreported. The memorandum opinion and order of the Superior Court of Arizona in and for the County of Maricopa is re- printed infra, App. 48a-50a, and is unreported. The order of the Supreme Court of Arizona denying petitioner’s Motion for Reconsideration, issued on April 7, 1987, is reprinted infra, App. 51a, and is unreported. JURISDICTION Petitioner seeks review of the February 26, 1987 decision of the Supreme Court of Arizona which va- cated the decision of the Court of Appeals and re- manded the case for reinstatement of the original judgment dated August 3, 1982. The Supreme Court of Arizona denied petitioner’s timely Motion for Re- consideration on April 7, 1987. The jurisdiction of this Court is conferred by 28 U.S.C. §1257(3). This petition is being filed within ninety days from the April 7, 1987 order denying petitioner’s Motion for Reconsideration. CONSTITUTIONAL PROVISIONS INVOLVED 1. The Excessive Fines Clause of the Eighth Amendment of the Constitution provides, in pertinent part, that: ‘“{NJor [shall] excessive fines [be] imposed 2. The Due Process Clause of the Fourteenth Amendment of the Constitution provides, in pertinent part, that: . “{Njor shall any State deprive any person of . property, without due process of law ” \ 3. The Equal Protection Clause of the Fourteenth Amendment of the Constitution provides, in pertinent part, that: ‘“(Njor shall any State ... deny to any person within its jurisdiction the equal protection of the laws.’ STATEMENT OF THE CASE This is an insurance “‘bad faith” case arising from the insureds’ dissatisfaction with an automobile pur- chased to replace their insured car, which had been demolished in an accident. Although petitioner re- placed the insureds’ car within two weeks of the ac- cident with a car having a value within $200 of the insured car, the jury awarded the insureds $15,000 in compensatory damages and $3,500,000 in punitive damages. The trial court set the punitive damage award aside on a number of grounds, including its excessiveness, and ordered a new trial. The inter- mediate appellate court affirmed the grant of a new trial, holding that there was no basis in the record to warrant a punitive damage award of $3,500,000. The Supreme Court of Arizona, applying unfavor- able Arizona law established after the verdict while refusing to apply post-verdict Arizona law favorable to petitioner,’ ordered the jury’s verdict reinstated. While each discrete act of judicial legerdemain per- formed by the court below to reach its result may not be cognizable under the federal constitution, the ultimate result and the process by which it was reached, taken as whole, raise substantial and im- portant federal questions which go to the heart of the manner in which juries, uncontrolled by any mean- ingful legal standards, administer an ad hoc, govern- ment-sponsored system of punishment on a daily basis in Arizona and other States. A. Facts Relevant to Petitioner’s Constitutional Questions On December 6, 1979, respondent Cynthia Hawkins was involved in an accident in which respondents’ five-month old car was ‘‘virtually demolished.” The accident was reported to their insurer, petitioner, that same day. Within a few days, the damaged car had been determined by petitioner to be a ‘“‘total loss.” App. la-3a, 733 P.2d, at 1076. During the first week after the accident, petitioner’s total loss adjuster determined the Blue Book value of respondents’ car to be $6,545 and the market value (actual cash value) to be $6,165. This latter calculation took into account a $35 subtraction from the esti- mated cash value as a reconditioning or ‘‘clean-up”’ deduction. On December 13, respondents requested that petitioner furnish them with a comparable car ‘The Supreme Court of Arizona issued Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565 (1986), on July 22, 1986; it issued Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 723 P.2d 675 (1986), on July 23, 1986. As discussed infra, the court below applied Rawlings but refused to apply Linthicum to the case at bar. oe it rather than the actual cash value of their insured car. Respondents looked at four similar cars and requested that petitioner purchase one of them, the cost of which was $300 more than petitioner was prepared to pay. On December 20, respondents accepted a check from petitioner for $6,471, payable to respondents and a local dealership, which they used to acquire a car. Respondents subsequently determined that the car they purchased was not sufficiently comparable to their insured car because it lacked power windows, had a larger engine, had dealer-installed rather than factory-installed cruise control, and lacked several styling features of their insured car. No evidence of the replacement car’s actual cash value was presented at trial. The only evidence on this subject was petitioner’s acknowledgment on appeal that the list price of the replacement car was at least $161.45 less than the list price of respondents’ insured car. Over petitioner’s objections, the trial court permit- ted testimony of three former employees of petitioner on the subject of petitioner’s claims practices. One witness testified concerning policies of petitioner’s Ta- coma, Washington, office. Another testified concern- ing activities in petitioner’s Phoenix office during a period fifteen years prior to respondents’ claim. Al- though not involved in the adjustment of respondents’ loss, a third testified concerning practices in the Phoe- nix office at the time of respondents’ claim. That latter testimony covered the deduction, in valuing a “total loss,” of a $35 ‘clean-up’ charge and a $5 “tire wear’ charge in determining the actual cash value of a car. The ex-employee who had worked for petitioner for two years in the early 1960s, Mr. Wil- liam Boettcher, testified, inter alia, that petitioner’s policy was to settle claims ‘for as low an amount as possible’ so as to ‘‘save the company money ....” App. 8a, 733 P.2d, at 1078. No evidence was admitted regarding the number of times the ‘“‘clean-up’”’ fee had been deducted with respect to other claims. During the trial, however, the following colloquy took place between respondents’ counsel and one of the wit- nesses: Q. If Allstate has 100,000 total loss claims every year, and they take $35 off on each one of those, that amounts to $3,500,000, doesn’t it? A. If you say so. 1 can’t figure that far. App. 18a, 733 P.2d, at 1083 n.9. After the jury returned its verdict, petitioner moved for judgment notwithstanding the verdict and, in the alternative, for a new trial on a variety of grounds, including the excessiveness of the punitive damage award’ and the trial court’s errors in admitting the testimony of petitioner’s three former employees. In a memorandum order granting these alternative mo- tions, App. 48a-50a, the trial court expressly held, inter alia, that the verdict against petitioner for com- mitting the tort of bad faith was not justified by the evidence; that punitive damages were not warranted: that ‘‘the damages are excessive”; that the verdict was the result of passion and prejudice on the part of the jury; and that the court had committed error 2 In its memorandum filed in support of its alternative motion, petitioner argued that the punitive damage award was more than 230 times the size of the award for compensatory damages and that the excessiveness of the award as a matter of law was virtually self-evident. Pon cieeesn ele in admitting the testimony of the three former em- ployees. App. 49a-50a. On respondents’ appeal to the Court of Appeals, that court concluded that the testimony of two of the three former employees was admissible but that the testimony of Mr. Boettcher was inadmissible under Rule 404(a), Arizona Rules of Evidence, because it constituted character evidence which was not suffi- ciently similar to or contemporaneous with the actual experience of respondents to qualify for admission under Rule 404(b) as evidence of a pattern of bad faith conduct by petitioner. App. 39a. The Court of Appeals rejected respondents’ argu- ment that the $3,500,000 punitive damage award could be sustained on the theory that it bore a “reasonable relationehip to the nature of the misconduct, All- state’s profit from such misconduct, its history, wealth, and income, and the deterrent effect fof that award].” App. 44a. The Court of Appeals determined that petitioner’s conduct could be found to be “‘op- pressive’ as a matter of Arizona law, and therefore sufficient to sustain a punitive damage award, only if petitioner was shown at trial to have engaged in a “corporate policy, sufficient to constitute a pattern, whereby an insurer chisels an amount small enough from each claimant such that only the occasional per- son will object and litigate the matter.’’ App. 4a. The Court of Appeals held that ‘‘where punitive dam- ages are based on wrongful corporate policies which are profit oriented, the supporting evidence [regard- ing the amount of punitive damages] must go far beyond informed speculation.” App. 46a. Finding that the only portion of the record re- garding the “profits’’ petitioner might have realized from its $35 “clean-up” deduction practice was the speculation of respondents’ counsel in the question quoted above, at p. 6, a majority of the Court of Appeals held that “‘the amount of punitive damages is not justified by the evidence,” id., and affirmed the trial court’s grant of a new trial. Because it found a basis for sustaining the grant of a new trial on this ground, the Court of Appeals did not reach the ques- tions whether the punitive damage award was oth- erwise excessive or whether the verdict was the result of passion and prejudice. One member of the Court of Appeals would have affirmed the grant of judgment notwithstanding the verdict. App. 47a. On December 17, 1985 respondents filed in the court below a Petition for Review of the Court of Appeals’ decision. In the questions presented by respondents for review, which are reprinted in full infra, App. 66a-67a, respondents did not present to the Supreme Court of Arizona the questions whether the punitive damage award was ‘“‘excessive” or whether the ver- dict was the result of “passion and prejudice’ — grounds for the grant of the motion for new trial which had not been passed on by the Court of Appeals. In that petition, respondents did assert that Mr. Boettcher’s testimony was admissible to show the “duration” of petitioner’s alleged pattern of miscon- duct and that review should be granted on that ques- tion because “[nJo Arizona decision specifically indicates whether or not duration of misconduct is a factor ... in assessing punitive damages.”’ App. 67a. Respondents also argued that they were not required to introduce evidence regarding the amount of petitioner’s ill-gotten ‘‘profits” in order to sustain a punitive damage award. Respondents acknowledged that there was ‘“‘no controlling Arizona decision” on this point, App. 67a, and sought review so that the court below could “clarify that rule ....’’ App. 72a. The court below scheduled, oral argument on respondents’ Petition for Review to determine whether the case presented issues not presented by two other cases then pending on its docket, Linthi- cum v. Nationwide Life Insurance Co., 150 Ariz. 326, 723 P.2d 675 (1986), and Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565 (1986). Oral argument was presented to the court below in both Linthicum and the case at bar on May 1, 1986. On July 23, 1986, the court below handed down its decision in Linthi- cum, holding that punitive damages may not be awarded in Arizona unless proof of liability is estab- lished by “clear and convincing” evidence. B. The Presentation of the Federal Questions On May 16, 1986, petitioner filed in the court below a motion for leave to file a ‘‘supplemental”’ brief in order to brief a number of issues of state law and “the federal constitutional implications of the manner in which this punitive damage award was imposed ....” App. 22a, 733 P.2d, at 1085-86. That motion was necessary because more than three years had elapsed since the parties had filed briefs in the case and, under Arizona practice, the court below disposes of cases in which it grants review on the basis of the briefs filed in the intermediate appellate court unless one or both of the parties request permission to file “supplemental” briefs or the court directs the parties to do so sua sponte. Petitioner’s motion was granted and its Supplemental Brief was filed on June 11, 1986. In its Supplemental Brief, petitioner drew the at- tention of the court below to this Court’s then-recent 10 decision in Aetna Life Insurance Co. v. Lavoie, No. 84-1601 (Apr. 22, 1986), 106 S. Ct. 1580 (1986). Petitioner argued that punitive damages constitute a criminal penalty and expressly invoked what it char- acterized as the ‘‘due process” argument in Lavoie— that the excessive size of the award in this case was attributable to the lack of sufficient standards for assessing the size of punitive damage awards in Ar- izona. Petitioner also argued that it was entitled, un- der the Due Process Clause of the Fourteenth Amendment, to the federal constitutional protections accorded to defendants in criminal cases because pu- nitive damages in Arizona are imposed to punish and deter and therefore constitute a criminal penalty. Fi- nally, petitioner argued that the Due Process Clause prohibits the imposition of punitive damages absent “clear and convincing”’ evidence of the underlying li- ability. On February 27, 1987, the court below handed down its decision, vacating the decision of the Court of Appeals and remanding the case for reinstatement of the jury’s verdict. In addressing the admissibility of Mr. Boettcher’s testimony, the court applied its newly formulated substantive test for punitive damages adopted on July 22, 1986 in Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565 (1986), to justify an ex- pansion of Rule 404(b), Ariz. R. Ev. The court then determined that the testimony was also admissible on the issue of the “sum of punitive damages’ to be imposed by the jury because it constituted ‘direct evidence of the duration of Allstate’s misconduct .... App. 15a, 783 P.2d, at 1082. ; 1] With respect to the punitive damage award, the court below held that Arizona law does not require any evidence of the profits realized by a defendant from its misconduct to sustain a punitive damage award. Following this rationale, the court reversed the contrary decision of the Court of Appeals on this point. App. 18a, 733 P.2d, at 1083. The court below then proceeded to reach several additional questions which had not been addressed by the Court of Appeals and had not been presented in respondents’ Petition for Review. First, the court held that ‘the amount of punitive damages awarded ... is neither so excessive nor unreasonable ... as to show passion or prejudice” on the part of the jury. App. 20a, 733 P.2d, at 1084. Regarding the amount of the award, the court next observed that, in Ari- zona, a punitive damage award is acceptable if it does not ‘“shock the conscience of the court’” and does “not financially kill the defendant.” Jd. The court then went on to observe that it had previously ‘‘up- held punitive damage awards representing a greater percentage of the defendant’s wealth against claims of excessiveness.” App. 20a, 733 P.2d, at 1084-85. By virtue of these holdings on issues not decided by the Court of Appeals and not included as questions in respondents’ Petition for Review, the court below positioned itself to reinstate the jury’s verdict by elim- inating the remaining grounds supporting the trial court’s grant of a new trial. The court below then turned to petitioner’s federal constitutional challenges to the punitive damage award. The court acknowledged that its practice in the past had been to consider “issues of ‘general statewide’ significance’ on appeal “as an exception 12 to the general rule that an appellate court will not consider issues not raised in the trial court.” App. 23a, 733 P.2d, at 1086. Without contesting the dis- senting Justice’s assertion that the federal questions raised by petitioner were ones of great statewide and national significance, App. 33a, 733 P.2d, at 1090, the court below held, sua sponte and as a matter of first impression, that whether it would reach a con- stitutional question raised for the first time in that court was in its absolute discretion: Thus, while we agree that this court has the power to consider the constitutional issues raised by Allstate, we decline to exercise that power in this case. App. 24a, 733 P.2d, at 1086. Justice Holohan, in dissent, pointed out that the $3,500,000 punitive damage award is three and one- half times the maximum fine imposable in Arizona for the commission of the most serious felony recognized by the legislature. App. 3la, 733 P.2d, at 1089. Jus- tice Holohan also recognized that there “appear to be strong arguments ... that due process requires ... maximum limits [on punitive damage awards] be- cause of [their] penal nature ....”’ App. 33a, 733 P.2d, at 1090. Finally, the court considered another dispositive is- sue which had not been briefed or argued by the parties. That issue arose as a result of the court’s holding in Linthicum v. Nationwide Life Insurance Co., supra, in July of 1986, that the same “clear and convincing” evidence standard of proof which had been urged upon it by petitioner in this case under the federal and Arizona constitutions would be ap- 13 plied to punitive damage cases as a matter of state “policy.” The issue was whether the standard adopted in Linthicum would be applied to the case at bar. The court acknowledged that ‘‘[iJn Arizona, a civil opinion is presumed to operate retroactively,’’ App. 25a, 733 P.2d, at 1087, and that retroactive appli- cation of the Linthicum standard of proof to this case would not result in unfairness to respondents, who had no “right”’ to punitive damages and who ‘“‘the- oretically [had been] fully compensated for their actual injury ....” App. 27a, 733 P.2d, at 1088. Nonethe- less, the court below held that Linthicum’s “clear and convincing” evidence standard would not be applied to this case. This result was said to arise from the court’s purported concern about “‘the potential burden on the judicial system from further litigation where claims have been disposed of by prior litigation ....” App. 27a-28a, 783 P.2d, at 1088. Without any dis- cussion of the number of cases which might be af- fected, the court below determined that Linthicum would not be applied if a verdict or judgment had been entered prior to September 15, 1986 and “‘there is no reason to require a new trial other than appli- cation of the new burden of proof.” App. 28a, 733 P.2d, at 1088. In refusing to apply Linthicum to this case, the court below ignored the fact that petitioner had come into that court entitled to a new trial and arguing that it was entitled te a “clear and convincing” stand- ard of proof. On the other hand, the appellant in Linthicum had not even raised the ‘‘clear and con- vincing”’ evidence issue in its Petition for Review; rather, the parties had been directed by the court below, sua sponte, to brief and argue that question. 14 150 Ariz., at 327, 723 P.2d, at 676. Justice Holohan, in dissent, concluded that all of the factors previously identified by that court as relevant to the “retroac- tivity” issue favored retroactive application. App. 30a, 733 P.2d, at 1089. After the decision of the court below, petitioner filed a timely ‘Motion for Reconsideration.” In that motion, petitioner pointed out that, by refusing to reach petitioner’s federal constitutional arguments, the court had failed to recognize that those arguments were advanced in support of the judgment of the trial court under which petitioner was entitled to a new trial. Because of this, if petitioner prevailed on any of its federal questions, it would not have expanded its rights under that judgment nor contracted those of respondents. App. 58a-55a. Thus, petitioner argued that the court below was required to consider its federal constitutional challenge to the excessiveness of the punitive damage award and the manner in which that award had been imposed because that court had adopted and followed the familiar rule that an appellee is free, without filing a cross-appeal, to raise arguments on appeal in support of the judgment be- low so long as those arguments neither expand its rights nor contract the appellant’s rights under the judgment from which the appeal has been taken. E.g., Maricopa County v. Corporation Commission of Ar- wzona, 79 Ariz. 307, 310, 289 P.2d 188, 185 (1955). In addition, petitioner argued for the first time—and at its first opportunity to do so—that the refusal of the court below to apply the Linthicum “clear and convincing”’ evidence standard to its case violated the Due Process Clause of the Fourteenth Amendment. et i Tara 15 App. 55a-58a. Petitioner’s motion was denied with- out opinion. App. 51a. REASONS FOR GRANTING THE WRIT Each of the questions presented herein raises fun- damental federal constitutional issues regarding the manner in which punitive damage awards are as- sessed in civil actions in Arizona and all other States which recognize punitive damages. Question 1 pre- sented herein is presently sub judice in this Court in Bankers Life and Casualty Co.-v. Crenshaw, No. 85- 1765 (prob. juris. noted Mar. 9, 1987), 107 S. Ct. 1367 (1987). This question is manifestly deserving of plen- ary consideration, having been described by this Court as raising an “important issue[ ] which, in an appro- priate setting, must be resolved.” Aetna Life Insur- ance Co. v. Lavoie, slip op., at 13, 106 S. Ct., at 1589. The remaining questions presented by petitioner are not yet before the Court. Before discussing the im- portance of those questions, petitioner shall address the question whether this Court’s jurisdiction under 28 U.S.C. § 1257(3) may properly be invoked not- withstanding that the court below expressly refused to reach any of the federal questions raised by petitioner in its “supplemental” brief filed in that court and that the court did not expressly decide any of the federal questions renewed, or raised initially, in petitioner’s Motion for Reconsideration. A. Jurisdiction 1. The Asserted Basis for Refusal To Reach the Federal Questions Is an Inadequate State Ground and Does Not Defeat This Court’s Jurisdiction In a series of cases going back almost five decades, the court below has made it clear to litigants in Ar- 16 izona that it has the power to decide issues raised for the first time on appeal and that it will do so if the issues are sufficiently important. Town of South Tucson v. Board of Supervisors, 52 Ariz. 575, 84 P.2d 581 (1938). In 1971, the court below reiterated that although as a general matter it will not decide issues raised for the first time in that court, it will hear such issues if they are of “general statewide signif- icance.”’ Ruth v. Industrial Commission, 107 Ariz. 572, 574, 490 P.2d 828, 830 (1971). In Ruth, the court entertained and decided a state constitutional chal- lenge to an Arizona statute raised in neither the trial court nor the court of appeals. In 1984, the court below characterized this practice as ‘‘a well recognized exception’’ to the general rule when! it decided a dispositive issue of state consti- tutional law which had been raised for the first time in a motion for rehearing in the court of appeals. Barrio v. San Manuel Division Hospital for Magma Copper Co., 143 Ariz. 101, 692 P.2d 280 (1984). In Barrio, the court allowed the parties to file supple- mental briefs, noting that resolution of the constitu- tional issue did not turn on “disputed” facts. The court struck down the challenged Arizona statute in that case. Jd., at 107, 692 P.2d, at 286. In this case, the court below did not dispute in any way—nor could it have done so—that petitioner’s fed- eral questions comprise isSues of “general statewide significance” for purposes of applying the court’s own “well recognized exception.”” Nor did the court below suggest that it needed any additional facts in order to decide petitioner’s federal questions (which are, in any event, not dependent on facts). Instead, after granting petitioner’s motion to brief the issues, the ote Set 17 court unexpectedly departed from its ‘‘well recog- nized’? rule and asserted absolute discretion not to consider an issue of statewide significance raised for the first time on appeal: We hold that consideration of a constitu- tional issue raised for the first time on appeal is discretionary with this court. This is not a case involving denial of a fundamental con- stitutional right in a criminal trial nor con- tentions which affect the jurisdiction of the court, and we do not feel compelled to ex- ercise our discretion. App. 24a, 733 P.2d, at 1086.° This Court’s cases establish that a state rule re- garding the proper presentation of federal questions may not be invoked successfully to deny this Court jurisdiction over a case unless that state rvie is “strictly or regularly” followed. Barr v. City of Co- lumbia, 378 U.S. 146, 149 (1954). Until the decision of this case by the court below, the rule in Arizona was clear: the Supreme Court of Arizona had juris- diction to entertain questions raised for the first time on appeal and would exercise that jurisdiction if the question presented for the first time on appeal was one of general statewide significance. The complete 3 By holding that this case did not involve a “fundamental constitutional right in a criminal trial,” the court below implicitly rejected on the merits petitioner’s federal constitutional argu- ment that because of the penal nature of the punitive damage award, it was entitled to all of the federal constitutional pro- tections accorded to criminal defendants. Thus, at a minimum, the court below erroneously applied its new rule to this case because freedom from excessive fines is clearly a right available under the Eighth Amendment to all defendants in criminal cases. a Se Te 18 departure from that settled rule in this case cannot, under Barr, constitute a basis for divesting this Court of its jurisdiction over the substantial federal ques- tions raised by petitioner.‘ 2. Alternative Basis Requiring Decision of Petitioner’s Federal Questions by the Supreme Court of Arizona Although Barr refutes any argument that this Court does not have jurisdiction over this case, petitioner would add that its presentation of the federal ques- tions was also fully consistent with the rule of the court below that an appellee, without filing a cross- appeal or cross-petition, may raise on appeal any ar- gument in support of the judgment below so long as that argument would not, if successful, expand its rights under the judgment or contract the rights of the appellant. See, e.g., Maricopa County v. Corpo- ration Commission of Arizona, 79 Ariz. 307, 289 P.2d 183 (1955).5 ‘The assertion of the court below that it has absolute discre- tion to hear or not to hear questions raised for the first time on appeal is itself insufficient to constitute an adequate state ground for defeating this Court’s jurisdiction because it vests too much discretion in the court below to discriminate against the presentation of federal questions. See Sullivan v. Little Hunt- ing Park, Inc., 396 U.S. 229, 234 (1969) (procedural rule re- quiring “‘reasonable notice’ to opposing counsel “more properly deemed discretionary than jurisdictional’ because “‘reasonabie”’ is subject to a variety of interpretations; rule therefore cannot “bar review [in this Court] by certiorari’’). * In Maricopa County, the Supreme Court of Arizona embraced the classic formulation of this principle articulated by Justice Brandeis in United States v. American Railway Express Co., 265 U.S. 425 (1924). As stated by Justice Brandeis, an appellee may “‘‘urge in support of a decree any matter appearing in the record, although his argument may involve an attack upon: the ° 19 There is no doubt that the favorable resolution of petitioner’s federal constitutional questions would not have enhanced its right to a new trial or diminished respondents’ rights under the trial court’s judgment as affirmed by the Court of Appeals. It is clear in Arizona that if a jury verdict is ‘‘excessive,’’ a new trial on punitive damages is appropriate. Excessive- ness was a ground for the trial court’s grant of | petitioner’s motion for a new trial. App. 49a. There- fore, petitioner was entitled in the Court of Appeals and the Supreme Court of Arizona to argue exces- siveness under any theory as long as its argument, if successful, would not expand its right to a new trial. As noted above, petitioner argued successfully to the trial court that the punitive damage award was excessive because it was grossly disproportionate to the compensatory damage award. In the court below, petitioner did nothing more than raise federal grounds by which the trial court could have reached precisely the same result using essentially the same analysis.* The compelling need to apply this principle to this ease is obvious because, as discussed above, the court below stripped petitioner of its state-law right to a reasoning of the lower court or an insistence upon matter over- looked or ignored by it.”’ Id., at 435 (footnote omitted). 6 Because Arizona courts apply the salutary rule that consti- tutional questions should be decided only if there is a necessity for doing so, eg., State v. Yslas, 189 Ariz. 60, 63, 676 P.2d 1118, 1121 (1984), there is no reason to believe that either the trial court or the Court of Appeals would have resolved petitioner’s federal questions had they been presented to those courts. The necessity for deciding petitioner’s federal questions did not even arise until the court below determined that petitioner was not entitled as a matter of state law to a new trial of this case. 20 new trial granted by the trial court and affirmed by the Court of Appeals by reaching and deciding ad- versely to petitioner questions regarding the exces- siveness of the punitive damage award which were not even presented by respondents to the court below in their Petition for Review. This Court should not permit state courts to manipulate its jurisdiction through the revision, misapplication and failure to ap- ply state rules regarding proper presentation of fed- eral (and state-law) questions as occurred in this case.” B. The Questions Presented Are Important, Recurring Questions of Federal Constitutional Law That Should Be Settled by This Court 1. The Excessiveness of the $3,500,000 Punitive Damage Award As stated by the court below, the purposes of the punitive damage award in this case, as in any case, ’ Because, as discussed in the text above, petitioner could not have anticipated that the court below would reinstate the jury’s verdict based on its resolution of questions in respondents’ favor which had been decided adversely to respondents by the trial court, not ruled on by the Court of Appeals and not presented as questions for review in respondents’ Petition for Review in the court below, petitioner would in any event be entitled, under this Court’s decision in Brinkerhoff-Faris Trust Co. v. Hill, 281 U.S. 673, 677-78 (1930), to raise all of its federal questions for the first time in this Court. In addition, it is clear that Question 4 did not arise until the court below had determined, sua sponte, that it would not apply its decision in Linthicum to this case without giving petitioner the opportunity to brief or argue that question. ied oh be 21 are “‘not to compensate the plaintiff, but to express society’s disapproval of outrageous conduct,’’ App. lla, 733 P.2d, at 1080, and to “‘punish the defendant and serve as an example to deter future similar mis- conduct.” App. 19a, 733 P.2d, at 1084. In Arizona, the maximum monetary punishment that could have been inflicted on petitioner if it had been convicted, after a criminal trial accompanied by all of the rights and procedural safeguards accorded to criminal defendants, of a deceptive business practice would have been $20,000.8 Thus, petitioner suffered the im- position of a fine 175 times as great as it could have received at the conclusion of a criminal trial for what would appear to be roughly analogous conduct. In addition, as petitioner argued to the trial court in successfully urging that the punitive damage award was excessive, the award is 233 times as great as the award for compensatory damages. This punitive fine was imposed in a civil action in which no limit had been placed on the verdict the jury could return. Indeed, in Arizona the “gentle rule that [punitive damages] not be excessive,” Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974), means that an appel- 8 Arizona punishes the commission of deceptive business prac- tices as “class 1” misdemeanors, Ariz. Rev. Stat. Ann. § 13- 2202 (1978), which carry a fine of up to $20,000. § 13-803 (Cum. Supp. 1986). Under Arizona law, all or a portion of that criminal fine may be paid over to any person who suffered damage be- cause of the crime. In determining the amount of restitution, the court cannot take into consideration the ‘‘economic circum- stances of the defendant.” Ariz. Rev. Stat. Ann. § 13-804C (Cum. Supp. 1986). As pointed out by Justice Holohan in dissent below, the highest monetary fine imposed by the legislature of Arizona for any criminal offense is $1,000,000. App. 3la, 733 P.2d, at 1089. a 22 late court may intervene to reduce an award only if the award will “kill” the defendant. App. 20a, 733 P.2d, at 1084. As appellant Bankers Life and Casualty Company has demonstrated in its opening brief in this Court, the concept of proportionality carried from Chapter 20 of Magna Carta into the Eighth Amendment pro- vides far more protection from the infliction of ex- cessive monetary punishment than simply preservation of the financial life of the defendant. Bankers Life and Casualty Co. v. Crenshaw, Br. of Appellant, at 25-27, 36-39. By any standard this Court might adopt in that case or the case at bar, the punishment in- flicted on petitioner is constitutionally excessive. Furthermore, the jury’s award in this case was rein- stated only after an extraordinary exercise by the court below of judicial gymnastics in which the rules of the game were changed or ignored wherever nec- essary in order to reinstate the excessive award. The court held, for the first time, that the “duration” of the alleged conduct warranting the imposition of pu- nitive damages is an appropriate consideration in de- termining the amount of punitive damages which Should be assessed. App. 15a, 733 P.2d, at 1085. This holding of substance was then relied upon by the court below both to justify its refusal to set aside the award as excessive and to justify the admission of the tes- timony of a former employee who had not worked for petitioner for fifteen years, the wrongful admis- sion of which had been one of the bases for the trial court’s grant of petitioner’s motion for a new trial and the affirmance of that grant by the Court of Appeals. Finally, in order to reinstate the jury ver- dict, the court below had to decide in respondents’ 23 favor two crucial questions that had not been pre- sented to the court by respondents, while simulta- neously disallowing petitioner’s attempt to invoke the protections of the federal constitution for the limited purpose of preserving its right to a new trial. Whatever may be said of the due process impli- cations of these and other similar actions set forth above in the context of the imposition of compensa- tory damages, the imposition of a $3,500,000 punitive fine in this fashion surely is violative of the Due Pro- cess Clause. The standards and rules under which this award was reinstated produced the opposite of the certainty which this Court has required when criminal penalties are to be imposed. See generally Kolender v. Lawson, 461 U.S. 352, 359 n.8 (1983). Petitioner had no fair warning that its conduct in 1979 could lead, in 1987, to reinstatement of a jury verdict that was sustained under legal standards that were non- existent in 1979. This violation of due process was compounded by the jury’s exercise of its uncontrolled discretion to assess punitive damages in a virtually unlimited amount, acting with carte blanche to impose a punitive fine based upon ‘“‘their own notions of what the law should be ....’”’ Giaccio v. Pennsylvania, 382 L.S. 399, 403 (1966). This Court should grant certiorari in order to make clear to all state courts that the Due Process Clause of the Fourteenth Amendment precludes the administration of a system of punitive justice in this fashion. 24 2. The Question Whether Punitive Damages May Be Im- posed Without According Federal Constitutional Pro- tections Due to Defendants in Criminal Cases Should Be Decided by This Court Punitive damages in Arizona, as in other jurisdic- tions, comprise a governmentally sponsored system for imposing penal fines for the purposes of enforcing society's standards through punishment and deter- rence. In Kennedy v. Mendoza-Martinez, 372 U.S. 144, 165-66 (1963), this Court struck down a federal stat- ute under which persons were punished with loss of citizenship in proceedings that did not afford them the procedural safeguards guaranteed by the Fifth and Sixth Amendments. Since that case was decided, this Court has made clear that the imposition of a monetary penalty, without more, may also require the State to provide the same procedural protections as are available to defendants in criminal cases. United States v. Ward, 448 U.S. 242, 248-51 (1980). There can be no dispute that punitive damages are imposed in Arizona solely for the purposes of pun- ishment and deterrence. As observed by Justice Ho- lohan below in this case, jurors in Arizona “are told that the purpose of punitive damages is to punish the defendant and to deter others. This also is the pur- pose of the criminal law.” App. 31a, 733 P.2d, at 1089 (Holohan, J., dissenting). This Court has also commented on the close relationship between punitive damages and fines imposed in criminal cases, stating that [p]unitive damages ‘‘are not compensation for injury. Instead, they are private fines levied by civil juries to punish reprehensible conduct and to deter its future occurrence.”’ 25 Electrical Workers v. Foust, 442 U.S. 42, 48 (1979), quoting Gertz v. Robert Welch, Inc., 418 U.S., at 350. Indeed, as Justice Marshall has observed, punitive damages “serve the same function as criminal pen- alties and are in effect private fines.” Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 82 (1971) (dissenting opinion). Question 2—whether ‘‘a punitive ‘fine’ should be imposed after a civil tria ” Smith v. Wade, 461 U.S. 30, 59 (1983) (Rehnquist, J., dissenting) (emphasis added)—is manifestly of great importance and worthy of plenary consideration by this Court in the case at bar. By permitting the award of punitive damages to private plaintiffs, the States have, for all practical purposes, conferred on those plaintiffs the power to prosecute defendants for “reprehensible” conduct and to impose monetary punishments on defendants which are constitutionally indistinguishable from the puni- tive fines imposed after conviction in a criminal trial. This civil imposition of criminal punishment cannot be reconciled with this Court’s cases, which require that before the States may impose sanctions in order to punish and deter antisocial conduct, the guarantees of the Fifth and Sixth Amendments must be accorded to the defendant. 3. The Question Whether Punitive Damages May, Under the Due Process Clause of the Fourteenth Amendment, Be Imposed Only After Liability Is Demonstrated by “Clear and Convincing’’ Evidence Should Be Resolved by This Court Like the court below in Linthicum v. Nationwide 26 Life Insurance Co., supra, a number of state courts? and state legislatures’ have recognized the- penal function served by punitive damages and the arbitrary fashion in which punitive damages are imposed—being “frequently based upon the caprice and prejudice of jurors,’ Smith v. Wade, 461 U.S., at 59 (Rehnquist, J., dissenting). Accordingly, these courts and legis- latures have determined that punitive damages should not be imposed absent clear and convincing evidence of liability for such damages. This Court has similarly recognized that the Due Process Clause requires a higher standard of proof when persons are at risk of being deprived of certain types of rights. See Santosky v. Kramer, 455 U.S. 745 (1982) (clear and convincing evidence required in order to support extinguishment of parent-child re- lationship); Addington v. Texas, 441 U.S. 418 (1979) (clear and convincing evidence required to support involuntary commitment). This Court has also rec- °E.9., Tuttle v. Raymond, 494 A.2d 1353, 1363 (Me. 1985); Travelers Indemnity Co. v. Armstrong, 442 N.E.2d 2d 349, 362- 63 (Ind. 1982); Wangen v. Ford Motor Co., 97 Wis. 2d 260, 294 N.W. 2d 487 (1980). 0 E.g., Act of the State of Alabama, H.27, 1 (June 9, 1987): Alas. Stat. § 09.17.020 (Supp. 1986); Minn. Stat. Ann. § 549.20 (Supp. 1987); Mont. Code Ann. § 27-1-221(2) (1986); Ore. Rev. Stat. Ann. § 30.925 (1983); Fla. Stat. Ann. § 768.73 (Supp. 1987) (clear and convincing evidence required to sustain punitive dam- age awards greater than three times the amount of actual dam- ages); Okla. Stat. Ann., Title 23, § 9 (1987) (clear and convincing evidence required to sustain punitive damage awards in excess of actual damages). The Colorado legislature has gone even fur- ther, requiring proof beyond a reasonable doubt to sustain a punitive damage award. Colo. Rev. Stat. Ann. § 13-25-127(2) (Supp. 1986). 27 ognized that where criminal penalties are to be im- posed, “‘the standard of certainty is higher.’’ Kolender v. Lawson, 461 U.S. 352, 359 n.8 (1983). This Court should decide in this case whether the Due Process Clause of the Fourteenth Amendment requires clear and convincing evidence of a plaintiff's right to recover punitive damages. Whether or not, as petitioner argues above, the size of punitive dam- age awards should be made subject to the restraints of the Eighth Amendment because of their punitive purposes, the arbitrariness with which such punish- ment may be and is routinely imposed implicates sub- stantial due process considerations. Where the chance of error is great, this Court has not hesitated to impose the Due Process Clause as a shield against arbitrary governmental action. See, e.g., Mathews v. Eldridge, 424 U.S. 319 (1976). It should do so once again in this case. 4. This Court Should Decide Whether the Punitive Pur- poses Advanced by Punitive Damage Awards Require That Rules Restricting Their Imposition Be Applied to Cases Pending on Appeal In Griffith v. Kentucky, 107 S. Ct. 708 (1987), this Court held that its decisions announcing new federal constitutional rules for the conduct of criminal pros- ecutions must, under the Due Process Clause of the Fourteenth Amendment, be applied retrospectively to cases pending on direct review or otherwise not yet final. As the Court observed in Griffith, failure to do so “violates the principle of treating similarly situated defendants the same.” Jd., at 713. If this Court holds, in Bankers Life and Casualty Co. v. Crenshaw, that the Eighth Amendment applies to control the size of punitive damage awards in civil 28 cases, the question will necessarily arise whether its decision will be applied retrospectively to other cases, like the case at bar, as a matter of constitutional compulsion or practice.’ Whether the constitutional dimension of this question is to be governed by the rule laid down in Griffith, or by the rule established for civil cases as articulated in Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07 (1971), is an important issue which should be decided in this case. The court below held that it was under no consti- tutional compulsion to apply its decision in Linthi- cum—adopting the ‘‘clear and convincing” standard of proof—“‘retrospectively” to this case. As pointed out above, this issue had been raised in Linthicum by the court below sua sponte. It would be difficult to posit two cases in which two similarly situated defendants had been subjected to more disparate treatment than Linthicum and the case at bar. This Court should decide whether the court below was en- titled to treat petitioner as a “‘civil’’ defendant for purposes of its retrospectivity analysis or whether, instead, petitioner was entitled, as a matter of federal constitutional right, to ‘‘retrospective’’"? application of This Court’s decision in Henry v. Collins, 380 U.S. 356 (1965) (per curiam), which applied retrospectively the constitu- tional rules announced in its decision in New York Times Co. v. Sullivan, 376 U.S. 254 (1964), establishes that petitioner is in any event entitled to the benefits of any ruling favorable to Bankers Life and Casualty Co. in No. 85-1765 as a matter of this Court’s settled practice. 2 As is evident from the circumstances discussed above, the evidentiary rule announced in Linthicum was not “applied”’ to the case at bar solely because the court below chose to use Linthicum as the vehicle for announcing this new evidentiary = en ee ee eee ee 29 Linthicum because the rule announced in Linthicum, although grounded on state “policy,” nevertheless af- fected directly the circumstances under which essen- tially criminal punishment was and is to be administered in Arizona. In an area of the law in which the rules are being modified constantly as re- gards the imposition of punishment, it is particularly important for this Court to clarify the circumstances under which similarly situated defendants may be sub- jected to different punishments on the basis of the “selective application of new rules ....” Griffith v. Kentucky, 107 S. Ct., at 718. CONCLUSION The questions presented by petitioner are substan- tial and arise on a daily basis in litigation occurring throughout the United States. As the dissenting Jus- tice below noted, these questions ‘‘will not disappear.” App. 33a, 733 P.2d, at 1090. The petition should be granted and these questions set for plenary consid- eration. July 6, 1987 Respectfully submitted, *THEODORE B. OLSON LARRY L. SIMMS GIBSON, DUNN & CRUTCHER 1050 Connecticut Ave., N.W. Washington, D.C. 20036 (202) 955-8500 Attorneys for Petitioner *Counsel of Record standard rather than this case, which was argued to the court below on the same day as Linthicum. 30 Of Counsel: MARK I. HARRISON DOUGLAS L. CHRISTIAN MARY E. BERKHEISER HARRISON & LERCH, P.C. 1001 North Central Avenue Suite 900 Phoenix, Arizona 85004 (602) 257-5800 APPENDIX la IN THE SUPREME COURT OF THE STATE OF ARIZONA Supreme Court No. CV-86-0010-PR Court of Appeals No.1 CA-CIV 6881 Maricopa County No. C-432754 JACK RANDY HAWKINS and CYNTHIA HAWKINS, husband and wife, Plaintiffs-A ppellants, VS. ALLSTATE INSURANCE INSURANCE COMPANY, a foreign cor- poration, and Does I through V, Defendant-A ppellee. Appeal from the Superior Court of Maricopa County The Honorable David J. Perry, Judge REVERSED AND REMANDED FILED FEB 26 1987 Memorandum Decision of the Court of Appeals Filed August 13, 1985 Vacated 2a Thur, Dawson & O'Sullivan Phoenix By; Calvin C. Thur Attorneys for Plaintiffs-Appellants Harrison & Lerch, P.C. Phoenix By: Mark I. Harrison Douglas L. Christian Attorneys for Defendant-Appellee Allstate Insurance Company GORDON, Chief Justice Jack and Cynthia Hawkins (Hawkins) petitioned this court to review a decision of the court of appeals reversing the trial court’s grant of a motion for judgment notwith- standing the verdict in favor of Allstate Insurance Com- pany (Allstate) and affirming the trial court’s grant of Allstate’s motion for a new trial. Hawkins v. Allstate In- surance Company, No. 1 CA-CIV 6881 (Ariz.Ct.App. filed Aug. 13, 1985). We granted review to determine the ad- missibility of an insurer’s past claims practices and policies and to examine the quantum of proof necessary to sustain an award of punitive damages. Rule 23, Ariz.R.Civ.App.P., 17A A.R.S. In its supplemental brief, Allstate questioned the constitutionality of the manner by which punitive dam- ages are imposed. We have jurisdiction pursuant to Ariz. Const. art. 6, §5(3) and A.R.S. §12-120.24. I. FACTS In July 1979, the Hawkins purchased a new Chevrolet Monte Carlo, loaded with options, for approximately $8,000. Five months after purchasing the Monte Carlo, Cynthia was involved in an automobile accident that vir- tually demolished the car. The Hawkins were insured by Allstate under a standard automobile liability policy. That policy included a collision provision limiting Allstate’s liability to either paying the 3a actual cash value of the car at the time of the loss or to replacing the car with one of like kind and quality. The Hawkins reported the accident to A'lstate the day it happened, December 6, 1979. Within a few days, Allstate classified the car as a “total loss” after determing that the actual cash value of the car was less than the estimated repair cost. The Hawkins’ claim was transferred to a total loss adjuster, Paul Schwenk. | According to Allstate’s witnesses, the actual cash value of a car is its market value. To determine actual cash value, Allstate’s total loss adjusters first establish a guide book value by calculating the high retail Blue Book value of the car and its optional equipment minus deductions for the car’s condition immediately prior to the loss. Such deductions represent amounts needed to bring the car to average retail condition and include deductions for the con- dition of the exterior of the car, paint, bumpers, uphol- stery, glass, tires, and clean up. The adjusters then perform a “market verification” by asking three or four local deal- erships to estimate the insured car’s worth and sometimes by checking the selling price of similar cars advertised in local car magazines. From the range of values resulting from this procedure, Allstate’s adjusters determine a spe- cific dollar amount as the actual cash value, apparently relying most heavily on the low estimates received from local dealerships. In the Hawkins’ case, Schwenk determined that the Blue Book value of the Hawkins’ car was $6,545. Schwenk did not examine the car and failed to consider many of the accessories on the insured car. From this figure, Schwenk deducted a $35 clean-up fee, which resulted in a guide book value of $6,510. Four dealer estimates of the value of a similar car ranged from $6,150 to $6,300. These es- timates were based on Schwenk’s description of the car and did not reflect all the options on the insured car. The 4a actual cash value recorded in the Hawkins’ claim file was $6,165 and was accompanied by the following explanation: Dealers have replacements, similar equipment but more miles; say one like this worth $6,200. De- duction for reconditioning. ACV $6,165. Schwenk first contacted Hawkins on December 13, 1979, one week after the accident. At that time, the Hawkins requested that Allstate provide them with a replacement car, rather than a sum of money equal to the actual cash value of their ‘‘totalled’” car. Schwenk sent them to look at four similar Monte Carlos at a local dealership. Schwenk would not let the Hawkins have the car they selected because it was $300 more than Allstate was willing to pay.’ Instead, Schwenk selected one of the other cars and insisted that the Hawkins take it. The Hawkins refused because the car Schwenk selected had few of the options their insured car had and was not comparable in either quality or gas mileage. Four days after Schwenk rejected the car the Hawkins selected as a replacement, Schwenk told the Hawkins he would pay them $4,500 in cash unless they took the car he had selected. The Hawkins refused, explaining that they had paid over $8,000 for their car five months earlier and could not purchase a comparable car for $4,500. Later, during the same conversation, Schwenk threatened to de- liver a check for $5,000. By December 20, the Hawkins, desperate for a car, accepted a check for $6,471, payable to Hawkins and a local dealership, to purchase the car Schwenk had selected. It had been approximately a week since the Hawkins viewed the car, and when Jack Hawkins went to pick up the car, he again realized the cars were not comparable ‘The evidence is conflicting whether the car the Hawkins selected was $300 more than the actual cash value of their insured car or $300 more than one of the remaining three cars. 5a and called Schwenk from the dealership to tell him he did not want the car. After a lengthy, heated discussion and assurances from Schwenk that the replacement car would be brought up to the insured car’s standards after the holidays, Jack Hawkins reluctantly gave the check to the dealer. The replacement car lacked power windows, had a larger engine and got worse gas mileage, had dealer-installed (not factory-installed) cruise control, and lacked several styling features of the original car. After the holidays, Allstate sent an additional $125 to the Hawkins to install power windows, but the Hawkins were unable to get the work done for less than $600. Allstate refused to make any other adjustments and closed the file. Although no evidence of the replacement vehicle’s actual cash value was presented, Allstate conceded on appeal that the list price of the re- placement vehicle was at least $161.45 less than that of the insured car. The Hawkins sued Allstate for fraud and bad faith. At trial, three former Allstate employees testified about Al- Istate’s claims procedures and practices. None had any direct experience with the Hawkins’ claim. In addition, Schwenk and his supervisor testified. The trial judge directed a verdict in favor of Allstate on the fraud count but submitted that bad faith claim to the jury to consider liability for both compensatory and punitive damages. The jury awarded the Hawkins $15,000 compensatory damages and $3.5 million punitive damages. The trial court subsequently granted Allstate’s motion for judgment notwithstanding the verdict on the ground that the evidence presented at trial was insufficient to sustain the verdict. In the alternative, the trial court granted Al- Istate’s motion for a new trial on five grounds. The court of appeals held that the trial court erred in entering a judgment notwithstanding the verdict, but affirmed the grant of a new trial for two reasons: 1) the testimony of 6a a former Allstate claims adjuster was improperly admitted, and 2) the amount of the punitive damages award was not justified by the evidence.? Hawkins, slip op. at 11, 16. II. ADMISSIBILITY OF INSURER’S PAST CLAIMS PRACTICES During trial, Hawkins called three former Allstate em- ployees to testify about Allstate’s procedures for handling total loss claims. Over Allstate’s objection on the grounds of relevancy, each testified concerning Allstate’s method of determining the amount of an insured’s loss (the actual cash value of the property) and general company policies regarding claims handling. One former claims representative, Pat Paterno, testified about Allstate’s claims practices in the Phoenix office at the time the Hawkins claim was processed. Although she did not work on the Hawkins claim, Paterno testified that as a claims representative Allstate instructed her to au- tomatically make certain deductions in determining a car’s actual cash value. Specifically, she testified that adjusters were instructed to deduct an extra $5 for tire wear and always to deduct a $35 cleaning fee, regardless of the car’s cleanliness. She testified that her supervisors ex- plained that a $5 deduction ‘“‘wouldn’t mean much to an insured or claimant, but $5 on every claim would mean a lot to the company.” Another former claims representative, Jan Mauritz, was employed by Allstate in Tacoma, Washington from 1978 to 1981. Like Paterno, Mauritz testified that he was in- structed automatically to make certain deductions, includ- ing a cleaning fee, in valuing a “‘total loss.” He testified that he was instructed to offer an insured the lowest value of a claim because the insured probably would take it in order to get his car fixed quickly. He also testified that *The Hawkins abandoned their appeal from the directed verdict on the fraud count. Hawkins, slip op. at 4. Ta Allstate used the adjusters’ “severity rating,” a ratio of total dollars paid out in claims over the number of claims, to evaluate adjusters’ performance and promotion poten- tial. Mauritz opined that the claims-handling practices and policies to which he testified were followed throughout the company and not merely in the Tacoma office because they were promulgated through corporate literature and policy statements. In his opinion, these practices. “may lead to what one may call chiseling, to calculated offers substan- tially below fair value... .” The third former Allstate employee that testified, Wil- liam Boettcher, was employed by Allstate as a claims ex- aminer in Phoenix from 1962 to 1964, 15 years before the Hawkins’ claim. He testified that he was instructed au- tomatically to take certain deductions on property damage claims, including amounts for tire wear. He also testified as to Allstate’s explanation for making the deductions: Q Was an explanation given as [to] why you should make various deductions? A Yes, it was. Q What explanation was given? A Basically, that particularly in terms of prop- erty damage or collision claim, that the owner of the vehicle was concerned whether or not he was going to get his vehicle back, how soon he could ! get it repaired and so forth. Therefore, he would i not perhaps object to some of these small de- ductions. And you’d be able to settle the claim at a cheaper rate. The statement was frequently made that if you could save one dollar on a mil- lion claims, you would save the company as much as a million dollars. Boettcher testified that he heard this explanation from instructors at an Allstate regional claims school, which he attended for approximately 2 weeks in 1962, from regional ——————=— 3 > leetiend’ Nae al 8a claims supervisors, and from his local assistant manager in the Phoenix office. Boettcher testified that both the local and regional claims supervisors’ general policy was to settle claims for as low an amount as possible. He also testified about the function of the claims department during his employment: “In gen- eral terms, I’d say it was perhaps not to settle claims as much as it was to save the company money, because this would increase their profits.” Among other reasons, the trial court granted Allstate’s motion for a new trial after deciding it had erred in ad- mitting the testimony of the former Allstate employees. The trial court did not explain the perceived error, but only summarily concluded that the testimony of the three witnesses should not have been admitted. The court of appeals affirmed the grant of a new trial, but held that the testimony of only one of the former employees, William Boettcher, was erroneously admitted. The appellate court reasoned that Boettcher’s testimony was inadmissible under Rule 404(b), Ariz. Rules of Evid., 17A A.R.S.* because Allstate did not deny its acts nor claim they were unintentional and because the evidence was irrelevant as the pratices Boettcher described were not sufficiently similar to the Hawkins’ experience to be admissible to establish a pattern of bad faith to support a punitive damages award. In light of this procedural history, the issue we address is whether the trial court’s admission of Boettcher’s tes- * We take this opportunity to voice our objection to such conclusory rulings because they impair effective appellate review. We urge trial judges to articulate their reasoning so appellate courts can determine on appeal whether the ruling was erroneous. ‘The Rules of Evidence, 17A A.R.S., will be referred to as ‘“‘Rule ——’’ throughout this opinion. 9a timony was an error that justified granting Allstate’s mo- tion for new trial. The power to grant a new trial is largely within the trial court’s discretion, but this power is not unlimited. King v. Superior Court, 138 Ariz. 147, 151, 673 P.2d 787, 791 (1983). “{I]f it appears clearly from the record that there was no error in the matters presented in the motion for new trial, it is an abuse of discretion for the court to grant a new trial.” Helena Chem. Co. v. Coury Bros. Ranches, 126 Ariz. 448, 450, 616 P.2d 908, 910 (App. 1980). A party cannot urge in a motion for new trial that evidence was erroneously admitted unless a proper objec- tion, stating the specific ground of the objection, was made at the time the evidence was offered, unless the error is fundamental. M. Udall & J. Livermore, Arizona Law of Evidence, §12, at 14 (2d ed. 1982); see Helena Chem. Co., 126 Ariz. at 453, 616 P.2d at 913; Rule 103. At trial, Allstate objected to Boettcher’s testimony only on grounds of relevancy.’ We disagree with the court of appeals that Boettcher’s testimony was erroneously admitted because it was irrelevant.® A. Relevance 1. Rules of Evidence Relevant evidence is defined as ‘‘evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more prob- able or less probable than it would be without the evi- ‘In pre-trial motions, Allstate also objected to Boettcher’s qualifi- cations as an expert, but his testimony was not offered as expert opinion evidence. 6 Allstate’s precise objection was that the testimony was “irrelevant and immaterial.” Modern rules of evidence capture both concepts in the tern “relevance.” M. Udall & J. Livermore, supra § 81, at 160; Rule 401. 10a dence.”” Rule 401. Relevancy is not an_ inherent characteristic of proffered evidence; instead, it is the re- lationship between the proffered evidence and the fact sought to be proved. See M. Udall & J. Livermore, supra, at 163; 1 Weinstein’s Evidence 4401[03], at 401-17 (1986). Essentially, relevancy is a two-part test. First, evidence is relevant only if it relates to a consequential fact; evi- dence directed to an undisputed issue is irrelevant. What is at issue in a particular case is determined from the pleadings and the substantive law. M. Udall & J. Liver- more, supra, at 161; Weinstein’s Evidence, supra, at 401- 17 to -19. Second, to be relevant, evidence need only alter the probability, not prove or disprove the existence, of a consequential fact. M. Udall & J. Livermore, supra, at 162; Weinstein’s Evidence, supra §401[06], at 401-33 to - 36. Allstate’s liability for both the tort of bad faith and punitive damages was at issue during the trial. Therefore, evidence that tends to establish a prima facie case of bad faith or entitlement to punitive damages is relevant. a. Bad Faith—Prima Facie Case We recently clarified that tort recovery for bad faith is allowed if an insurer intentionally breaches the implied covenant of good faith and fair dealing in the insurance contract by denying the insured the security and protection from calamity that is the object of the insurance relation- ship. Rawlings v. Apodaca, _____ Ariz. , 726 P.2d 565 (1986). To establish a prima facie case of bad faith, Hawkins had to prove that Allstate acted intentionally, not inadvertently or mistakenly, and that Allstate dealt unfairly or dishonestly with the Hawkins’ claim or failed to give fair and equal consideration to the Hawkins’ in- terests. Id. at , 726 P.2d at 576. b. Punitive Damages—Prima Facie Case Punitive damages are recoverable in insurance bad faith tort actions only if the insured acted with an “evil mind” in breaching the implied covenant of good faith and fair lla dealing. Rawlings, Ariz. at ——_, 726 P.2d at 578- 79. The requisite evil mind is found if the insurer intended to injure the insured or consciously pursued a course of conduct knowing that it created a substantial risk of sig- nificant harm to the insured. Jd. at ___, 726 P.2d at 578. In addition, the requisite evil mind may be inferred if the insured’s conduct is sufficiently ‘‘oppressive, out- rageous or intolerable.’’ Jd. at _—_., 726 P.2d at 578-79. To recover punitive damages, the plaintiff must also introduce sufficient evidence to allow the trier-of-fact to calculate a punitive damage award that is reasonable under the circumstances. E.g., Nielson v. Flashberg, 101 Ariz. 335, 341, 419 P.2d 514, 520 (1966) Although a precise laundry list of relevant evidence is impossible, evidence is properly considered by the trier-of-fact in assessing pu- nitive damages if it bears upon the purpose and function of punitive damages. The purpose of punitive damages is not to compensate the plaintiff, but to express society's disapproval of outrageous conduct and to deter such con- duct by the defendant and others in the future. See, ¢.9., Nielson v. Flashberg, 101 Ariz. at 341, 419 P.2d at 520; Acheson v. Shafter, 107 Ariz. 576, 578, 490 P.2d 832, 834 (1971). One category of relevant evidence is the defendant’s : financial position. See, e.g., Acheson v. Shafter, 107 Ariz. at 578, 490 P.2d at 834 (wealth or financial status of defendant relevant to allow jury to impose an appropriate punishment), Nielson v. Flashberg, 101 Ariz. at 341, 419 P.2d at 520. Obviously, the goals of punishment and de- terrence would be circumvented if the financial position of the defendant allowed it to comfortably absorb the award. a Another category of relevant evidence is the nature of the defendant’s conduct, including the reprehensibility of the conduct and the severity of the harm likely to result, as well as the harm that has occurred, from the defendant’s conduct. See Mallor & Roberts, Punitive Damages: Toward 12a a Principled Approach, 31 Hastings L.J. 639, 667 (1980); Owen, Punitive Damages in Products Liability Litigation, 74 Mich. L. Rev. 1257 (1976). The more reprehensible the act and the more severe the resulting harm, the greater the award of punitive damages that is reasonable under the circumstances. The duration of the misconduct, the degree of defendant’s awareness of the harm of the risk of harm, and any concealment of it are elements to con- sider in judging the reprehensibility of the defendant’s conduct. See Neal v. Farmers Ins. Exchange, 21 Cal.3d 910, ___, 582 P.2d 980, 990, 148 Cal.Rptr. 389, 399, (1978); Chodos v. Ins. Co. of North America, 126 Cal.App.3d 86, 104, 178 Cal.Rptr. 831, 841 (1981); State ex rel. Young v. Crookham, 290 Or. 61, ___ , 618 P.2d 1268, 1274 (1980). A third relevant consideration is the profitability of the defendant’s conduct. See Cox v. Stolworthy, 94 Idaho 683, ——, 496 P.2d 682, 690 (1972); Wangen v. Ford Motor Co., 97 Wis.2d 260, , 294 N.W.2d 437, 460 (1980); Mallor & Roberts, supra, at 667-68. A punitive damage award that disgorges ill-gotten profits serves to deter fu- ture similar conduct by eliminating any profit incentive. These factors are presented only as guidelines to the character of evidence that is relevant to assessing punitive damages and should be viewed as neither exhaustive nor exclusive.* Furthermore, it is well settled that not all rel- evant evidence is admissible and whether such evidence is admissible in a particular case depends upon the circum- stances of that case. See Rules 402-411. ‘ Although the authors advocate that the judge, not the jury, assess the sum of punitive damages, the evidence discussed here is appropri- ately considered by the trier-of-fact under Arizona’s procedure for im- posing punitive damages. *Some courts and commentators suggest that the jury consider the plaintiff's litigation expenses in assessing punitive damages. We express no view on this factor in this case. Peewee See oi Chel tn ile 13a Thus, to establish a prima facie case for the recovery of punitive damages, Hawkins had to prove that an evil mind—either a desire to harm or conscious disregard of the Hawkins’ right to a fair valuation of their property loss—motivated Allstate’s bad faith conduct. To recover punitive damages Hawkins also had to establish a factual basis from which the jury could assess a sum of punitive damages that would accomplish the goals of punishment and deterrence. | 2. Application to Present Case Boettcher’s testimony is relevant both to Allstate’s li- ability for the tort of bad faith and punitive damages. See Dunlap v. Jimmy GMC of Tucson, Inc., 136 Ariz. 338, 343, 666 P.2d 83, 88 (App. 1983) (evidence of past deceptive sales practices relevant to whether those practices are cur- rently used and to issue of punitive damages). Regarding Allstate’s liability for bad faith, Boettcher’s testimony is relevant to whether Allstate acted intentionally. Evidence of previous, similar acts alters the probability that the conduct in question was unintentional; the more frequently an act occurs, the more probable it is intentional. Thus, Boettcher’s testimony made it more probable that the in- valid $35 cleaning fee deduction used in estimating the actual cash value of Hawkins’ loss was not mistakenly nor inadvertently made. More importantly, Boettcher’s testimony is relevant both to establish a prima facie case for recovery of punitive damages and to assess a sum of punitive damages. We note that unless the defendant is willing to take the stand and admit its ‘evil mind,” the plaintiff must prove enti- tlement to punitive damages with circumstantial evidence. Thus, whether the defendant intended to injure the plaintiff or consciously disregarded the plaintiff's rights may be suggested by a pattern of sir ‘lar unfair practices. Colonial Life & Acc. Ins. Co. v. Superior Court, 31 Cal.3d 785, 792, 647 P.2d 86, 90, 183 Cal.Rptr. 810, 814 (1982); Moore l4a v. American United Life Ins. Col., 150 Cal. App.3d 610, 624-25, 197 Cal.Rptr. 878, 886-87 (1984); see Rawlings v. Apodaca, ____Ariz. at , 726 P.2d at 578-79 (im- proper motives may be inferred from sufficiently oppres- Sive, outrageous or intolerable conduct). We disagree with the court of appeals that the practices about which Boettcher testified lacked sufficient similarity to the Hawkins’ experience and the other adjusters’ tes- timony to constitute such a pattern. All three former em- ployees described a policy of routine, automatic deductions, regardiess of their validity, in valuing an insured’s loss. Boettcher’s testimony is different because he did not de- scribe the specific cleaning fee deduction testified to by Mauritz and Paterno and included in the actual cash value valuations of the Hawkins’ car. This difference is imma- terial to the purpose for which the evidence was offered. Boettcher’s testimony was offered to show that Allstate engaged in a conscious course of conduct, firmly grounded in corporate policy, which denied Hawkins and countless other insureds the actual cash value of their property. The evidence was not offered to establish any particular con- duct regarding the Hawkins’ claim. This testimony was offered to explain Allstate’s motive or its state of mind when dealing with the Hawkins and other insureds. Boettcher’s testimony also is different because he de- scribed Allstate’s claims procedures and policies 15 years before the Hawkins claim. Allstate argues this time span robs the evidence of its relevance. We disagree. Remote- ness in time goes to the weight of the evidence, not its admissibility. State v. Jeffers, 135 Ariz. 404, 418, 661 P.2d 1105, 1119, cert. denied, 464 U.S. 865, 104 S.Ct. 199, 78 L.Ed.2d 174 (1983). As noted above, relevance requires only a modieum of rationally probative forced. While a Significant time span may reduce the probative force of evidence, it does not eliminate it. 15a Clearly, Boettcher’s testimony concerning Allstate’s past claims practices also was relevant to assessing an appro- priate sum of punitive damages. Boettcher’s testimony pre- sents direct evidence of the duration of Allstate’s misconduct and establishes evidentiary facts from which the jury could determine the reprehensibility of Allstate's conduct. See ante at 12-14. Because we find Boettcher’s testimony relevant to both the issue of bad faith and punitive damages, we hold that the trial court abused its discretion if it granted a new trial because Boettcher’s testimony was not relevant. B. Character Evidence We also disagree with the court of appeals that a new trial was justified because Boettcher’s testimony was er- roneously admitted in violation of Rule 404. Because Al- Istate did not object to Boettcher’s testimony as impermissible character evidence, this error was not pre- served as an issue for Allstate’s motion for a new trial. M. Udall & J. Livermore, supra § 12, at 18; Grant v. Arizona Public Service Co., 183 Ariz. 434, 450, 652 P.2d 507, 523 (1982) (objection that evidence is irrelevant, with- out specifying how or why, does not raise any issue on appeal where the evidence would have been relevant under any possible circumstance); 1 Weinstein’s Evidence € 103[02], at 103-28 to -24 (if a general objection is over- ruled, party objecting is precluded from asserting a proper objection on appeal). Therefore, we hold that the trial court abused its discretion if it granted a new trial because Boettcher’s testimony was inadmissible character evidence. However, even if the issue was properly preserved, the evidence was not admissible pursuant to Rule 404. Sub- section (b) permits evidence of ‘other crimes, wrongs or acts’ if the purpose is to show a party’s motive, intent or absence of mistake or accident. These are precisely the purposes for which Boettcher’s testimony was admitted. See ante at 15-17. We disagree with the court of appeals l6a that Rule 404(b) “is inapplicable.” See Rawlings slip op. at 6. We interpret the court’s statement to mean that because Allstate did not deny its acts nor allege that they were unintentional, the deliberateness of Allstate’s conduct was not at issue and Boettcher’s testimony was irrelevant because it was not directed to a fat of consequence to the determination of the case. This reasoning ignores that Boettcher’s testimony is relevant and admissible to prove Allstate’s improper motives for purposes of punitive dam- ages. Furthermore, proof of intentional conduct is neces- sary to establish a prima facie case of the tort of bad faith. Absent a stipulation by Allstate to this element of the claim, Hawkins was required to put on such proof to survive a directed verdict. Also, when Allstate did present its defense, it took the position that its claims practices were innocent, cost-saving measures taken to prevent ov- erpayment of claims. Certainly, Boettcher’s testimony was admissible to rebut this contention. C. Unfair Prejudice Allstate also argues that in granting a new trial based on erroneously admitted evidence, the trial court properly exercised its discretion to exclude Boettcher’s testimony because the probative force of the evidence was substan- tially outweighed by the danger of unfair prejudice. See Rule 403. Allstate urges that its objection on grounds of unfair prejudice. This argument finds support in our case law. See Jones v. Pak-Mor Mfg. Co., 145 Ariz. 121, 125, 700 P.2d 819, 823 (question of relevancy looks at whether evidence lacks probative value and whether probativeness is outweighed by danger of prejudice), cert. denied, ___ U.S. —_., 106 S.Ct. 314, 88 L.Ed.2d 295 (1985). But see 1 Weinstein’s Evidence 4 103[02], at 103-23 (objec- tions pertaining to undue prejudice or impermissible char- acter evidence must be stated specifically and are not raised by “incompetent irrelevant and immaterial” objec- tion); Jay Edwards, Inc. v. New England Toyota Distrib- utor, Inc., 708 F.2d 814, 823 (1st Cir. 1983) (only stated vaaseculay eae Wille Beek ai i ete US CT Be ale mace 6 i i ‘ i 17a objection was relevancy and court refused to consider pre)- udicial effect), cert. denied, 464 U.S. 894, 104 S.Ct. 241, 78 L.Ed.2d 231. However, Allstate misperceives the pos- ture of this case on review. The issue is not whether the trial court could have exercised its discretion to exclude Boettcher’s testimony as unfairly prejudicial, but whether admitting the testimony was an error that justified a new trial. Because we discern no legal error in the admission of Boettcher’s testimony, we hold that the trial court abused its discretion by ordering a new trial on this basis. III. PUNITIVE DAMAGE AWARD The court of appeals reversed the entry of judgment notwithstanding the verdict, holding that Hawkins had es- tablished a prima facie case for punitive damages. How- ever, the court affirmed the grant of a new trial because, inter alia, ‘“‘the amount of punitive damages award was not justified by the evidence.” Slip op. at 16. The court considered evidence of Allstate’s corporate policy to deduct routinely a $35 cleaning fee from the estimated value of a total loss vehicle, as well as Allstate’s dealings with the Hawkins, but concluded that the amount of the punitive damages award was improper because there was no proof of the profits made by Allstate from its improper deduc- tions. See slip op. at 16 (‘Where punitive damages are based on wrongful corporate policies which are profit ori- ented, the supporting evidence must go far beyond in- formed speculation.”’). The court of appeals found the only reference to either the number of total loss claims adjusted by Allstate or the amount of illicit profits was by Hawkins’ counsel when he suggested to adjuster Schwenk that if Allstate improperly deducted $35 from 100,000 total loss claims, Allstate would gain $3.5 million.® *“Q, [Hawkins’ counsel] My question was, this decision to take $35 off on every total loss for car cleanup is really quite an important 18a The court of appeals appears to have carved out a new requirement of proof to support a punitive damage award. Neither the court of appeals, the parties, nor our research reveals any authority that proof of ill-gotten gains is nec- essary for an award of punitive damage. See Moore v. American United Life Ins. Co., 150 Cal.App.3d 610, 197 Cal.Rptr. 878 ($2.5 million punitive award for insurance company’s bad faith upheld without evidence of the profits from company’s deceptive claims practices); Chodos v. Ins. Co. of North America, 126 Cal.App.3d 86, 178 Cal.Rptr. 831 ($200,000 punitive award upheld in light of insurer’s wealth and nature of its acts, without proof of profits derived from insurer’s appraisal practices). Indeed, Allstate admits that the ‘‘[a]ppellants were not required to present evidence of illicit profits to obtain an award of punitive damages.’’ Appellee’s Supplemental Brief at 34. Allstate argues that once Hawkins “‘intentionaliy re- leased the specter of illicit profits’ to solicit punitive dam- ages, Hawkins must present more than speculative proof of such profits. Allstate suggests that the $3.5 million punitive damage award ‘‘bears more than a casual resem- blance’”” to the amount Hawkins’ counsel hypothetically suggested Allstate would gain from improperly deducting $35 from 100,000 total loss claims. See ante at n. 8. In effect, Allstate contends Hawkins did not meet its burden of producing evidence that establishes a reasonable basis from which the jury could estimate damages. decision from the company’s standpoint; isn’t that true? A. [Schwenk] I would say so, yes. Q. As a matter of fact, we could figure it out mathematically. If Allstate has 100,000 total loss claims every year, and they take $35 off on each one of those, that amounts to $3,500,000; doesn’t it? Q. If you say so. I can’t figure that far. Q. If Allstate has one million total loss claims every year in the United States, if we figure it out mathematically, it would amount to a 35 million decision; isn’t that right? A. Yes.” 19a We agree that a damage award, punitive or otherwise, must be based on more than mere speculation or conjec- ture. However, we disagree that the punitive damage award in this case is the result of speculation or not jus- tified by the evidence. Arguably, if it were the only evidence from which to determine an appropriate award, a hypothetical suggestion of the profitability of a defendant’s conduct would result in an award based merely on speculation. However, ample evidence was presented in this case from which the jury could assess an amount of punitive damages that would accomplish the dual goal of punishment and deterrence. We vest the trier-of-fact with discretion to award an amount of punitive damages that, in its judgment, will punish the defendant and serve as an example to deter future similar misconduct. Once exercised, this discretion should not be disturbed unless the award is the result of passion or prejudice. Nielson v. Flashberg, 101 Ariz. at 341, 419 P.2d at 520. The appropriate test of passion or prejudice is whether the verdict is ‘‘so manifestly unfair, unreasonable and outrageous as to shock the conscience of the court.’’ Acheson v. Shafter, 107 Ariz. at 579, 490 P.2d at 835 (citing Young Candy & Tobacco Co. v. Mon- toya, 91 Ariz. 363, 370, 372 P.2d 703, 707 (1962); accord Linsenmeyer v. Hancock, 23 Ariz. App. 444, 448, 533 P.2d 1181, 1185 (1985) (quoting Wry v. Dial, 18 Ariz. App. 503, 515, 503 P.2d 979, 991 (1972) (‘‘The test to be applied ... is whether the ‘verdict is so outrageously excessive as to suggest, at first blush, passion or prejudice.’”’)). The amount of the award alone is not sufficient evidence to prove the jury acted with passion or prejudice. Nienstedt v. Wetzel, 1383 Ariz. 348, 357, 651 P.2d 876, 885. The previously outlined categories of evidence relevant to assess a sum of punitive damages see ante at 13-14, are equally applicable to determine whether sufficient evi- dence supports the $3.5 million award. A plaintiff is not 20a required to put on proof of every factor, nor is any single factor a prerequisite to recovery of punitive damages. See Nienstedt v. Wetzel, 133 Ariz. at 357, 651 P.2d at 885 (evidence of defendant’s wealth not required to recover punitive damages). Rather, the plaintiff must produce evi- dence so that the amount awarded may not be said to be ‘“‘so unreasonable in regard to the circumstances as to show the influence of passion or prejudice.’’ Nielson v. Flashberg, 101 Ariz. at 341, 419 P.2d at 520. We find that the amount of punitive damages awarded against Allstate is neither so excessive nor unreasonable in light of the circumstances as to show the influence of passion or prejudice. First, the $3.5 million punitive dam- age award is not disproportionate to Allstate’s financial position. It is axiomatic that the wealthier the wrongdoing defendant, the greater the award of punitive damages nec- essary to punish him. Maxwell v. Aetna Life Ins. Co., 143 Ariz. 205, 219, 693 P.2d 348, 362 (App. 1984). We rec- ognize, however, that the award must not financially kill the defendant. Jd. Allstate’s 1981 Annual Statement re- ported total assets of $8.6 billion, unassigned (surplus) funds of $2.4 billion, and net income of $346.7 million. The jury’s award represents approximately 3-1/2 days’ net income or 1/25 of 1% of total assets. This court, as well as others, has upheld punitive damage awards representing a greater percentage of the defendant’s wealth against claims of excessiveness. See Acheson v. Shafter, 107 Ariz. 576, 490 P.2d 832 (1971) (award representing 5% of net worth upheld); accord Dodge City Motors v. Rogers, 16 Ariz. App. 24, 490 P.2d 853 (1971) (award representing 2+ weeks’ net income and 4% net worth upheld);'° Moore v. American United Life Ins. Co., 150 Cal.App.3d 610, 197 Cal.Rptr. 878 (1984) (award representing 3.4 weeks of © The net worth and income amounts are not set forth in the reported decision but are contained in the record. See Maricopa Superior Court Case No. C-222384; Appellee’s brief in CA-CIV 1457. 2la defendant’s income and 3.2% of net assets upheld); Weth- erbee v. United Ins. Co., 18 Cal.App.3d 266, 271, 95 Cal.Rptr. 678, 681 (1971) (award equal to one week’s after- tax earnings upheld). Cf. Egan v. Mutual of Omaha Ins. Co., 24 Cal.38d 809, 824, 169 Cal.Rptr. 691, 620 P.2d 141 (1979) (award reversed where it represented more than seven months of net income), cert. denied and appeal dis- missed, 445 U.S. 912, 100 S.Ct. 1271, 63 L.Ed.2d 597 (1980); Merlo v. Standard Life and Acc. Ins. Co., 59 Cal.App.3d 5, 180 Cal.Rptr. 416 (1976) (punitive award constituting nearly one-third of defendant’s net worth set aside). Second, the amount of punitive damages is not outra- geous or excessive in light of the particular nature of Allstate’s conduct. In general, the more reprehensible the defendant’s conduct and the more serious the harm likely to occur, the larger the appropriate punishment. See ante at 13-14. The jury could have rationally concluded that Allstate’s conduct was highly reprehensible and resulted in harm to countless insureds. The jury reasonably could have concluded that Allstate engaged in deceptive claims practices spanning up to 18 years whereby Allstate took advantage of its insureds’ predicaments to settle claims at lesser amounts by deducting relatively small, innocuous amounts from each total loss claim under the guise of cost saving. The jury could have found this conduct particularly reprehensible because the average insured would be un- likely to discover or prosecute this misconduct, see Moore v. American Life Ins. Co., 150 Cal.App.3d at 637, 197 Cal.Rptr. at 895, and the deceptive practices were estab- lished company policy. We hold that evidence of Allstate’s wealth, the repre- hensibility and duration of its conduct, and the potential effect on innumerable claimants is sufficient to support the $3.5 million punitive damage award. 22a IV. CONSTITUTIONAL CHALLENGE After oral argument and after our order granting the Hawkins’ Petition for Review “on the issues set forth therein,” filed May 2, 1986," we granted Allstate’s request to file supplemental briefs. Order (filed May 28, 1986). Allstate stated that the following reasons necessitated sup- plemental briefing: A. It has been more than three years since the parties briefed the issues on appeal. B. Significant developments in Arizona law re- lating to punitive damages have occurred since the filing of appellate briefs. C. Since oral arguments were heard before the petition for review was granted, the entire record was presumably unavailable at the time of ar- guments and supplemental reference to the re- cord is necessary and appropriate. D. Questions by the court at oral argument suggest that clarification of certain critical evi- dentiary facts may be necessary. Motion for Leave to File Supplemental Briefs and For Additional Oral Argument (filed May 16, 1986). In its discussion of reason “‘B,’’ Allstate pointed to three recent Arizona Court of Appeals cases relating to punitive damages and also requested ‘that this court allow addi- tional briefing on the federal constitutional implications of the manner in which this punitive damage award was im- posed under Arizona law.”’ Id. at 5-6. Allstate ultimately argued in its Supplemental Brief that punitive damages We heard oral argument before accepting review to determine whether this case raised issues not presented by two other cases pre- viously accepted for review: Rawlings v. Apodaca, __ Ariz. ___ , 726 P.2d 565 (1986); Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326. 723 P.2d 675 (1986) 23a are a criminal penalty, which entitle a civil defendant to the same constitutional protections as a criminal defendant (e.g., proof beyond a reasonable doubt, protection against double jeopardy, privilege against self-incrimination, and conviction by a unanimous jury in Arizona) and, in the alternative, that procedural due process requires clear and convincing proof of entitlement to punitive damages. Allstate acknowledges that the question of the consti- tutionality of punitive damage awards was not raised at trial, but argues that this issue properly may be raised for the first time on appeal because it involves issues “of a general public nature, affecting the interests of the state at large.”’ Appellee’s Supplemental Brief at 35 (citing Town of South Tucson v. Board of Supervisors, 52 Ariz. 575, 583, 84 P.2d 581, 584 (1938)). We agree that issues of “general statewide significance” are an exception to the general rule that an appellate court will not consider issues not raised in the trial court. E.g., Barrio v. San Manuel Div. Hosp. for Magma Copper Co., 143 Ariz. 101, 692 P.2d 280 (1984). However, this general rule and its ex- ception are rules of procedure, not matters of jurisdiction, established for the purpose of orderly administration and the attainment of justice. Town of South Tucson v. Board of Supervisors, 52 Ariz. at 582-83, 84 P.2d at 584. ‘Whether this court should review a question raised here for the first time depends upon the facts and circumstances disclosed by the particular record. It undoubtedly has the power, but ordinarily will not exercise it. The question is one of administration, not of power.’’ Jd. (quoting Cappon v. O’Day, 165 Wis. 486, ____ , 162 N.W. 655, 657 (1917)). Thus, while we agree that this court has the power to consider the constitutional issues raised by Allstate, we decline to exercise that power in this case. Efficient and orderly administration requires some point in time at which it is too late to raise new issues on appeal. We note that Allstate did not raise its constitutional ar- guments in the pleadings, post-trial motions, court of 24a appeals, petition (or cross-petition) for review, response to petition for review, or at oral argument. Allstate first voiced its constitutional concerns after the issues for re- view by this court were set by our order granting the petition for review. In light of this procedural history, we believe it does not promote sound appellate practice to consider issues so belatedly urged. Our: order allowing is- sues accepted for review and was premised on the parties’ need to update its briefs ‘filed three years earlier. We hold that consideration of a constitutional issue raised for the first time on appeal is discretionary with this court. This is not a case involving denial of a fun- damental constitutional right in a criminal trial nor con- tentions which affect the jurisdiction of the court, and we do not feel compelled to exercise our discretion. Our decision to decline consideration of the constitu- tionality of the manner in which punitive damages were imposed is bolstered by our recent adoption of the clear and convincing standard of proof Allstate seeks. Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 723 P.2d 675, 681 (1986) (recovery of punitive damages “only upon clear and convincing evidence of defendant’s evil mind’’). Our decision to require a more stringent standard of proof for punitive damages than for compensatory damages was grounded on policy, not constitutional, considerations. Jd. em , 723 P.2d at 680-81 (higher burden of proof necessary to preserve deterrent effect and prevent op- pressiveness of loosely-assessed punitive damages). V. RETROACTIVITY OF CLEAR AND CONVINCING BURDEN OF PROOF Here, the jury was instructed that it could award pu- nitive damages in its discretion if a preponderance of the evidence established conduct by Allstate that warranted such damages. Because we decline to consider whether the clear and convincing burden of proof is constitutionally required, the question we must address is whether the 25a clear and convincing burden of proof for punitive damages announced in Linthicum applies retroactively to the dis- pute sub judice. | In Arizona, a civil opinion is presumed to operate ret- ) roactively, as well as prospectively, unless otherwise stated. Brannigan v. Raybuck, 186 Ariz. 513, 520, 667 P.2d 213, 220 (1983) (citing Chevron Chemical Co. v. Superior Court, | 131 Ariz. 431, 435, 641 P.2d 1275, 1279 (1982)). To over- come this presumption of retroactive application, Arizona utilizes the three factors set forth by the United States Supreme Court in Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S.Ct. 349, 355, 30 L.Ed.2d 296, (1971): (1) Whether the decision establishes a new legal principle by either overruling clear and reli- able precedent or deciding an issue whose res- olution was not clearly foreshadowed; (2) Whether retroactive application will further or retard operation of the rule, considering its prior history, purpose and effect; and (3) Whether retroactive application will produce _, substantial inequitable results. See Brannigan v. Raybuck, 136 Ariz. at 520, 667 P.2d at 220; Chevron Chemical Co. v. Superior Court, 131 Ariz. at 436, 641 P.2d at 1280; Peagler v. Phoenix Newspapers, Inc., 114 Ariz. 309, 313, 560 P.2d 1216, 1220 (1977). These factors are sometimes referred to as the reliance, purpose, and inequity factors, respectively. The reliance factor strongly favors prospective-only ap- plication. Linthicum announced a new principle of law that overruled clear and reliable precedent. Proof by a pre- ponderance of the evidence is the traditional measure of proof for most civil cases. See Schwalback v. Jones, 27 Ariz. 260, 232 P. 558 (1925); E. Cleary, McCormick on Evidence § 339, at 956 (3d ed. 1984). Our research reveals no reported Arizona decisions foreshadowing this change; 26a indeed, none even broaches the subject of a higher burden of proof for punitive damages. Regarding the purpose factor, retroactive application of the new clear and convincing burden of proof standard would not ‘‘affect adversely the purpose behind the new rule.” See Chevron Chemical Co. v. Superior Court, 131 Ariz. at 436 641 P.2d at 1280 (restating Chevron Oil Co. v. Huson’s second factor). An important purpose of the more stringent burden of proof is to assure that punitive damages are properly awarded. The higher burden of proof underscores that punitive damages are an extraordinary remedy, to be assessed only in “the most egregious of cases.’ Linthicum, 150 Ariz. at , (28 P.2d at 681. The effect of the Linthicum rule is to allow the trier of fact to impose punitive damages only where he is con- vinced to a higher degree. of probability that the defendant possessed the requisite evil mind. Applying this new rule retroactively obviously would not impair the purpose of the rule; however, neither would retroactive application significantly further its purpose. Current practice provides several avenues of review to assure that an award of pu- nitive damages is justified: the plaintiff must get past a motion for a directed verdict, the jury must exercise its discretion to award punitive damages, the verdict is subject to post-trial motions and review by the trial judge, and the judgment is subject to appeal. All of these procedures are designed to assure that the award is justified and not the result of the jury’s passion or prejudice. The inequity factor also neither strongly favors nor dis- favors prospective-only application of the change in law. This factor is closely related to the reliance factor and focuses on the injustice or hardship resulting from ret- roactive application of the new rule. See Peagler v. Phoenix Newspapers 114 Ariz. at 313, 560 P.2d at 1220. Retro- active application of the new burden of proof would force further litigation in this and other lawsuits similarly sit- uated, where the parties have prepared and presented their ee 27a cases in reliance upon clear precedent and with adequate protection against an improper award of punitive damages. Requiring plaintiffs to retry cases under a higher burden of proof where the passage of time will have impaired considerably their ability to discover evidence and prove their case certainly works an injustice. On the other hand, plaintiffs are not entitled to punitive damages as a matter of right; and, theoretically, they are fully compensated for their actual injury by the compensatory damage award. Arguably then, retroactive application creates only a minor hardship and goes one step further in assuring properly awarded punitive damages. Whether retroactive application is inappropriate if a sin- gle factor favors prospective application, or whether all factors must favor prospective application, is unclear. See Brannigan-v. Raybuck, 136 Ariz. at 521, 667 P.2d at 221 (‘{E]ven if three-part test of Chevron Oil Co. v. Huson is interpreted liberally, so that the proponent of prospective application is not required to satisfy all three elements, _...”); Chevron Chemical Co. v. Superior Court, 131 Ariz. at 436-37, 641 P.2d at 1280-81 (decision given retroactive application where all three factors were satisfied); Peagler v. Phoenix Newspapers, Inc., 114 Ariz. 309, 560 P.2d 1216 (looked only to lack of substantial inequitable results to conclude retroactive application proper). See generaliy Note, Confusion in Federal Courts: Application of the Chevron Test in Retroactive-Prospective Decisions, 1985 ae eM Rev. 117. However, we need not establish a precise for- mula for applying these factors. Whether a judicial holding will be given only prospective application is a question of policy. See Lemieux v. Superior Court, 132 Ariz. 214, 644 P.2d 1300 (1982) (United States Constitution does not re- strict retrospective-prospective decision of state courts). In this case, we are faced with a judicial decision an- nouncing an unforeshadowed departure from clear and re- liable precedent. We are concerned with the potentiai burden on the judicial system from further litigation where 28a claims have been disposed of by prior litigation or settle- ment. See Harmann v. Hadley, 128 Wis.2d 371, , 382 N.W.2d 673, 677 (1986). Under these circumstances, we hold that the new burden of proof shall be given only prospective application. After September 15, 1986, the date Linthicum was mandated, punitive damages are recover- able only upon clear and convincing evidence of a defendant’s evil mind. The new burden of proof shall not apply where a verdict or judgment based upon proof by a preponderance of the evidence has been entered and where there is no reason to require a new trial other than application of the new burden of proof. See Wangen v. Ford Motor Co., 97 Wis.2d 260, ___, 294 N.W. 2d 437, 458 (1980). Cf. Tuttle v. Raymond, 494 A.2d 1353 (Me. 1985) (higher standard of - proof given retroactive application where prior case law gave notice of intent to reexamine burden of proof). The opinion of the court of appeals is vacated. The verdict for compensatory and punitive damages is affirmed and the matter is remanded for reinstatement of the orig- inal judgment dated August 3, 1980. FRANK X. GORDON, JR. Chief Justice CONCURRING: STANLEY G. FELDMAN Vice Chief Justice BRUCE MEYERSON Judge Pro Tempore, Court of Appeals, Division One 2 o ; 3 1 ; ; | | 3 | | } : , q 4 29a Justice James Duke Cameron recused himself and did not participate in the determination of this matter, and Bruce Meyerson, Judge Pro Tempore, Court of Appeals, Division One, sat in his place and stead. Justice Jack D. H. Hays participated in the determi- nation of this matter but retired before this opinion was filed. 30a HOLOHAN, Justice dissenting The concept of punitive damages has been the subject of considerable controversy among legal scholars. Punitive damages are not allowed in some states; in others, re- strictive rules have been developed to control such dam- ages. The entire concept of punitive damages has been subjected to attack from some sources. RESTATEMENT (SECOND) OF TORTS § 908 comment f (1965). This court in Rawlings v. Apodaca, 151 Ariz. ____ , 726 P.2d 565 (1986), and Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 723 P.2d 675 (1986), narrowed the field of con- duct justifying punitive damages and adopted a higher standard of proof to justify the imposition of punitive dam- ages. These reforms should not be viewed as the end of the reexamination of the concept of punitive damages. The action by the court in this case in declining to apply the Linthicum standard of proof retroactively does not appear justified. The three factors of reliance, purpose and inequity, adopted in Chevron Chemical Co. v. Superior Court, 131 Ariz. 431, 641 P.2d 1275 (1982), for the ret- roactive-prospective analysis, weigh heavily for retroactive application of the Linthicum rule. Reliance on the old rule is the only factor which favors prospective application. The purpose of the new rule to avoid loosely assessed punitive damage favors retroactive application. Finally, the factor of inequity does not favor the plaintiffs because there is no particular right to punitive damages—they are a wind- fall. Punitive damages are a discretionary matter with the jury, and a retrial of the punitive damage issue does not deprive the plaintiffs of their right to compensatory dam- ages—which are the only damages they had a right to recover. From my review of the Chevron factors I conclude that they weigh in favor of the usual rule in civil cases of retroactive application. I therefore dissent from the deci- sion of the court. 3la There is also another matter which deserves comment. The compensatory damage award in this case is $15,000, but the punitive damage award is $3.5 million which is three and one-half times the maximum fine which could have been imposed upon the defendant if it had been con- victed of a felony. See A.R.S. § 13-803(A\(1) (Supp. 1986). The amount of the award in this case is a clear illustration of the penal nature of such damages. The court, however, declines to consider the constitutional issues raised by the defendant concerning the current procedures for assessing punitive damages. I believe that this case presents the right opportunity for the court to consider the constitu- tionality of our procedures in determining and assessing punitive damages. Two notableJaw review articles discuss a number of the constitutional issues arising from the current procedure employed by a number of states in determining and as- sessing punitive damages. Wheeler, The Constitutional Case for Reforming Punitive Damages Procedures, 69 VA. L. REV. 269 (1983); Grass, The Penal Dimensions of Punitive Damages, 12 HASTINGS CONST. L. Q. 241 (1985). Es- sentially, the authors agree that punitive damages are penal in nature and require a due process procedure greater than that required for civil matters but not as strict as that required for criminal matters. The authors note that juries are usually given no standards to guide them in assessing the amount of punitive damages. They are told that the purpose of punitive damages is to punish the defendant and to deter others. This is also the purpose of the criminal law. Unlike the criminal law, however, there are no defined limits to the punishment in the instance of punitive dam- ages. The jury’s discretion is virtually unlimited save and except for the occasional finding by an appellate court that the award was manifestly unfair, unreasonable or outra- geous so as to shock the conscience of the appellate court. The authors conclude that such broad unguided discretion 32a does not meet due process requirements for the assess- ment of what is in fact a criminal penalty. At least three minimum requirements have been sug- gested as necessary for punitive damage procedures to meet due process standards: (1) the procedure should be bifurcated from the compensation portion of the case; (2) proof of the right to punitive damages should be by clear and convincing evidence; and (3) the maximum amount for punitive damages should be established by law. Wheeler, supra. The United States Supreme Court has not directly ad- dressed the issue of procedural due process for assessing punitive damages. That court has noted that the due proc- ess clause protects civil litigants who seek recourse in the courts either as defendants hoping to protect their prop- erty or as plaintiffs attempting to redress grievances. Lo- gan v. Zimmerman Brush Co., 455 U.S. 422, 102 S.Ct. 1148, 71 L.Ed.2d 265 (1982). On another occasion it has observed that in most jurisdictions jury discretion over the amounts awarded is limited only by the general rule that punitive damages not be excessive. Consequently, juries assess punitive damages in wholly unpredictable amounts bearing no necessary relation to the actual harm caused. Juries remain free to use their discretion selectively to punish or not punish. Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974). Last year in Aetna Life Insurance Co. v. Lavoie, U.S. : 106 S.Ct. 1580, 89 L.Ed.2d 823 (1986), the court acknowl- edged that challenges to the constitutionality of the lack of standards for the award of punitive damages raised important issues which, in an appropriate setting, must be resolved. The case was, however, decided on another basis which made it unnecessary for the court to resolve the challenge to the award of punitive damages. No purpose can be accomplished by delaying a decision on the important issues raised by the defendant’s challenge 33a to the corstitutionality of our present procedure for award- ing punitiy. damages. In Linthicum this court adopted the higher standard of proof to establish a claim for punitive damages. This action brings us part of the way towards meeting the suggested due process standards for assessing punitive damages. The mechanism for meeting another requirement—bifurcated trial—is already in place. Arizona Rule of Civil Procedure 42(b), 16 A.R.S. permits separate trials of claims on any issue. A claim for punitive damages could and should be separated from the other issues in the case and tried sep- arately after the plaintiff has prevailed on the issues for compensatory damages. The same jury which heard the first phase of the case could hear the second phase dealing with the punitive damages issue. The only matter of real controversy is whether due proc- ess requires that limits be placed on the maximum amount which may be awarded for punitive damages. There ap- pears to be strong arguments for the position that due process requires such maximum limits because of the penal nature of punitive damages. In any event, the issue should be considered and resolved. The constitutional issues raised in this case will not dis- appear. Other counsel faced with the problem will, per- haps, make a better record, but ultimately this court must decide the issues. The case presented the opportunity for this court to resolve the challenges to the constitutionality of the Arizona procedure for awarding punitive damages. The decision of the court leaves the matter in doubt and speculation. WILLIAM A. HOLOHAN, Justice 34a IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE 1 CA-CIV 6881 Department A JACK RANDY HAWKINS and CYNTHIA HAWKINS, husband and wife, Plaintiffs-A ppellants, VS. ALLSTATE INSURANCE COMPANY, a foreign corporation, and Dogs I through V, Defendant-A ppellee. MEMORANDUM DECISION (Not for Publication, Rule 28, Arizona Rules of Civil Appellate Procedure) An Appeal from the Superior Court for Maricopa County Cause No. C-432754 The Honorable David J. Perry, Judge AFFIRMED IN PART; REVERSED IN PART; RE- MANDED Thur, Dawson & O’Sullivan by Calvin C.Thur Attorneys for Plaintiffs-Appellants Scottsdale Harrison & Lerch, P.C. by Mark I. Harrison Douglas L. Christian Attorneys for Defendant-Appellee Phoenix Phoenix Filed Aug 13 1985 CORCORAN, Judge Appellants, Jack and Cynthia Hawkins,.in a two-count tort action alleging bad faith and fraud in the resolution of an auto insurance claim, appeal from the trial judge’s grant of a motion for judgment notwithstanding the ver- dict, or in the alternative for a new trial. The Hawkins had obtained a jury verdict for $15,000 compensatory dam- ages and $3,500,000 punitive damages. We must decide whether the trial court erred in its assessment of the evidence as to both type of damages, and if so, also erred as to the grant of a new trial. 1. The Facts In July, 1979, the Hawkins purchased a new Chevrolet Monte Carlo, which included many options, for just over $8,000. On December 4, 1979, Cynthia had an accident which resulted in damages to her car totaling $6,900. The Hawkins were insured under a standard Allstate auto- mobile liability insurance policy. The collision provision lim- ited Allstate’s liability to the actual cash value of the car, or replacement with a car of like kind or quality. Cynthia reported the accident to her agent the day it occurred. Once Allstate determined that the actual cash value of the insured car was less than the estimated cost of repair, it was classified as a ‘‘total loss” and transferred to a total loss adjuster, Paul Schwenk. Schwenk contacted the Hawkins on December 13, 1979. The Hawkins indi- cated to Schwenk that they wanted a replacement car. Schwenk sent the Hawkins to look at four similar Monte Carlos at a local car dealership. The Hawkins chose one of the vehicles but were told that they could not have it 36a because its actual cash value was $300 more than their insured car. Schwenk told the Hawkins they would have to take one of the other cars or $4,500 in cash. On De- cember 20, 1979, Schwenk brought the Hawkins a check for $6,471, payable to the Hawkins and Midway Chevrolet, intending that they purchase the car he had selected. After an acerbic exchange between Jack and Schwenk, the Hawkins reluctantly accepted the replacement vehicle. The replacement vehicle lacked power windows, got worse gas mileage due to a more powerful engine, had dealer (rather than factory) installed cruise control, and lacked several styling features of the original car. There was no evidence produced at trial concerning the actual cash value of the insured vehicle or the replacement vehicle at the time of the accident. Calculations based on the “‘list price” of the vehicles indicate a difference of several hundred dollars. Taking into account all of the amounts paid, Allstate con- cedes the difference in list price between the insured ve- hicle and replacement was at least $161.45 in favor of Allstate. At trial, the Hawkins testified as to their dealings with Allstate, and also called three former Allstate adjusters. The latter group testified as witnesses rather than as ex- pert witnesses. One adjuster testified as to Allstate’s claim procedures in Phoenix from 1962 until 1964; another spoke to its practices in Tacoma, Washington, from 1978 to 1981: and the last described the practice at the Phoenix office at the time the Hawkins’claim was processed. Each tes- tified to Allstate’s methods of determing the loss to the insured, termed ‘‘chiseling’’ by the Hawkins and ‘‘cost sav- ing” by Allstate. At the conclusion of the trial, the trial judge directed a verdict in favor of Allstate on the fraud complaint and submitted the bad faith claim to the jury on both com- pensatory and punitive damages. The jury returned a ver- dict for the Hawkins. The court subsequently granted Allstate’s motion for judgment notwithstanding the verdict = - ey ete Le el 37a on the basis that there was insufficient evidence presented at trial to justify the verdict. It further granted Allstate’s motion for a new trial, in the alternative, for the following reasons: (1) the verdict was not supported by the evidence; (2) the verdict was the result of passion or prejudice; (3) the damages were excessive; (4) the court erred in ad- mitting the testimony of the former Allstate employees; and, (5) the court erred in instructing the jury on the nature of bad faith, the duty owed by Allstate to the Hawkins, and the extent of the damages. The Hawkins appeal from the judgment notwithstanding the verdict and the order for a new trial, and from the directed verdict on the fraud count. The fraud issue was not addressed in the briefs or in oral argument and we deem it abandoned. 2. Standard of Review On appeal, the standard of review for a judgment not- withstanding the verdict favors the appellant, whereas his burden is greater in showing that the trial court should also not have ordered a new trial. If there is substantial evidence from which reasonable minds could differ as to the ultimate facts, a motion for judgment notwithstanding the verdict should be denied. Times Mirror Co. v. Sisk, 122 Ariz. 174, 593 P.2d 924 (App. 1978). On the other hand, an appellate court will not disturb an order granting a new trial in the absence of a clear showing of abuse of discretion. Suciu v. Amfac Distrib. Corp., 138 Ariz. 514, 675 P.2d 1333 (App. 1983). We discuss separately the per- tinent evidence as to the judgment and the order. 3. Testimony of Former Allstate Employees The Hawkins contend that the trial court erred in its post-trial determination that the testimony of former Al- Istate employees was inadmissible. They argue that it was properly received pursuant to rule 404(b), Arizona Rules 38a of Evidence, to show motive (profit), knowledge (that its agents knew of the company’s policies), and state of mind (that it expressly intended to engage in the practices which were the subject matter of the suit). They also contend that it was admissible to show a pattern. Rule 404(b) is a specialized exception to the general rule excluding circumstantial use of character evidence. 1 M. Udall and J. Livermore, Arizona Practice: Law of Evidence § 84 (2d ed. 1982). It is primarily invoked in criminal cases but its use in civil litigation is permitted. E.g., Sequoia Mfg. Co. v. Halec Constr. Co., 117 Ariz. 11, 570 P.2d 782 (App. 1977); American Hot Rod Ass’n v. Carrier, 500 F.2d 1269 (4th Cir. 1974); 10 Moore’s Federal Practice § 404.21[2] (2d ed. 1985). Such testimony generally tends to prove culpability where the defendant acknowledges an act but claims it was unintentional, or it shows a compelling situational similarity with past acts that it makes it more likely that the defendant was the perpetrator. Allstate does not deny its acts nor does it claim that they were unin- tentional. Therefore, we believe this rule is inapplicable. The pertinent query is whether the testimony is rele- vant. But see Dunlap v. Jimmy G.M.C., 136 Ariz. 338, 666 P.2d 83 (App. 1983) (holding that evidence of past unethical] sales practices is relevant on the issue of whether defendant was currently involved in deceptive sales prac- tices and on the issue of punitive damages). Plaintiffs, alleging a pattern of behavior which taken as a whole con- stitutes bad faith may use indirect evidence to support an award of punitive damages. Colonial Life & Acc. Ins. Co. v. Superior Court, 31 Cal.3d 785, 183 Cal.Rptr. 810, 64” P.2d 86 (1982). In Moore v. American United Life Ins. Cv., 150 Cal.App.3d 610, 197 Cal.Rptr. 878 (1984), the court held that evidence of another insured’s claim was admis- sible to establish a pattern or practice of unreasonable behavior. In its analysis, the California court stated the antecedent practice must be substantially similar to the case before the trial court. We agree. al cat 6 LS tat MeN le wet the rai wenas 39a The first former adjuster testified in very general terms as to Allstate’s claim practice 20 years ago. Q. Did they [Allstate] have a general policy re- garding claims handling? A. Yes, they did. Q. What was that general policy? A. They were interested in settling claims for as low a dollar possible. Oftentimes, again, if they could save the company money, or if the adjuster could, you were doing a good job. Q. In other words, you were praised if you could cut a claim down below its true value? A. Well, it’s difficult to determine what it’s true value is, that’s always a matter of opinion. But you felt you were saving the company money for what the claimant desired to settle his claim for, then you were doing a good job. This testimony is not sufficiently similar to the Hawkins’ experience; rather, it resembles character evidence which is not admissible for the purpose of proving that Allstate acted in a specific manner on a particular occasion. Rule 404(a), Arizona Rules of Evidence. This testimony was improperly admitted. The second and third former adjusters testified in detail regarding company procedures for handling total loss claims. Although neither had any direct experience with the Hawkins’ claim, each described deductions and settle- ment practices that were nearly identical to those in the Hawkins’ adjustment. Nonetheless, the trial court ulti- mately ruled their testimony inadmissible without stating any reason. A trial court’s rulings on exclusion or admis- sion of evidence will not be disturbed on appeal! unless clear abuse of discretion appears and prejudice results. 40a Selby v. Savard, 134 Ariz. 222, 655 P.2d 342 (1982). How- ever, counsel] must state each specific ground of objection. Cf. State v. Evans, 88 Ariz. 364, 373, 356 P.2d 1106, 1111, cert. denied, 371 U.S. 835 (1960). Our review of the record indicates no substantial objections to the adjusters’ testi- mony, other than those pertaining to relevancy which we answered adv [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_2314%3A1. Public record. Not legal advice.