California Supreme Court Rules that Brandt Fees Must Be Included in the Calculation of Punitive Damages

The California Supreme Court has confirmed that the attorneys’ fees an insured is compelled to incur due to a carrier’s bad faith (its “Brandt fees”) are compensatory damages to be considered when determining the constitutionality of a punitive damages award against an insurer whether the Brandt fees were awarded by a jury or by the trial court. Nickerson v. Stonebridge Life Ins. Co., No. S213873, 2016 WL 3192499, at *8 (Cal. June 9, 2016)

Nickerson reviewed a jury’s punitive damages award of $92 million after a $35,000 in compensatory damages for Stonebridge Life Insurance’s fraudulent handling of Thomas Nickerson’s claims. After the jury rendered the verdict, and pursuant to the parties’ stipulation, the trial court awarded Nickerson $12,500 in Brandt fees in addition to the compensatory damage awarded by the jury. Stonebridge protested that the punitive damages were unconstitutionally excessive, and a trial court applied California’s rule that the ratio between punitive and compensatory damages should not exceed 10-to-1. See; Simon v. San Paolo U.S. Holding Co., Inc., 35 Cal.4th 1159, 1182 (2005). The adjusting court only considered the jury’s $35,000 compensatory award – and not the trial Brandt fees awarded by the judge – to recalculate the punitive award to $350,000. Nickerson appealed, arguing that the Brandt fees also should have been considered in recalculating the award.

The California Supreme Court agreed, and confirmed that Brandt fees qualify as compensatory damages for the purpose of recalculating a punitive damages award, whether the Brandt fees are awarded by a jury or by the trial court.