Government Employees Insurance Co. v. Gonzalez, 403 P.3d 1153

Background

In 1996 Sandra Gonzalez was injured in a car crash; GEICO paid bodily-injury limits to release tort claims but repeatedly delayed responding to her requests for underinsured motorist (UIM) benefits.
Gonzalez sued GEICO for breach of contract and tortious bad faith for delayed UIM payment, and sued adjuster Michael Lina for negligent handling; GEICO later paid the UIM limits plus interest after litigation began.
At trial (2012) the jury found GEICO acted in bad faith but that that bad faith was not a "substantial factor" in causing Gonzalez’s additional asserted harm; it found Lina not negligent.
The court instructed the jury to award nominal damages given the bad-faith finding; the jury awarded $2 in nominal compensatory damages and $450,000 in punitive damages.
The superior court awarded Gonzalez attorney’s fees and costs against GEICO and awarded Lina attorney’s fees; the court denied Gonzalez’s post-trial motions (including JNOV and nunc pro tunc judgment date change).
On appeal the Alaska Supreme Court affirmed all rulings except remanded for a new proceeding on the calculation/allocation of Lina’s attorney’s fees.

Issues

Issue	Plaintiff's Argument (Gonzalez)	Defendant's Argument (GEICO/Lina)	Held
Whether the court erred by refusing Gonzalez’s proposed jury instruction that belated payment doesn’t excuse bad faith	The instruction was necessary to prevent jury from thinking GEICO’s post-lawsuit payment cured bad faith	GEICO said existing instructions sufficed and no prejudice resulted	Court: The proposed instruction was correct but its absence was not prejudicial given other instructions and the verdict; no reversal
Whether Gonzalez was entitled to nominal damages despite jury finding no substantial causation for additional harm	Nominal damages required where insurer acted in bad faith and eventual payment with interest does not cure tort	GEICO said mandating nominal damages relieved plaintiff of proving causation	Court: Ennen controls — bad-faith delay entitles plaintiff to at least nominal damages; court correctly ordered nominal award
Whether $450,000 punitive award violated due process or punished non-parties	Punitive award justified by repeated nondisclosure, reprehensibility, and statutory penalty range; counsel’s figures were proper evidence of financial gain	GEICO argued award grossly excessive, impermissibly based on harms to other insureds, and excessive relative to compensatory damages	Court: Award upheld under Gore/Campbell guideposts; including post-lawsuit contractual payment in harm calculus yields reasonable single-digit ratio; jury did not impermissibly punish for nonparty harm
Whether Lina waived right to fees and whether superior court properly calculated Lina’s fees	Lina argued he timely sought fees and was entitled to a portion of fees incurred; precise segregation was difficult because same counsel represented GEICO and Lina	Gonzalez argued Lina waived fees by delay and failed to segregate fees between defenses of GEICO vs Lina	Court: No waiver; but remanded because Lina bears burden to segregate fees — the superior court’s apportionment was an abuse of discretion and must be redone

Key Cases Cited

Progressive Ins. Co. v. Simmons, 953 P.2d 510 (Alaska 1998) (stacking of UM/UIM issues under Alaska law)
Ennen v. Integon Indem. Corp., 268 P.3d 277 (Alaska 2012) (belated payment with interest does not fully cure insurer bad faith; nominal damages available)
Anchorage Chrysler Ctr., Inc. v. DaimlerChrysler Motors Corp., 221 P.3d 977 (Alaska 2009) (nominal damages available when actual loss shown but amount not proved)
State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S. 2003) (due process guideposts for punitive damages)
BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (U.S. 1996) (punitive damages guideposts)
Philip Morris USA v. Williams, 549 U.S. 346 (U.S. 2007) (limits on using punitive damages to punish defendant for harm to nonparties)
Progressive Corp. v. Peter ex rel. Peter, 195 P.3d 1083 (Alaska 2008) (prevailing party analysis where partial recovery occurs)
In re Exxon Valdez, 490 F.3d 1066 (9th Cir. 2007) (consideration of pre-judgment voluntary payments when assessing punitive/compensatory relationship)
Offshore Sys.–Kenai v. State, Dep’t of Transp. & Pub. Facilities, 282 P.3d 348 (Alaska 2012) (prevailing party fee awards require adequate segregation/description of fees)