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JOSEPH EDWARD SLOAN BYRON Z. MOLDO, CHAPTER 7 TRUSTEE IN RE: JOSEPH EDWARD SLOAN, DEBTOR, PLAINTIFFS-APPELLANTS/CROSS-APPELLEES v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, DEFENDANT-APPELLEE/CROSS-APPELLANT
Citation: 320 F.3d 1073Docket: 02-2050
Court: Court of Appeals for the Tenth Circuit; February 11, 2003; Federal Appellate Court
The United States Court of Appeals for the Tenth Circuit is seeking clarification from the New Mexico Supreme Court regarding whether an instruction for punitive damages is mandatory in insurance bad faith cases when evidence supporting compensatory damages is presented. The court references conflicting precedents, specifically questioning if the New Mexico Court of Appeals' interpretation—that a culpable mental state beyond bad faith is necessary for punitive damages—contradicts the Uniform Jury Instruction stating that an instruction must be given if compensatory damages are established. The case involves an appeal and cross-appeal concerning a trial in which Plaintiffs were awarded $600,000 in compensatory damages (later reduced to $540,000). State Farm's motion for judgment as a matter of law on the punitive damages claim was granted, which Plaintiffs contest on the grounds that sufficient evidence of bad faith should necessitate a jury instruction on punitive damages. The court cites New Mexico case law, particularly Jessen v. National Excess Ins. Co., which supports that punitive damages can follow a finding of bad faith, as long as there is evidence of bad faith or malice in the insurer's denial of coverage, as established in United Nuclear Corp. v. Allendale Mut. Ins. Co. The court emphasizes the importance of adhering to the New Mexico Uniform Jury Instructions unless specific case circumstances justify deviation from them. Under 8 UJI 13-1718, punitive damages in insurance bad faith cases may be awarded if compensatory damages are granted to the plaintiff due to the insurer's bad faith actions. These damages serve to punish the wrongdoer and deter similar conduct in the future. The amount of punitive damages should be reasonable and just, considering the nature of the wrongdoing and any aggravating or mitigating factors, and must be proportionate to the compensatory damages awarded. The instruction is mandatory for all actions under UJI 13-1704 and is deemed comprehensive, negating the need for the general punitive damages instruction (UJI 13-1827) in such cases. UJI 13-1718 was established by the New Mexico Supreme Court for cases filed after November 1, 1991. The general punitive damages instruction specifies that punitive damages are applicable when the defendant's conduct is malicious or in bad faith, provided compensatory damages are awarded. Recent case law, such as Allsup's and Paiz, suggests that a culpable mental state may be necessary for punitive damages, while the 1999 Teague-Strebeck ruling indicates that aggravated conduct beyond basic bad faith is required for such damages, creating a conflict with UJI 13-1718. The court acknowledges the need to reassess the uniform jury instructions in light of these decisions. Ultimately, the court believes that significant state law questions arise from these issues, warranting certification to the New Mexico Supreme Court for clarification. The appeal is stayed until the Supreme Court resolves these certified questions. The process includes transmitting relevant documents to the Supreme Court and notifying all parties involved.