NEAL v. FARMERS INSURANCE EXCHANGE

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Court of Appeal, Fourth District, Division 2, California.

William NEAL, Administrator of the Estate of Frances Neal, Plaintiff, Respondent and Cross-Appellant, v. FARMERS INSURANCE EXCHANGE, Defendant, Appellant and Cross-Respondent.

Civ. 15793.

Decided: March 07, 1977

Gage & Cooper and Sanford M. Gage, Beverly Hills, Aitken, Bradshaw & Andres and Wylie A. Aitken, Santa Ana, and Leonard Sacks, Encino, for plaintiff, respondent and cross-appellant. Hagenbaugh & Murphy, Irwin Waldman and Brand L. Cooper, Los Angeles, for defendant, appellant and cross-respondent.

OPINION

William Neal, administrator of the estate of Frances Neal (hereinafter ‘plaintiff’) sought compensatory and punitive damages for ‘bad faith’ failure to pay uninsured motorist benefits under a policy of insurance issued by Farmers Insurance Exchange (hereinafter ‘defendant’). The jury returned an undifferentiated verdict in plaintiff's favor in the amount of $1,548,211.35. The trial court denied defendant's motion for judgment notwithstanding the verdict and granted defendant's motion for new trial as to damages only on condition that if plaintiff agreed to a reduction of the judgment to $749,011.48 the motion for new trial would be denied. Plaintiff agreed to the reduction. Defendant appeals from the judgment.1 Plaintiff cross-appeals from the order conditionally granting the motion for new trial. (See Miller v. National American Life Ins. Co., 54 Cal.App.3d 331, 341–345, 126 Cal.Rptr. 731.)

Facts

On July 13, 1970, Mrs. Frances Neal was gravely injured in an automobile accident. She was a passenger in an automobile owned by her and her husband William Neal and which was, at the time of the accident, being operated by Mr. Neal. At an intersection controlled by 3-way electric traffic signals, the Neal vehicle was in the process of making a left turn when it was struck broadside by a vehicle driven by an uninsured motorist.

Prior to the accident Mrs. Neal was in good health and had been regularly employed. As a result of her injuries incurred in the accident, Mrs. Neal spent 69 days in the hospital. At first she was essentially totally paralyzed from the neck down due to fractured vertebrae in the neck and a damaged spinal cord. She had a total flaccid paralysis; her motor function and sensation were destroyed and she was completely numb with no control over her bodily functions. During her stay in the hospital an embolism developed in one of her lungs rendering it inactive. She also sustained multiple facial lacerations and a near amputation of her left ear lobe. Eventually Mrs. Neal recovered the use of the thumb and one finger on the right hand and one finger on the left hand. She used a special kind of cup that she could take with her two hands so that she could drink. She did not have enough sensation in her extremities, however, to distinguish heat and cold and she could not tell when she was getting burned. She also recovered partial use of her legs so that with the use of special canes, a walker and a wooden device, she was able to get around the house to some extent. However, if she fell down, she would be unable to get back on her feet without help. Mrs. Neal remained totally disabled until her death from cancer on February 22, 1974.2

To add to the tragedy, sometime prior to January 21, 1971, the Neals' adult son developed cancer requiring major surgery and, ultimately, resulting in his death.

At the time of the automobile accident there was in force a policy of automobile insurance issued by defendant which included medical payment coverage of $5,000 and uninsured motorist coverage of $15,000.

A few days after the accident the Neals got in touch with attorney Paul Gergen, a family friend, and Mr. Gergen undertook without expectation of remuneration, to communicate and negotiate with defendant in the hope of obtaining early payment under the medical payment and uninsured motorist coverages of the automobile insurance policy.

Shortly after October 26, 1970, defendant paid the Neals $5,000 pursuant to the medical payment coverage. The evidence is conflicting, at least conflicting inferences exist, as to whether this payment was made speedily and willingly or belatedly and grudgingly.

Negotiations as to payment under the uninsured motorist coverage continued until late in May 1971. We shall not attempt to detail all of the communications and facts pertinent to these negotiations. Suffice it to say that defendant declined to pay the policy limit of $15,000 under the uninsured motorist coverage. It took the position that, in accordance with an express policy provision3 and as expressly permitted by statute in effect on the date the policy was issued,4 it was entitled to offset the $5,000 paid under the medical payment coverage against any amount owing under the uninsured motorist coverage; that the automobile accident resulted solely from the negligence of Mr. Neal so that the uninsured motorist had no liability; and that even if the uninsured motorist was negligent, Mr. Neal was contributorily negligent and such contributory negligence might be legally imputable to Mrs. Neal.

On January 21, 1971, Mr. Gergen wrote a letter to defendant disclosing that the Neals' son had cancer and required expensive medical treatment and that the Neals were, therefore, in a position of great financial hardship and in urgent need of funds. Mr. Gergen proposed that the case be settled promptly by defendant's payment of $10,000, reserving the question of the $5,000 offset for decision by an appropriate tribunal.

On January 25, 1971, Mr. Gergen received a telephone call from an employee of defendant advising Mr. Gergen that defendant was going to seek the legal opinion of its attorney. Almost three months later, on April 21, 1971, defendant's attorney reported his conclusions that no negligence on the part of Mr. Neal could be imputed to Mrs. Neal; that the law was unclear as to whether defendant would be entitled to offset the $5,000 paid under the medical payment coverge against any amount due under the uninsured motorist coverage; and that the case was a 50–50 case on liability. There was evidence, however, from which the jury could have concluded that defendant failed to disclose to its attorney all of the pertinent information at its disposal.

Apparently based on its attorney's opinion, defendant offered to settle the case by the payment to the Neals of an additional $5,000, making a total payment of $10,000 on a maximum exposure of $20,000 liability.5

On May 1, 1971, Mr. Gergen wrote a comprehensive letter to defendant by which he rejected defendant's settlement offer and in which he set forth at length the evidence pointing to liability on the part of the uninsured motorist and repeated his offer to settle for payment of an additional $10,000 and the reservation of the claimed $5,000 offset for litigation. Defendant did not respond to this letter.

On May 11, 1971, Mr. Gergen wrote another letter to defendant withdrawing all previous offers of settlement, demanding full payment of $15,000 with no offset within 10 days and threatening to commence arbitration proceedings in which the Neals would seek ‘realistic damages in the sum of $500,000.00.’ Defendant did not respond to this letter.

Thereafter Mr. Gergen turned the case over to attorney Aitken, who, on August 5, 1971, made a demand for arbitration. Because of the unavailability of the arbitrator agreed upon, the first date set for the arbitration hearing was April 21, 1972. The proceeding was continued at Mr. Aitken's request, and the next available date was February 16, 1973. The arbitration proceedings commenced on that day.

On April 10, 1973, the arbitrator rendered a decision in favor of Mrs. Neal on the issue of liability. When the arbitrator's decision on the offset issue did not follow as expected, Mr. Aitken requested that defendant pay the first $10,000 without waiting for the final award. Defendant complied. The final arbitration award in favor of Mrs. Neal on the offset question was not forthcoming until October 5, 1973. On October 11 defendant paid the final $5,000.

The instant action for ‘bad faith’ was filed November 8, 1973. At trial plaintiff proved compensatory damages totaling $9,573.65: $3,588.50 in costs and finance charges for a second trust deed loan on the Neals' residence and $5,985.15 in legal fees, expert witness fees and costs incurred in the arbitration proceeding. It was also proved that, as of December 31, 1974, defendant had gross assets of approximately $765,000,000 and net assets of $211,000,000 and that its net income for 1974 was close to $45,000,000.

We have made no attempt to set out all of the evidence pertaining to defendant's ‘bad faith’ or its lack thereof. We content ourselves with the observation that there was conflicting evidence, especially conflicting inferences, on the question of defendant's ‘bad faith.’ There was substantial evidence from which the jury could have concluded that defendant did no more than reasonably and in good faith assert its legal position. On the other hand, there was substantial evidence from which the jury could have concluded that defendant knew early on, and certainly by the time of its receipt of Mr. Gergen's letter of May 1, 1971, that it had no legitimate defense to plaintiff's uninsured motorist claim, that the only genuine issue in dispute was defendant's right to a $5,000 offset, that Mr. Gergen's proposal to settle for an additional $10,000 reserving the offset question for decision by an appropriate tribunal was wholly reasonable and should have been accepted by defendant, and that in refusing to settle on that basis defendant was attempting to take advantage of the Neals' unhappy plight and effect a settlement at a bargain price. There was also evidence from which the jury could have concluded that in so doing defendant was carrying out an established company policy.

Contentions

On the appeal defendant contends: (1) There is no substantial evidence that defendant breached the implied covenant of good faith and fair dealing, and the court should have therefore granted defendant's motion for judgment notwithstanding the verdict, (2) there is no substantial evidence that defendant intended to injure, harass or annoy plaintiff and no basis therefore for an award of punitive damages; (3) the judgment is a result of passion and prejudice intentionally fostered and created by plaintiff's counsel, and (4) the trial court prejudicially erred in evidentiary rulings excluding from evidence certain events occurring after May 21, 1971, and permitting into evidence expert opinions that defendant acted in bad faith.

On the cross-appeal plaintiff contends that the court's specification of reasons given in support of its order conditionally granting new trial as to damages are insufficient and that the court was prohibited from adopting such reasons because they were furnished by counsel.

Discussion

THE APPEAL

Sufficiency of the Evidence—Judgment Notwithstanding the Verdict

Defendant's argument that there is no substantial evidence that it breached its implied-in-law duty of good faith and fair dealing and that its motion for judgment notwithstanding the verdict should have been granted is premised upon a statement of the facts viewed most favorably to defendant. This constitutes unacceptable appellate practice. To effectively raise the issue of sufficiency of the evidence, an appealing party must present to the appellate court all the evidence touching upon the question involved, both that favorable to him and that unfavorable to him. When he fails to abide by this well-established and necessary rule of appellate practice, the appellate court is entitled to indulge in a presumption that the evidence sustains the determination of the trial court. (Foreman & Clark Corp. v. Fallon, 3 Cal.3d 875, 881, 92 Cal.Rptr. 162, 479 P.2d 362; Strutt v. Ontario Sav. & Loan Assn., 28 Cal.App.3d 866, 874, 105 Cal.Rptr. 395, and cases there cited; Estate of Palmer, 145 Cal.App.2d 428, 431–432, 302 P.2d 629.)

Nevertheless, we have reviewed the record and are satisfied that, as previously observed, there is substantial evidence to support the jury's implied determination that defendant asserted defenses known to be invalid in an effort to take advantage of the Neals' desperate situation and effect a settlement at a bargain price.

Substantial Evidence—Punitive Damages

Defendant's contention that there is no substantial evidence to support an award of punitive damages suffers from the same procedural defect as that considered under the preceding heading. In any event, however, the contention is not meritorious. ‘In order to justify an award of exemplary damages, the defendant must be guilty of oppression, fraud or malice. (Civ.Code, § 3294). He must act with the intent to vex, injure or annoy, or with a conscious disregard of the plaintiff's rights. [Citations omitted.]’ (Silberg v. California Life Ins. Co., 11 Cal.3d 452, 462, 113 Cal.Rptr. 711, 718, 521 P.2d 1103, 1110; Beck v. State Farm Mut. Auto. Ins. Co., 54 Cal.App.3d 347, 355, 126 Cal.Rptr. 602.) There is substantial evidence that defendant was guilty of oppressive conduct, that is, that it acted with a conscious disregard of plaintiff's rights and that, in so doing, it was carrying out an established company policy.

Evidentiary Rulings

Defendant objected at trial to plaintiff's expert witnesses expressing their opinion that defendant was guilty of ‘bad faith.’ The basis of defendant's objections was that this was not a proper subject for expert testimony. It is true that Evidence Code section 801(a) limits expert opinion to subject matter ‘that is sufficiently beyond common experience that the opinion of an expert would assist the trier of fact. . .’ Whether such an occasion exists is a matter to be determined by the trial court in the exercise of its sound judicial discretion. (People v. Cole, 47 Cal.2d 99, 105, 301 P.2d 854.) Whether defendant had a reasonable good faith belief in the existence of the defenses it asserted is a question upon which expert opinion could be helpful to a jury. The jury, of course, was not bound by the opinions of the witnesses but was free to determine the weight to which the opinions were entitled and to disregard them if they found them unreasonable, and the jury was so instructed. No abuse of discretion appears.

Defendant's arguments that the trial court should have admitted into evidence its exhibits marked ‘A’ and ‘B’, virtually the entire case files of defendant and its attorney, are without merit. These exhibits are replete with hearsay evidence and items for which no proper foundation had been laid. The court offered to admit any individual document in these files which defendant could show was relevant and for which a foundation had been laid. Except for a few documents, defendant did not take advantage of this offer.

Judgment Resulting from Passion and Prejudice

Defendant contends that the judgment is a result of passion and prejudice intentionally fostered by plaintiff's counsel. We are constrained to agree.

Before proceeding to the substance of this issue it is appropriate to address ourselves briefly to the undifferentiated verdict form submitted to and returned by the jury. Notwithstanding that both punitive and compensatory damages were sought, the jury was supplied and returned a verdict form with only one space for the insertion of the amount of damages, without any segregation as to the amount attributed to compensatory damages and the amount attributed to punitive damages. We can see no justification for the submission of such a verdict form to the jury when both compensatory and punitive damages are sought. Ordinarily the return of such a verdict would make review of the claimed excessive amount thereof next to impossible, for neither the trial court on motion for new trial nor the appellate court on appeal would have any way of knowing the amount of the respective awards. Only the unique circumstances of this case permit us to avoid this problem. Here, Mrs. Neal died prior to trial, and no recovery for emotional distress was permissible. (Prob.Code, § 573.) The jury was so instructed. All parties as well as the trial court are agreed that the economic loss proved by plaintiff amounted to between $9,000 and $10,000 and that the balance of the award must be attributed to punitive damages. Our consideration of the damage issues will be based upon the same assumptions.6

The trial court's order on defendant's motion for new trial reads in pertinent part: ‘The motion for a new trial is granted as to the issue of damages only on the ground that the damages are excessive. . . . The Court is convinced from the entire record and from weighing the evidence that the jury should have reached a different verdict. The Courts [sic] reasons for conditionally granting the motion on the ground stated are the following: [¶] 1. The amount of the verdict appears to be the result of passion on the part of the jury. [¶] 2. The Counsel for plaintiff stoked such passion by repeated reference to ‘Mrs. Neal lying paralyzed in her bed’, by stating in argument ‘Frances is looking down on us' . . .. [¶] 3. The special damages recoverable on the issue before the jury . . . were less than $10,000.00. [¶] 4. The fact that there were two deaths in the Neal family from cancer within a short period of time would tend to arouse sympathy in the minds of the jurors. [¶] 5. The amount of the verdict exceeds the amount necessary to act as a deterrent to the defendant and others. [¶] 6. The amount of the verdict exceeds the amount necessary to punish in a manner consistent with the offense.’ We entirely agree with the analysis of the trial court.

The trial court attempted to deal with the excessive verdict by requiring plaintiff to agree to a reduction of the judgment from $1,548,211.35 to $749,011.48 on pain of a new trial on the issue of damages. We do not think the trial court went nearly far enough. Apropos is the language of the court in Livesey v. Stock, 208 Cal. 315, 322, 281 P. 70, 73: ‘[W]e can reach no other conclusion upon this record than that the action of the jury was largely prompted by prejudice or passion. It is true that the trial court undertook to purge the verdict of excessive damages due thereto, but, in our judgment, the excess is much greater than he found it to be.’

Although there is no fixed ratio by which to determine the propriety of punitive award, punitive damages should bear a reasonable relationship to the compensatory damages awarded. (E. g., Wilkinson v. Singh, 93 Cal.App. 337, 344–345, 269 P. 705; Forte v. Nolfi, 25 Cal.App.3d 656, 689, 102 Cal.Rptr. 455; see also Schroeder v. Auto Driveaway Co., 11 Cal.3d 908, 922, 114 Cal.Rptr. 622, 523 P.2d 662; Oakes v. McCarthy Co., 267 Cal.App.2d 231, 263, 73 Cal.Rptr. 127; 4 Witkin, Summary of Cal.Law (8th ed.) p. 3156.) According to the evidence, the compensatory damages could not be in excess of $10,000. That leaves almost three-quarters of a million dollars as punitive damages. A punitive damage award of that size is not justified by defendant's conduct as disclosed by the record.

We recognize, of course, that a reviewing court must give considerable deference in matters relating to damages to the jury in the first instance and to the trial court secondarily. (Bertero v. National General Corp., 13 Cal.3d 43, 64, 118 Cal.Rptr. 184, 529 P.2d 608; Cunningham v. Simpson, 1 Cal.3d 301, 308, 81 Cal.Rptr. 855, 461 P.2d 39; Fletcher v. Western National Life Ins. Co., 10 Cal.App.3d 376, 408–409, 89 Cal.Rptr. 78; Merlo v. Standard Life & Acc. Ins. Co., 59 Cal.App.3d 5, 17, 130 Cal.Rptr. 416, 424.) However, “[w]hen the award as a matter of law appears excessive, or where the recovery is so grossly disproportionate as to raise a presumption that it is the result of passion or prejudice, the duty is then imposed upon the reviewing court to act.” (Cunningham v. Simpson, supra, 1 Cal.3d at pp. 308–309, 81 Cal.Rptr. at p. 859, 461 P.2d at p. 43 [quoting from Rosenberg v. J. C. Penney Co., 30 Cal.App.2d 609, 628, 86 P.2d 696]; Merlo v. Standard Life & Acc. Ins. Co., supra; Forte v. Nolfi, supra, 25 Cal.App.3d at p. 688, 102 Cal.Rptr. 455; see also Bertero v. National General Corp., supra.)

In the case at bench, moreover, we are not limited to observing the disproportionate size of the damage award. From our review of the entire record we are persuaded that plaintiff's counsel, starting with the opening statement and continuing to the last sentence of closing argument, undertook to inflame the jury by appeals to sympathy, passion and prejudice and that, in this effort, counsel were eminently successful. We are further persuaded that an erroneous legal theory introduced and fostered by plaintiff's counsel pervaded the entire trial and affected the verdict and, possibly, even the amount of the remittitur imposed by the trial court.

The injuries suffered by Mrs. Neal in the uninsured motorist accident constituted at most marginally material matter. Their materiality was only that the value of her claim against the uninsured motorist was equal to or in excess of the $15,000 limit of the uninsured motorist coverage, a proposition the defense never contested. Nevertheless, plaintiff's attorney persistently and repeatedly paraded before the jury Mrs. Neal's terrible injuries and pitiable condition.

On one occasion about midway in the trial, amidst argument on an objection by defense counsel, the court stated: ‘And that would be number 14, if we're counting the times the condition of that lady was paraded before the jury. Maybe not number 14, maybe only ten. But it seems to me as though we have now come to a point where the Court ought to exercise its discretion under 352 [Evid.Code, § 352] and say, you have recited it enough, and that you cannot justify a further recitation of the conditions [sic] of this unfortunate lady from this witness as reasons for his opinion. A second reason I see is because there is no dispute by the defense that the valuation of the claim far exceeded the coverage of the insurance policy.’ The court nevertheless overruled the objection and permitted the evidence to come in yet another time.7

If this were not enough, we also observe that plaintiff's counsel took advantage of every opportunity to remind the jury of the further tragedy of the Neals' son's cancer and death.

The attempt by plaintiff's counsel to arouse and play upon the jury's sympathy and passion is epitomized by counsel's parting words to the jury: ‘And somehow I have the feeling that Frances Neal is smiling down on us because she left this unfinished business. I hope we can finish it for her.’

The prejudicial effect of these blatant appeals to the jury's sympathy was compounded by counsel's pursuit of an erroneous legal theory. Based upon the severity of the injuries suffered by Mrs. Neal, counsel elicited from two witnesses who testified as experts8 that Mrs. Neal's claim against the uninsured motorist was worth at a minimum $500,000. Counsel then proceeded to elicit from these witnesses that defendant's conduct should be judged, not on the basis of its maximum exposure under the policy, $20,000, but, rather, on the basis of the $500,000 value of Mrs. Neal's claim against the uninsured motorist. Thus, defendant's $10,000 settlement offer (see text opposite fn. 5, ante) was repeatedly characterized as a ‘token’ offer. That this was the basis for judging defendant's conduct as reasonable or unreasonable or in ‘good faith’ or ‘bad faith’ was presented to the jury, often over defendant's objections, innumerable times throughout the trial. For example, in his summation to the jury, plaintiff's counsel stated: ‘Are they living up to the duty, fiduciary duty that they owe to their insured when they use the leverage of legal processes to force them and then the alternative to that is, however, if you will drop everything, you know, then he [sic] will pay $5,000. Five thousand dollars, a claim worth $500,000 and up, one percent—one percent of the value, that's what we will offer you. . . .’ Six pages later in the transcript plaintiff's counsel argued: ‘In a case where the parties agree that the valuation is in the neighborhood of $500,000 and up, and certainly there are verdicts involving that kind of injury well above that a measure of malice, a measure of wrongful conduct, a way of looking at how wrongful their conduct was to look at what was the value of the claim and how did they treat it.’

Indeed, the jury was instructed: ‘In determining whether the insurer acted in good faith in refusing to settle Frances Neal's uninsured motorist claim, you may take into consideration the reasonable value of her personal injury claim.'9 This instruction was correct only in a very limited way. The value of the claim against the uninsured motorist was only significant to prove whether that value was equal to or in excess of the policy limit for uninsured motorist coverage. To the extent the jury was informed that the reasonableness or unreasonableness of defendant's conduct should be determined by reference to the $500,000 value of plaintiff's claim against the uninsured motorist, this instruction and the argument of counsel, made repeatedly, were erroneous.

Implicit in the position that defendant's conduct was to be measured not by its maximum liability of $20,000 but, rather, by the $500,000 value of plaintiff's claim against the uninsured motorist, is the notion that defendant could somehow be liable for the full $500,000 claim. Believe it or not, that is exactly the theory entertained and pursued by plaintiff's counsel. It was foreshadowed in Mr. Gergen's letter of May 11, 1971, in which he told defendant that if it did not pay the full $15,000 within 10 days he would ‘institute arbitration proceedings requesting what I consider to be realistic damages in the sum of $500,000.00.’ It was carried forward into plaintiff's first amended complaint wherein plaintiff sought damages for ‘. . . c. The full damages that FRANCES NEAL would have been ‘legally entitled to recover’ without reference to said policy limit of $15,000.00, for the injury said FRANCES NEAL sustained in the sum of $500,000.00. . . .' Plaintiff even requested a jury instruction to that effect.10 The trial court refused to render the requested instruction, but we think the damage was long since done.

We can guess that plaintiff's counsel derived this theory from the so-called ‘third-party cases' in which the insurer has unreasonably refused to settle a within-policy-limits claim of a third person against the insured. In those cases the insurer is held liable for the full amount of any judgment rendered against the insured. (E. g., Johansen v. California State Auto. Assn. Inter-Ins. Bureau, 15 Cal.3d 9, 15, 123 Cal.Rptr. 288, 538 P.2d 744; Comunale v. Traders & General Ins. Co., 50 Cal.2d 654, 660, 328 P.2d 198; Cain v. State Farm Mut. Auto. Ins. Co., 47 Cal.App.3d 783, 791, 121 Cal.Rptr. 200.) That is the result in the ‘third-party’ cases because the full amount of the third-party judgment constitutes the damage to the insured resulting from the insurer's breach of its implied covenant of good faith and fair dealing. (See Johansen v. California State Auto. Assn. Inter-Ins. Bureau, supra, 15 Cal.3d at p. 15, 123 Cal.Rptr. 288, 538 P.2d 744.) However the full amount of the insured's claim against an uninsured motorist is not the damage caused by the insurer's unreasonable refusal to settle the insured's claim under the uninsured motorist coverage of the policy. In such a case, the insured's recoverable damages are the economic loss, emotional distress and any other consequential damage caused by the unreasonable ‘bad faith’ refusal to settle. (See Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 579–580, 108 Cal.Rptr. 480, 510 P.2d 1032; Fletcher v. Western National Life Ins. Co., supra, 10 Cal.App.3d at pp. 401–402, 89 Cal.Rptr. 78; Merlo v. Standard Life & Acc. Ins. Co., supra, 59 Cal.App.3d at p. 16, 130 Cal.Rptr. 416.)

For all of the reasons stated, we conclude that the award of $749,011.48 cannot stand. It remains to be decided whether the judgment must be reversed outright or only as to the amount of compensatory and punitive damages. Defendant maintains that not only the amount of the judgment is a result of the improprieties we have noted but that, indeed, the jury's finding of liability is itself a product of those same improprieties. After mature deliberation we are constrained to agree.

As was succinctly pointed out in Ensign v. Southern Pac. Co., 193 Cal. 311, 322, 223 P. 953, 957: ‘Where the element of sympathy enters into a case, the difficulty is that it is as likely to result in the giving of a verdict against the evidence of nonliability as it is to increase the verdict where a liability exists. Sympathy permeates the whole case and introduces an irrelevant factor which may result not only in the giving of an excessive verdict but a verdict where none would otherwise be given.’ (See also Love v. Wolf, 226 Cal.App.2d 378, 393–394, 38 Cal.Rptr. 183; Nakamura v. Los Angeles G. & E. Corp., 137 Cal.App.487, 490, 30 P.2d 1022; cf. Weaver v. Shell Oil Co. of California, 129 Cal.App. 232, 234, 18 P.2d 736.)

Moreover, the erroneous legal theory introduced and pursued by plaintiff's counsel went directly to the question whether or not defendant was guilty of ‘bad faith’—a liability question. As we have said, we are persuaded that this erroneous theory pervaded the entire trial and affected not only the amount of the verdict but, also, the verdict itself.

Accordingly, we have concluded that the appropriate disposition is outright reversal.

THE CROSS-APPEAL

In view of our intended disposition of the case, plaintiff's appeal from the trial court's order conditionally granting defendant's motion for new trial is moot and will be dismissed.

DISPOSITION

The judgment is reversed. Plaintiff's cross-appeal is dismissed. Defendant shall recover costs on appeal.

FOOTNOTES

1.  Judgment on the original jury verdict was entered April 21, 1975. Defendant's notice of appeal identifies the judgment of April 21 as the judgment appealed from. Plaintiff urges that the judgment of April 21 was superseded by subsequent events and that defendant's appeal should be dismissed because it is taken from a nonexistent judgment. On the contrary, although the April 21 judgment was modified, it is the only judgment that has been rendered in the case. The conditional denial of defendant's motion for new trial is embodied in a minute order dated June 16, 1975. Plaintiff's written consent to the remittitur was filed June 25, 1975. No new judgment or amended judgment was rendered. The reduction in judgment was accomplished by a handwritten notation in the margin of the judgment of April 21, which remains the only judgment extant. The assertions in defendant's opening brief that it is appealing from the denial of its motions for judgment notwithstanding the verdict entered June 12 and the judgment entered June 16 are incorrect. There was no judgment rendered on June 16, and the order denying the motion for judgment notwithstanding the verdict is not appealable. The propriety of that ruling is reviewable on appeal from the judgment.

2.  The original complaint in the action was filed in the name of Mrs. Neal. After her death, Mr. Neal as administrator of her estate was substituted as plaintiff.

3.  The policy provided: ‘Any loss payable to any person under the terms of this Part II [uninsured motorist provision] shall be reduced by . . . (2) the amounts paid or due to be paid under any valid and collectible automobile medical expense insurance available to the insured.’

4.  Insurance Code section 11580.2(h) as it then existed read in pertinent part: ‘Any loss payable under the terms of the uninsured motorist endorsement or coverage to or for any person may be reduced:‘. . .‘(2) By the amounts paid or due to be paid under any valid and collectible automobile medical payment insurance available to the insured.’ (See Stats.1969, ch. 1353, p. 2731.)

5.  This offer was frequently referred to at trial by plaintiff's attorney as a ‘token’ offer.

6.  The only consequential damages proved by plaintiff were $3,588.50 in costs and finance charges for a second trust deed loan on the Neals' residence and $5,985.15 in legal fees, expert fees and costs incurred in the arbitration proceeding, a total of $9,573.65. Any award of compensatory damages in excess of that amount would be unsupported by the evidence. As reduced by the trial court, the total award was $749,011.48. Deducting the proven compensatory damages, leaves almost $740,000 attributable to punitive damages. As hereinafter indicated we find that amount excessive.

7.  The court's observation that it should exercise its discretion under Evidence Code section 352 was sound.

8.  Mr. Gergen, the Neals' former attorney, was one of these witnesses.

9.  As requested this instruction read: ‘In determining whether the insurer acted in good faith in refusing to settle Frances Neal's claim for bodily injury, you may take into consideration the reasonable value of her personal injury claim which is to be determined without regard to the policy limits.’

10.  The requested instruction read: ‘If you find that the insurer in this case breached its duty of good faith and fair dealing then the insurer can no longer rely on the policy limits of its contract and become obligated in damages to the plaintiff for the full nature and extent of her personal injuries. . . .’

KAUFMAN, Associate Justice.

GARDNER, P. J., and McDANIEL, J., concur.