Allstate Insurance v. Wade

Present: Hassell, C.J., Lacy, Keenan, Koontz, Kinser, and
Lemons, JJ., and Compton, S.J.

ALLSTATE INSURANCE COMPANY

v. Record No. 021201

TIMOTHY L. WADE, ET AL.

ALVIN WAYNE SOWERS

v. Record No. 021209 OPINION BY JUSTICE ELIZABETH B. LACY
April 17, 2003
TIMOTHY L. WADE, ET AL.

BRUCE WILLIAM DEGARMO

v. Record No. 021227

TIMOTHY L. WADE, ET AL.

FROM THE CIRCUIT COURT OF PATRICK COUNTY
David V. Williams, Judge

This is a consolidated appeal from a judgment awarding

compensatory and punitive damages for injuries suffered in an

automobile accident. The issues involve whether the jury

should have received information concerning the potential

liability of a party's uninsured motorist insurance carrier,

whether consideration of the compensatory and punitive damages

issues should have been bifurcated, and whether the evidence

presented supported the compensatory and punitive damages

awards.
 Bruce William DeGarmo and Alvin Wayne Sowers began

drinking whiskey and beer around 5:00 p.m. on October 16,

1998. DeGarmo had four or five shots of bourbon whiskey and

Sowers had three or four beers before the two men drove to an

ABC store in Henry County. After purchasing a fifth of

whiskey, the two men drove to an isolated road and drank the

whiskey. The men returned to the ABC store and purchased a

second fifth of whiskey which they also drank. While the

details of the events that transpired over the next few hours

are in conflict, the two men continued drinking and driving

throughout the evening, ultimately winding up on a gravel road

near a church shortly before 11:00 p.m.

When DeGarmo, the driver of the vehicle, stopped near the

church, he left the driver's seat and told Sowers to drive.

DeGarmo testified that he was "drunk" and "couldn't hardly

hold [his] head up anymore." Sowers testified that he was

also intoxicated at this point but, nevertheless, began

driving DeGarmo's car down the curvy, country road. DeGarmo

urged Sowers to "speed up" because DeGarmo wanted to get home.

Sowers then increased his speed to 50 or 55 miles per hour.

While in a blind curve, Sowers passed another vehicle and

entered a second blind curve where he lost control of the

vehicle, crossed into the oncoming traffic lane, and collided

head-on with a vehicle driven by Cheryl S. Kiefer. Judith G.

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Steele, Timothy L. Wade, and Ronald S. Steele were passengers

in Kiefer's vehicle.

Following the accident, DeGarmo moved to the back seat of

his vehicle, and Sowers moved to the passenger seat. The two

men told the investigating officer that a third party was

driving DeGarmo's vehicle but that he had "jumped out and run"

after the accident. The investigating officer smelled a

strong odor of alcohol around DeGarmo and Sowers, as did the

emergency room physician who treated them. The emergency room

physician testified that DeGarmo and Sowers said that they

were traveling 70 miles per hour or more at the time of the

accident. The blood alcohol levels of DeGarmo and Sowers were

0.179 and 0.264, respectively.

Kiefer, Judith Steele, and Wade each filed motions for

judgment against Sowers and DeGarmo asserting that Sowers'

negligent driving caused the accident and that DeGarmo

negligently entrusted his car to Sowers. 1 Each plaintiff

sought compensatory and punitive damages from both defendants.

Kiefer's uninsured motorist insurance carrier, Allstate

Insurance Company (Allstate), entered an appearance in each

case in its own name pursuant to Code § 38.2-2206(F). At a

1
Ronald Steele also filed a motion for judgment against
Sowers and DeGarmo, but his claim was settled prior to
commencement of the trial and is not before us in these
appeals.

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pre-trial hearing, Allstate moved the trial court for

permission to tell the jury that it was Kiefer's insurance

carrier and to argue to the jury that an award of punitive

damages would not serve the function of deterrence and

punishment if Allstate, rather than the defendants, paid the

award. The trial court denied Allstate's motion.

The cases were consolidated prior to trial. The morning

of trial, Sowers and DeGarmo both admitted that they were

negligent, that their negligence was a proximate cause of the

plaintiffs' injuries, and that the plaintiffs were entitled to

compensatory damages. The defendants moved to bifurcate the

issues of compensatory and punitive damages and to exclude

evidence of post-accident statements or conduct by the

defendants. 2 The defendants also asserted that the allegations

in the motions for judgment did not support an award of

punitive damages.

The trial court denied the defendants' motions. The

issues of punitive and compensatory damages were submitted to

the jury. The jury found Sowers and DeGarmo jointly and

severally liable for compensatory damages of $75,000 each for

2
The defendants had previously sought bifurcation of the
punitive damage issue from each of the four cases prior to
their consolidation. In that request they sought a single
hearing on that issue, arguing that they should not be exposed
to four punitive damages awards for the same conduct. This
request was also denied.

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Wade and Kiefer and $100,000 for Steele. The jury also found

DeGarmo liable for punitive damages of $5,000 to each of the

plaintiffs. The trial court denied the defendants' motions to

set aside the verdict and entered judgment on the verdict. We

awarded appeals to DeGarmo, Sowers, and Allstate from the

trial court's judgment and consolidated those appeals for

consideration here.

ALLSTATE'S APPEAL

Record No. 021201

Allstate asserts that the trial court erred in not

allowing Allstate to tell the jury that it was the uninsured

motorist insurance carrier for Kiefer and to argue that an

award of punitive damages would not serve as a deterrent if

such award was paid by Allstate, not the defendant

tortfeasors. Allstate argues that the requested action came

within the scope of Code § 38.2-2206(F) which allows an

insurer to appear in its own name and to take such action

"allowable by law."

We have previously held that an insurance carrier was not

allowed to inform the jury that it was the uninsured motorist

carrier for the plaintiff and that it would be the source of

payment for any damages the jury may award. In Travelers Ins.

Co. v. Lobello, 212 Va. 534, 186 S.E.2d 80 (1972), the

plaintiff asserted that the defendants were jointly and

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severally liable for the plaintiff's damages. The trial court

allowed Travelers Insurance Company to tell the jury that it

was the plaintiff's uninsured motorist carrier, that it was

assisting in the defense of one of the defendants, and that it

would be responsible for " 'payment for the recovery of any

verdict' " returned against that defendant. Id. at 535, 186

S.E.2d at 82. We held that this communication was reversible

error. Injection of information identifying a party as an

insurer may imply that the second defendant was insured and

that such insurance would be available for both defendants.

This created "a situation permitting the return of a possibly

inflated verdict binding upon all defendants so liable." Id.

at 536, 186 S.E.2d at 82.

Allstate seeks to distinguish Lobello pointing out that

Lobello did not involve punitive damages and that, unlike the

Lobello plaintiff, the plaintiff here did not object to the

insurer's motion. Relying on Willard v. Aetna Cas. & Sur.

Co., 213 Va. 481, 483, 193 S.E.2d 776, 778 (1973), Allstate

asserts that if the insurer waives its objection to the

injection of insurance in litigation, as Allstate did in this

case, the mention of insurance is not improper.

Allstate's attempt to distinguish Lobello is not

persuasive. First, the rationale of Lobello does not rely on

the nature of the damages at issue. Next, the injection of

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insurance in this case arose in the form of a pre-trial motion

advanced by Allstate. Allstate bore the burden of convincing

the trial court that the action it requested was proper and

should be allowed. The plaintiffs' failure to "object" to

Allstate's pre-trial motion is not dispositive under these

circumstances.

Allstate's reliance on Willard is also misplaced. The

injection of insurance into a case is generally held to be

reversible error because of its prejudicial effect on a party.

Most often the party prejudiced is the insurance carrier

because, as we noted in Lobello, knowledge that insurance is

available to pay any damages may result in an inflated damage

award. But the party prejudiced by the injection of insurance

is not always the insurer. In Lobello, the prejudice flowed

to a defendant. Here, allowing Allstate to explain its

position as Kiefer's uninsured motorist carrier and that it

would be paying the punitive damages award, could improperly

deflate the amount of the award, prejudicing the plaintiffs.

Accordingly, the statement in Willard upon which Allstate

relies, that an insurer may waive the public policy forbidding

the injection of insurance because such policy is for the

"benefit and protection of the insurer," is not applicable in

this case. Id. at 483, 193 S.E.2d at 778.

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 Allstate's final argument is that it should have been

allowed to make the requested disclosures to the jury because

the policy considerations relating to an award of punitive

damages differ from those applicable to compensatory damages.

Allstate argues that the purpose of punitive damages is to

punish the tortfeasor and that purpose is defeated if punitive

damages are paid by the insurance company rather than the

tortfeasor. Allstate acknowledges that thirty years ago we

rejected this same argument. In Lipscombe v. Security Ins.

Co., 213 Va. 81, 85, 189 S.E.2d 320, 323 (1972), we held that

the requirement in the predecessor to Code § 38.2-2206 that an

insurer pay "all sums" which an insured is legally entitled to

recover as damages included payment of punitive damages. The

insurer's policy argument failed because the subrogation

provisions of that section subject the tortfeasor to liability

for payment of punitive damages even though those damages are

initially paid by the insurer. Id., 189 S.E.2d at 323-24.

Allstate seeks to avoid the holding in Lipscombe by

asserting that Lipscombe involved an insured's direct action

against its insurer and because Allstate, in this case, agreed

to waive its subrogation rights. First, the plaintiff in this

case, Kiefer, like the defendant in Lipscombe, entered into a

contract with the insurer for payment of all sums the

plaintiff was entitled to recover, including sums based on the

8
uninsured motorist provisions of the policy. The difference

in the form of the litigation undertaken to determine the

extent of the insurer's liability does not distinguish

Lipscombe from this case.

Allstate's purported waiver of its subrogation rights is

also immaterial. 3 Since this Court's decision in Lipscombe,

the General Assembly has enacted Code § 38.2-227 which

specifically states that "[i]t is not against the public

policy of the Commonwealth for any person to purchase

insurance providing coverage for punitive damages" awarded in

personal injury negligence cases. This policy allowing

payment of punitive damages by insurers is not contingent upon

whether such insurer can or will exercise rights of

subrogation.

Finally, punishment of the wrongdoer is not the only

purpose of punitive damages. An award of punitive damages

also serves the purposes of protecting the public and of

providing an example and warning to deter others from engaging

in the same or similar conduct. Huffman v. Love, 245 Va. 311,

315, 427 S.E.2d 357, 361 (1993) (citing Baker v. Marcus, 201

3
Apparently at trial, Allstate offered to waive its
subrogation rights if the trial court granted its motion
regarding its role and liability in this litigation and then
did waive such rights "in return for the cooperation of
[Sowers' and DeGarmo's] insurer in this appeal."

9
Va. 905, 909, 114 S.E.2d 617, 620 (1960)). See Doe v. Isaacs,

265 Va. ___, ___ S.E.2d ___ (2003) decided today.

In summary, applying the principles established in

Lipscombe, Lobello, and Code § 38.2-227, we conclude that the

trial court correctly refused Allstate's request to inject

insurance into this case because of the potential for

prejudice to the plaintiffs and that the trial court's ruling

was consistent with the public policy of the Commonwealth.

APPEALS OF SOWERS AND DEGARMO

Record Nos. 021209 and 021227

DeGarmo and Sowers both assign error to the trial court's

refusal to bifurcate the jury's consideration of punitive and

compensatory damages. The trial court's error, according to

the defendants, allowed the compensatory damages award to be

tainted by the jury's exposure to evidence relating to

punitive damages, resulting in awards that were inflated and

excessive as a matter of law. DeGarmo also asserts that the

evidence was insufficient to support an award of punitive

damages.

Bifurcation

Trial courts have the inherent authority to consolidate

claims for trial and have been given specific authority to

order separate trials in certain circumstances. Code § 8.01-

272; Rule 3:8; Clark v. Kimnach, 198 Va. 737, 745, 96 S.E.2d

10
780, 787 (1957). A decision to order separate trials or to

consolidate claims for a single trial is a matter of

procedure, left to the trial court's discretion. In making

this decision, a trial court must be cautious to insure that

separating or consolidating claims for trial does not

prejudice the substantial rights of any party. Id. When

considering a request for separate trials, the trial court

must also consider any resulting unnecessary delay, expense,

or use of judicial resources that would flow from separate

trials of the claims at issue. Leech v. Beasley, 203 Va. 955,

960-61, 128 S.E.2d 293, 297 (1962). In reviewing the trial

court's ruling regarding consolidation or separation of

trials, we will not alter the ruling unless the trial court

plainly abused its discretion. Id.

Here, the defendants have not sought separate trials of

the claims at issue. Rather, the defendants requested

bifurcation, or sequencing, of the jury's consideration of two

issues in the case. See e.g. Code § 8.01-374.1 (allowing

bifurcation of issues in certain asbestos litigation).

Nevertheless, the standards applied to determinations

regarding the consolidation or separation of trials are

equally applicable to questions involving the bifurcation of

the issues presented in this case. A determination in a civil

trial regarding the bifurcation of a jury's consideration of

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issues is a matter for the trial court's discretion and

requires consideration of whether any party would be

prejudiced by granting or not granting such request, as well

as the impact on judicial resources, expense, and unnecessary

delay.

On the morning of trial, the defendants admitted

liability and made a motion to bifurcate the jury's

consideration of compensatory and punitive damages, arguing

that the compensatory damages would be tainted by evidence

relevant only to the punitive damages claims. Such evidence

included the intoxication of both defendants, their extended

drinking "spree," and their claim that a third party was

driving the car.

The trial court, in ruling on the defendants' request,

noted that juries are routinely required to differentiate

between evidence of compensatory and punitive damages in

negligence cases. While the trial court commented that the

defendants' admission of liability gave him "a little pause,"

it concluded that in the absence of any case directly on

point, the matter could be handled through instructions to the

jury.

The defendants claim, however, that the amount of the

compensatory awards shows that they were prejudiced by the

jury's improper consideration of evidence relevant only to

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punitive damages and, therefore, that denying bifurcation was

an abuse of discretion. We disagree.

The amount of the compensatory damages award alone is not

determinative of whether the trial court abused its discretion

in this case. Whether the decision constituted an abuse of

discretion must be viewed from the perspective of the facts

and circumstances known to the trial court at the time of its

ruling. Nothing in this record suggested that the refusal to

bifurcate would have caused the jury to experience any greater

difficulty in determining compensatory damages than normally

present in cases in which a jury determines a defendant's

liability for and the amount of compensatory and punitive

damages in a single proceeding.

In this case, prior to jury selection the trial court

instructed the venire regarding the nature of punitive damages

and that certain evidence should be considered only for

compensatory damages while other evidence should be considered

only for punitive damages. The court's instructions to the

jury at the conclusion of the evidence distinguished between

compensatory and punitive damages. And, the verdict form

submitted by the court to the jury delineated the compensatory

damages award from the punitive damages award.

The only deficiency cited by the defendants regarding

instruction of the jury is Sowers' assertion that because

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certain evidence was relevant and admissible solely for

evaluating the punitive damages issue, the trial court should

have given "clear and explicit instructions regarding which

portions of the plaintiffs' testimony were to be considered by

[the jury] regarding punitive damages only." Sowers seeks to

impose a procedural requirement that a trial court give a

cautionary instruction regarding the proper use of each piece

of evidence. This has never been required in cases involving

punitive and compensatory damages, and we decline to adopt it

in this case.

Finally, the defendants argue that this Court's decision

in Eubank v. Spencer, 203 Va. 923, 128 S.E.2d 299 (1962),

requires bifurcation in this case. We disagree with the

defendants. In Eubank, the defendant admitted that he was

negligent, and the trial proceeded on the plaintiff's claims

for compensatory and punitive damages. The plaintiff

abandoned her claim for punitive damages after admission of

evidence on both issues, and the jury considered only the

compensatory damages issue. The error of the trial court in

Eubank was the failure to instruct the jury, following the

abandonment of the punitive damages claim, that the jury

should not consider the evidence irrelevant to compensatory

damages. Id. at 926-27, 128 S.E.2d at 302. Here, the

punitive damages claims were not abandoned by the plaintiffs.

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 Accordingly, we conclude that the trial court did not

abuse its discretion in refusing the defendants' request for

bifurcation of the jury's consideration of compensatory and

punitive damages.

Compensatory Damages

Defendants argue that the compensatory damages awards to

Wade and Kiefer of $75,000 each and $100,000 to Steele, were

excessive as a matter of law because the plaintiffs' special

damages were approximately $2,000, $5,000, and $6,000,

respectively.

A verdict is excessive when it shocks the conscience of

the court and creates the impression that the jury was biased

or prejudiced against a party, or misunderstood the facts or

the law, or suggests that it was not the product of fair and

impartial decision making because it is so disproportionate to

the injuries incurred. Smithey v. Sinclair Refining Co., 203

Va. 142, 146, 122 S.E.2d 872, 875 (1961).

In this case, each of the plaintiffs suffered soft tissue

injuries. Wade sustained cervical and lumbar strains, and as

a result, experiences neck pain while operating heavy

equipment on his job. Further, he curtailed his avocational

activities due to his injuries. Wade testified that at the

time of the trial, three years after the accident, he

continued to experience "pain, constant pain, every day."

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Similarly, Kiefer testified that she has low back pain

"[e]very day" in conjunction with her work at a flower shop.

She suffered pinched nerves and soft tissue injury which is

consistent with chronic pain. Finally, Steele suffered severe

headaches and neck pain which did not respond to medication or

physical therapy. Her neurologist diagnosed her with a

chronic cervical strain and muscle spasms which caused

headaches. The neurologist testified that Steele sustained a

permanent injury in the accident which would cause chronic

discomfort and pain on the left side of her neck and would

limit her neck movement. As a result of her injuries Steele

must perform daily therapy exercises. She testified that she

lives with pain and has to "work with the pain."

Whether a verdict is excessive is left to the discretion

of the trial court. Modaber v. Kelley, 232 Va. 60, 69, 348

S.E.2d 233, 238 (1986). In this case, the verdict did not

shock the conscience of the trial court. The jury instruction

specifically identified the elements of damage that could be

included in a compensatory damages award. Although there is a

disparity between the actual medical expenses of these

plaintiffs and the compensatory damages award, each plaintiff

experiences chronic pain in the course of everyday life, and

the jury was entitled to compensate them for pain and

suffering. When viewed in this light, the disparity between

16
incurred medical costs and the amount of compensatory damages

awarded does not rise to a level suggesting that it was not

the product of fair and impartial decision making. Based on

this record, we cannot say that the trial court abused its

discretion in refusing to set aside the compensatory damages

awards on the grounds that they were excessive as a matter of

law. 4

Punitive Damages

DeGarmo asserts that, as a matter of law, the evidence is

insufficient to support an award of punitive damages for

negligent entrustment and that the trial court erred in

refusing to set aside the punitive damages award against him.

An award of punitive damages requires a showing that a

defendant's "conduct was of 'such recklessness or negligence

as evinces a conscious disregard of the rights of others.' "

Puent v. Dickens, 245 Va. 217, 219, 427 S.E.2d 340, 342 (1993)

(quoting Baker, 201 Va. at 909, 114 S.E.2d at 621). DeGarmo

argues that neither his intoxication nor his understanding of

the extent of Sowers' intoxication alone, without evidence of

additional egregious conduct, can support an award of punitive

damages. And, DeGarmo concludes, other than being very drunk,

4
In light of this holding, we need not address DeGarmo's
assignment of error claiming that evidence of post-accident
conduct should not have been admitted for purposes of
compensatory damages.

17
there is no evidence that he engaged in any conduct that could

be considered reckless.

We agree with DeGarmo that mere intoxication would be

insufficient to establish willful and wanton conduct. 5

However, whether a defendant acted willfully or wantonly in

conscious disregard for the safety of others, involves

consideration of the entire conduct of the defendant.

Huffman, 245 Va. at 314-15, 427 S.E.2d at 360. The record in

this case shows that DeGarmo and Sowers had been drinking

together since approximately 5:00 p.m. and had consumed more

than two fifths of whiskey and numerous beers. Although

DeGarmo drove until just before the accident at 11:00 p.m., he

apparently decided that he could not drive any longer because

if he did so, he would cause an accident. As DeGarmo

testified, he had "run [them] out of the road two or three

times." DeGarmo was aware of the amount of alcohol Sowers

consumed and knew, or should have known, that Sowers was

equally unable to drive safely and was equally likely to cause

an accident. Then, while Sowers was driving the car along

narrow, curvy, country roads, DeGarmo repeatedly expressed a

need to get home and urged Sowers to "speed up."

5
Code § 8.01-44.5 provides that a presumption of willful
and wanton conduct attaches to a driver with a blood alcohol
level 0.15 percent or higher.

18
 A jury could properly conclude that DeGarmo's conduct

amounted to more than simple negligence and reflected a

conscious disregard for the safety of others. In addition to

DeGarmo's intoxication and his knowledge of Sowers'

intoxication, DeGarmo encouraged a person he knew was impaired

to drive faster on roads that he knew were difficult to

navigate. Accordingly, the trial court did not err in

refusing to set aside the punitive damages award against

DeGarmo.

In summary, for the reasons set out above, we conclude

that the trial court did not err in refusing to allow Allstate

to inform the jury that it was one of the plaintiffs'

uninsured motorist insurance carrier and that it had liability

for payment of any punitive damages award, that the trial

court did not abuse its discretion in refusing to bifurcate

the jury's consideration of punitive and compensatory damages,

that the compensatory damages awards were not excessive as a

matter of law, and that the evidence supported an award of

punitive damages against DeGarmo. Accordingly, we will affirm

the judgment of the trial court.

Record No. 021201 – Affirmed.
Record No. 021209 – Affirmed.
Record No. 021227 – Affirmed.

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