Filed 11/3/16 Opinion on remand from Supreme Court
                 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                  SECOND APPELLATE DISTRICT

                           DIVISION THREE


THOMAS NICKERSON,                                    B234271

       Plaintiff and Appellant,                      (Los Angeles County
                                                     Super. Ct. No. BC405280)
       v.

STONEBRIDGE LIFE INSURANCE
COMPANY,

       Defendant and Appellant.




      APPEALS from orders and a judgment of the Superior
Court of Los Angeles County, Mary Ann Murphy, Judge. Order
denying motion for judgment notwithstanding the verdict is
affirmed, order granting the new trial motion is vacated, and the
judgment is modified and affirmed.
      Shernoff Bidart Echeverria Bentley, William M. Shernoff,
Howard S. Shernoff, Travis M. Corby; The Ehrlich Law Firm and
Jeffrey Isaac Ehrlich for Plaintiff and Appellant.
      Baute Crochetiere & Wang, David P. Crochetiere, Henry C.
Wang; Reed Smith and Margaret A. Grignon for Defendant and
Appellant.
       Amy Bach; Knapp & Roberts and David L. Abney for
United Policyholders as Amicus Curiae on behalf of Defendant
and Appellant.
                     _________________________
                         INTRODUCTION
       The sole issue raised by both parties to this appeal concerns
the punitive damage award, specifically, whether the trial court’s
remittitur of that award from $19 million to $350,000 based on a
ratio of punitive to compensatory damages of 10:1 comports with
due process. Thomas Nickerson sued Stonebridge Life Insurance
Company (Stonebridge) challenging the insurer’s partial denial of
his claim for hospitalization benefits. The trial court ruled that a
policy provision limiting coverage was not conspicuous, plain, and
clear and was therefore unenforceable, entitling Nickerson to
$31,500 in additional benefits under the policy. A jury then
found that Stonebridge had breached the implied covenant of
good faith and fair dealing and awarded Nickerson $35,000 in
compensatory damages for emotional distress. The jury found
Stonebridge acted with fraud and fixed the punitive damage
award at $19 million. The trial court conditionally granted
Stonebridge’s new trial motion unless Nickerson consented to a
reduction of the punitive damages to $350,000.1 Both parties
appeal. After weighing all of the relevant factors and
circumstances pursuant to State Farm Mut. Automobile Ins. Co.
v. Campbell (2003) 538 U.S. 408 (State Farm) and Simon v.
San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159 (Simon),


1     For convenience, we refer to the remitted punitive damage
amount of $350,000 as the remitted punitive damage award or
the punitive damage award.




                                 2
we held the trial court’s remittitur of punitive damages was
proper.
       The Supreme Court granted review, limited to the question
of whether, when assessing the constitutionality of the punitive
damages award, we properly excluded as compensatory damages,
the award of attorney fees under Brandt v. Superior Court (1985)
37 Cal.3d 813, on the basis that such fees were awarded by the
trial court after the jury had rendered its verdict. (Nickerson v.
Stonebridge Life Ins. Co. (2016) 63 Cal.4th 363, 371.) The
Supreme Court did not address the bulk of our opinion in which
we determined that the ratio of punitive to compensatory
damages of 10:1 passed constitutional muster under the due
process clause of the Fourteenth Amendment. The Supreme
Court held only that the Brandt fees should be included as
compensatory damages in the ratio calculation irrespective of
whether such fees were awarded by the trial court or the jury.
(Id. at p. 368.) The Supreme Court reversed our previous opinion
and remanded the case to this court for further proceedings
consistent with its decision. Pursuant to the opinion of the
Supreme Court, we hold that the Brandt fees should be included
in the compensatory damages, modify the judgment and, as
modified, affirm it.
       FACTUAL AND PROCEDURAL BACKGROUND
       1.    The insurance policy
       Stonebridge insured Nickerson under a policy (the policy)
providing coverage for hospital confinement, intensive care unit
confinement, and emergency room visits. Stonebridge agreed to
pay indemnity in the amount of $350 per day for each day of
confinement in a hospital for a covered injury, $350 per day for
each day of confinement in a hospital intensive care unit, and




                                3
$150 per visit to a hospital emergency room. Although payment
of claims under this policy is related to healthcare services
rendered to the insured, the policy is not healthcare insurance
that pays for medical expenses. The insured is free to use the
funds in any manner he or she wishes, i.e., for rent or a car
payment.
       The policy’s insuring clause for the “Accidental Daily
Hospital Confinement Benefit” stated: “We will pay the Daily
Hospital Confinement Benefit stated on the Schedule Page for
each day of Confinement due to a covered injury, beginning with
the first day of Confinement. A Covered Person must be under
the professional care of a Physician, and such Confinement must
begin within 90 days of the accident causing the injury.”
(Capitalization omitted.)
       A definitions section contained 10 definitions, including:
       “HOSPITAL
CONFINEMENT/CONFINEMENT/CONFINED means being an
inpatient in a Hospital for the necessary care and treatment of an
Injury. Such confinement must be prescribed by a Physician.
       “Confinement does not include outpatient care and
treatment, including outpatient surgery or outpatient
observation received in a Hospital.
       “[¶] . . . [¶]
       “NECESSARY TREATMENT means medical treatment
which is consistent with currently accepted medical practice.
Any confinement, operation, treatment, or service not a valid
course of treatment recognized by an established medical society
in the United States is not considered ‘Necessary Treatment.’ No
treatment or service or expense in connection therewith, which is
experimental in nature, is considered ‘Necessary Treatment.’




                                4
       “We may use Peer Review Organizations or other
professional medical opinions to determine if health care services
are:
“1. medically necessary; and
“2. consistent with professionally recognized standards of care
with respect to quality, frequency, and duration; and
“3. provided in the most economical and medically appropriate
site for treatment.
       “If services do not meet these criteria, expenses related to
those services will not be deemed ‘Necessary Treatment.’ ”
       The policy defined a “Hospital” as an institution that,
among other things, is engaged primarily in providing “medical,
diagnostic, and major surgery facilities for medical care and
treatment of sick and injured persons on an inpatient basis,”
excluding any institution or any part of an institution operated
primarily as a “convalescent home, convalescent, rest, or nursing
facility.”
       The policy period began in October 2007, and the policy
stated that coverage would continue as long as Nickerson
continued to pay his monthly premium.
       2.     Nickerson’s injury and hospitalization
       Nickerson served in the United States Marines and
therefore is entitled to medical care at Veterans Administration
(VA) hospitals at no cost. He was involved in a snowmobile
accident in 1997 and became paralyzed from his chest down. He
now relies on a wheelchair. Nickerson is single and has worked
as a live-in caretaker for other veterans since 2000 in exchange
for free rent. His only income is a very small military pension.
       Nickerson was sitting in a motorized wheelchair on a lift
about to be lowered from his van when he accidently struck the




                                 5
control, causing the wheelchair to lurch forward. He fell from the
wheelchair on the lift down to the pavement. The accident
occurred on February 11, 2008. He suffered a broken leg and was
taken to a VA hospital in Long Beach, first to the emergency
room and then to a spinal cord unit, that was equipped to treat
paraplegics and quadriplegics. Nickerson’s primary care
physician, Dr. Hung Nguyen, treated him there together with
orthopedic physicians.
       Nickerson suffered a comminuted, displaced fracture of his
right tibia and fibula, meaning that the leg was broken,
splintered, and out of place. A full-leg splint, a so-called Long
Beach splint, was put in place extending from his upper thigh to
the beginning of his toes. He soon experienced complications
from the injury, including heterotopic ossification (formation of
bone in a joint), bruising, swelling, blistering, infection, and a
risk of gangrene. He remained at risk for blood clots. Nickerson
was confined to a hospital bed and received intravenous fluids
until around February 29, 2008, although he continued to have
some blisters from an infection.
       An orthopedic physician approved Nickerson’s sitting in a
wheelchair again on March 24, 2008. He could tolerate two hours
at a time in a wheelchair by May 9, 2008, and an orthopedic
physician determined that he would be ready for discharge when
he could tolerate three hours at a time in a wheelchair.
Dr. Nguyen decided that Nickerson was stable and ready to
return home on May 19, 2008, except that he was unable to
maneuver into his bathroom without a particular part needed for
his wheelchair. After obtaining the needed part, Dr. Nguyen
discharged Nickerson from the hospital on May 30, 2008. In all,




                                6
Nickerson was hospitalized under Dr. Nguyen’s care from
February 11 until May 30, 2008, a total of 109 days.
       3.    Nickerson’s claim and Stonebridge’s handling of his
claim
       Nickerson submitted a claim to Stonebridge on June 2,
2008, together with a completed form that Stonebridge had
provided to authorize the release of his medical records.
Stonebridge sent him a letter dated June 18, 2008, stating that
the Long Beach VA hospital required him to complete and sign a
different authorization form. Rather than complete the form,
Nickerson went to the hospital himself, obtained copies of his
records and mailed them to Stonebridge. Nonetheless,
Stonebridge sent him another letter enclosing the same
authorization form along with an Explanation of Benefits form
stating that his file was closed until the information requested of
him was received. Nickerson completed and returned the form.
       Nickerson sought assistance from the California
Department of Insurance on July 22, 2008. He explained that he
had been in the hospital for 109 days and could not use the
bathroom or enter a bedroom because of the Long Beach splint on
his leg. After he had sent his medical records to Stonebridge,
Nickerson was notified that his file was closed until the insurer
received additional information. On August 15, Stonebridge
wrote to Nickerson to advise him it was ordering records from the
Long Beach VA Hospital.
       Stonebridge notified Nickerson in a letter dated August 28,
2008, that it had received the information requested from the
Long Beach VA Hospital, and that it was requesting additional
information from a medical peer review organization.
Stonebridge sent Nickerson’s file to the Medical Review Institute




                                 7
of America and requested answers to three questions: (1) “Was
the confinement medically necessary for inpatient treatment of
the right tibia/fibula fracture? If so, for how many days?”
(2) “Was treatment consistent with professionally recognized
standards of care with respect to quality, frequency and
duration?” and (3) “Was treatment provided in the most
economical and medically appropriate site for treatment?” The
Case Review Submittal Form included a box to check if
Stonebridge required a phone consultation between the peer
reviewer and the treating physician. Stonebridge did not check
the box. Amy Hammer, Stonebridge’s technical claims specialist,
testified that neither she nor anyone at Stonebridge had ever
requested a reviewer contact the treating physician.
       Stonebridge received a peer review report dated September
9, 2008 that concluded, “By 2/29/08 the fracture blebs and leg
swelling was improved and there were no further signs of active
leg infection, compartment syndrome or thromboembolic disease.
His initial splint had been changed to a more stable Long Beach
splint and was able to transfer from bed to gurney. At that point
it was reasonable that a transfer to a less acute care environment
such as a rehabilitation center or even back home with a care
giver was possible. Visits to the orthopaedic clinic for further
follow up could have been arranged and there was no evidence of
additional need for acute hospitalization. Ongoing care after that
date was primarily directed to care of his chronic trophic
ulcerations and physical therapy. Average length of stay for
proximal tibial fractures according to ODG is 4.0 days, however
Milliman indicates that hospitalization for complications for
paraplegic treatment as in this case can result in extended stays.
That extension based on the clinical situation as described in the




                                8
progress notes should have been until Feb. 29. [¶] . . . [¶] After,
Feb. 29, [sic] a more economical and medically appropriate
facility could have been chosen.” (Italics added.)
       Stonebridge notified Nickerson in a letter dated September
10, 2008, that it had completed the processing of his claim for
benefits. The letter stated that an independent medical reviewer
had determined that acute care hospitalization was medically
necessary only from February 11 until February 29, 2008, and
that his treatment after February 29 could have been done in a
less acute care environment or at home with a caregiver. It
stated that his hospitalization therefore was “Necessary
Treatment,” as defined in the policy, only from February 11 until
February 29, 2008, and that he was entitled to benefits only for
that period. Stonebridge sent Nickerson a check for $6,450
shortly thereafter.
       Nickerson turned to Dr. Nguyen for help by asking him to
write a letter to Stonebridge explaining his extended
hospitalization. Dr. Nguyen’s three-paragraph letter dated
September 30, 2008, stated, in relevant part: “The fracture was
complicated by extensive swelling, infection, blistering, and
muscle damage that required acute hospitalization, intravenous
fluids and antibiotics, and full staff support including
consultation with an orthopedic surgeon. The infection and
blistering subsided as Mr. Nickerson completed his antibiotics on
March 1, 2008. During this time, the right leg was placed in a
Long Beach Splint, kept elevated and fully extended.
       “Mr. Nickerson was living alone and could not have been
discharged safely at that time. The orthopedic consultants
recommended that he remain supine in bed or gurney and did not
clear him for wheelchair use until March 24, 2008. He did not




                                 9
have an available caregiver that could provide bedside care at
home during this period. They also recommended that his
fractured leg be kept fully extended in the splint (no flexion
permitted) to allow healing. They did not lift this restriction until
May 5, 2008. His home has narrow doorways and corners he
could not have managed in his wheelchair if his leg was fully
extended.” (Italics added.)
       Stonebridge responded to Nickerson in a letter dated
October 10, 2008, stating that Dr. Nguyen’s letter did not change
its decision because Dr. Nguyen did not indicate that
hospitalization in an “acute care setting” was required as of
March 1, 2008. Continuing, the October 10 letter stated in
relevant part: “Although you may have needed to be confined on
an inpatient basis, there is no indication that you had any
medical conditions [o]n March 1, 2008 or after that required
inpatient acute care. Therefore, your confinement in an acute
care setting as of March 1, 2008 was not provided in the most
economical and medically appropriate site for treatment and was
not consistent with professionally recognized standards of care.”
(Italics added.) Hammer conceded there is no requirement in
Nickerson’s policy that the care be acute to be covered.
       Hammer did not know at the time she received the
reviewer’s report that care at VA hospitals was free for veterans
like Nickerson. She acknowledged that she did not believe that
the Long Beach VA Hospital kept patients hospitalized
unnecessarily. Hammer conceded that Nickerson’s claim fell
within the policy’s grant of coverage and not within any of the
policy’s stated exceptions. She also conceded that the Long Beach
VA Hospital was the most economical site for Nickerson’s
treatment. Hammer testified she would handle Nickerson’s claim




                                 10
the same way today. This was confirmed by Stonebridge’s vice
president of claims at the time.
       4.    Trial court proceedings
       Nickerson’s lawsuit against Stonebridge ensued. His
complaint alleged Stonebridge breached the insurance contract
by failing to pay him benefits for the full 109 days of his hospital
stay and that Stonebridge breached the implied covenant of good
faith and fair dealing by acting unreasonably and in bad faith in
denying him the full policy benefits.
       At the close of Nickerson’s case, the trial court granted his
motion for a directed verdict on the cause of action for breach of
contract, finding as a matter of law that the “Necessary
Treatment” limitation was a limitation of coverage that was not
conspicuous, plain and clear in the policy and therefore was
unenforceable. The court found that Nickerson was entitled to
$31,500 in unpaid benefits for the breach of contract cause of
action.
       The jury returned a special verdict finding that
Stonebridge’s failure to pay policy benefits was unreasonable or
without proper cause and that Nickerson suffered $35,000 in
damages for emotional distress as a result. The jury also found
Stonebridge had “enagage[d] in the conduct with fraud.”
       In the punitive damages phase of trial, the court instructed
the jury that Stonebridge failed to comply with two orders to
produce documents. This instruction was the result of
Stonebridge’s defiance of two court orders to produce its so-called
“Blue Forms,” the internal forms Stonebridge used when denying
claims so as to comply with the California Fair Claims Practices
Act. Nickerson introduced two exhibits showing Stonebridge had
a net worth in excess of $368 million, and a binder of evidence




                                 11
(Exhibit 33) showing other claims that Stonebridge had denied
based on the “Necessary Treatment” or “Necessary Emergency
Treatment” definition in its policies. The jury awarded Nickerson
$19 million in punitive damages, equaling approximately 5
percent of the company’s net worth.
       The parties had stipulated before trial that the trial court
could determine the Brandt fees, if Nickerson succeeded on his
complaint. After trial, the parties stipulated to $12,500 in
attorney fees, and the court awarded that amount.
       Stonebridge moved for judgment notwithstanding the
verdict (JNOV) seeking a reduction in the punitive damage
award from $19 million to $35,000. The insurer argued that the
punitive damage award was unconstitutionally excessive and
that it should not exceed the amount of tort damages awarded.
Stonebridge also moved for a new trial seeking a reduction in the
punitive damage award “to a minimal amount.” In neither post-
trial motion did Stonebridge challenge the directed verdict on the
breach of contract cause of action, the discovery order, the
sufficiency of the evidence to support the finding it breached the
covenant of good faith and fair dealing, or the fraud finding,
which latter finding is the predicate to an award of punitive
damages. (Civ. Code, § 3294.)
       The trial court denied Stonebridge’s JNOV motion. On the
new trial motion, after conducting the constitutional analysis
under State Farm, supra, 538 U.S. at page 419, the trial court
reduced the punitive damage award to a ratio of punitive to
compensatory damages of 10:1. The trial court explained it “may
be unlikely that a punitive damage award reduced to a 10:1 ratio
will deter Stonebridge from engaging in similar tortious conduct
in the future,” but the court felt “constrained to reduce the




                                12
punitive damage award to 10:1 based on recent California and
federal authority.” In calculating the amount of punitive
damages, the court considered only the $35,000 in compensatory
damages for Stonebridge’s breach of the implied covenant; it did
not include the $31,500 in damages for the insurer’s breach of
contract or the $12,500 in attorney fees. Accordingly, the court
conditionally granted Stonebridge’s new trial motion unless
Nickerson consented to a remittitur of the punitive damage
award to $350,000, in which event the new trial motion would be
denied.
       The trial court entered a judgment on June 13, 2011,
awarding Nickerson compensatory damages of $31,500 for breach
of contract and $35,000 for breach of the implied covenant, plus
$12,500 in attorney fees as economic damages, $30,603.45 in
costs, and $19 million in punitive damages.
       Nickerson rejected the reduction in punitive damages and
filed a timely appeal from the order granting a new trial. (Code
Civ. Proc., § 904.1, subd. (a)(4).) As a consequence of Nickerson’s
refusal to accept the remittitur of damages, the trial court’s
ruling on the new trial motion constitutes an order granting a
new trial. (See DeTomaso v. Pan American World Airways, Inc.
(1987) 43 Cal.3d 517, 524.)
       Stonebridge timely appealed from the June 13, 2011
judgment and the denial of its JNOV motion. (Code Civ. Proc.,
§ 904.1, subd. (a)(4).)
                          CONTENTIONS
       Neither party challenges the judgment of liability or the
jury instructions employed at trial. Accordingly, we address
neither the correctness of the liability judgment nor the
instructions. (See Simon, supra, 35 Cal.4th at p. 1171, fn. 1.)




                                13
The contentions on appeal raise only the question of whether the
remitted punitive damage award passes constitutional muster
under the due process clause.
      Nickerson contends the trial court erred (1) in concluding it
was constrained by law to limit punitive damages to no more
than 10 times the compensatory award; and (2) in excluding
certain categories of compensatory damages when fixing the ratio
of compensatory to punitive damages.
      Stonebridge contends the trial court erred in failing to rule
on the merits of its JNOV motion seeking a greater reduction of
the punitive damage award because (1) there is a low degree of
reprehensibility and Nickerson only suffered non-economic
damages, and because (2) the evidence does not support the jury’s
finding that Stonebridge acted with fraud.
                           DISCUSSION
      The maximum constitutionally permissive punitive damage
award
      “Punitive damages may be imposed under state law to
further a state’s legitimate interests in punishing unlawful
conduct and deterring its repetition. [Citation.] States have
considerable flexibility in determining the appropriate level of
punitive damages to allow in different classes of cases and in any
particular case. [Citation.] The amount of punitive damages
offends due process under the Fourteenth Amendment as
arbitrary only if the award is ‘ “grossly excessive” ’ in relation to
the state’s legitimate interests in punishment and deterrence.
[Citations.]” (Bullock v. Philip Morris USA, Inc. (2011)
198 Cal.App.4th 543, 558.)
      In determining the constitutional maximum for a
particular punitive damage award under the due process clause,




                                 14
we are directed to follow three guideposts: “(1) the degree of
reprehensibility of the defendant’s misconduct; (2) the disparity
between the actual or potential harm suffered by the plaintiff and
the punitive damages award; and (3) the difference between the
punitive damages awarded by the jury and the civil penalties
authorized or imposed in comparable cases. [Citation.]” (State
Farm, supra, 538 U.S. at p. 418, citing BMW of North America,
Inc. v. Gore (1996) 517 U.S. 559, 575 (Gore).)
       Appellate courts conduct de novo review of a trial court’s
application of the guideposts to the jury’s punitive damage
award. (State Farm, supra, 538 U.S. at p. 418; Simon, supra,
35 Cal.4th at p. 1172; accord Gober v. Ralphs Grocery Co. (2006)
137 Cal.App.4th 204, 212.) “Exacting appellate review ensures
that an award of punitive damages is based upon an
‘ “application of law, rather than a decisionmaker’s caprice.” ’
[Citations.]” (State Farm, supra, at p. 418.) We accept as true
the jury’s findings of historical fact as long as they are supported
by substantial evidence (Simon, supra, at p. 1172; Gober, supra,
at p. 216), but we do not defer to findings inferred from the jury’s
award. (Simon, supra, at pp. 1172-1173.) We are always
conscious, however, that “[o]ur task here is only to determine the
maximum permissible award under the Constitution, which is not
necessarily the same award we would reach as jurors.
[Citation.]” (Roby v. McKesson Corp. (2009) 47 Cal.4th 686, 720
(conc. & dis. opn. of Werdegar, J.) (Roby).) With these rules in
mind, we address seriatim the three guideposts delineated by the
United States Supreme Court.
       a. Degree of reprehensibility
       “ ‘[T]he most important indicium of the reasonableness of a
punitive damages award is the degree of reprehensibility of the




                                15
defendant’s conduct.’ ” (State Farm, supra, 538 U.S. at p. 419;
Gore, supra, 517 U.S. at p. 575; accord, Simon, supra, 35 Cal.4th
at p. 1180; Roby, supra, 47 Cal.4th at p. 713.) We determine the
reprehensibility of Stonebridge’s behavior by considering five
aggravating factors, namely “whether: [(1)] the harm caused was
physical as opposed to economic; [(2)] the tortious conduct evinced
an indifference to or a reckless disregard of the health or safety of
others; [(3)] the target of the conduct had financial vulnerability;
[(4)] the conduct involved repeated actions or was an isolated
incident; and [(5)] the harm was the result of intentional malice,
trickery, or deceit, or mere accident. [Citation.] The existence of
any one of these factors weighing in favor of a plaintiff may not
be sufficient to sustain a punitive damages award; and the
absence of all of them renders any award suspect. [We presume
Nickerson] has been made whole for his injuries by compensatory
damages, so punitive damages should only be awarded if
[Stonebridge’s] culpability, after having paid compensatory
damages, is so reprehensible as to warrant the imposition of
further sanctions to achieve punishment or deterrence.
[Citation.]” (State Farm, supra, at p. 419.) The parties dispute
the application of all five of the reprehensibility factors and so we
address them seriatim.
       (i)    Nickerson did not suffer physical harm.
       The first factor is whether the harm caused to Nickerson
was physical or economic. Nickerson’s injuries were solely
economic as they “arose from a transaction in the economic
realm, not from some physical assault or trauma” and “there
were no physical injuries.” (State Farm, supra, 538 U.S. at p.
426.) Nickerson’s counsel admitted as much in closing argument
by stating: “Number 1 is whether the conduct caused physical




                                 16
harm. Obviously, it did not in this case. There was no – physical
harm to Mr. Nickerson. There was emotional harm, and you’ve
already compensated – him for his emotional harm.”
       Despite having conceded the lack of physical harm at trial,
on appeal Nickerson asserts he did suffer physical harm and cites
Roby, supra, 47 Cal.4th 686 that when the defendant’s conduct
causes damage that affects the plaintiff’s emotional and mental
health, it is treated as physical harm. Roby is distinguished as
the plaintiff there experienced physical manifestations of her
emotional distress: she developed agoraphobia, became suicidal,
forewent medical treatment, and was deemed “completely
disabled.” (Id. at p. 697.) Nickerson, by contrast, testified he felt
upset, frustrated, angry, and betrayed. The trial court found him
to be a “stoic man who did not appear comfortable talking about
his feelings in response to his attorney’s questions.” Nickerson
never testified he suffered physical effects from Stonebridge’s
conduct. Nor is the difference between the harm suffered by
Nickerson and that suffered by Roby simply a matter of degree,
as Nickerson would have it. The record contains no indication
that Nickerson suffered any physical symptoms of his emotional
distress and so this factor does not apply.
       (ii) Stonebridge acted with indifference to, and a reckless
              disregard of, the health or safety of Nickerson and
              others.
       The second factor is whether Stonebridge’s tortious conduct
evinced its indifference to or reckless disregard of the health and
safety of others. Nickerson is paralyzed from his chest down and
relies on a wheelchair. He obtained his policy with Stonebridge
for peace of mind and security. (Amerigraphics, Inc. v. Mercury
Casualty Co. (2010) 182 Cal.App.4th 1538, 1562 (Amerigraphics),




                                 17
disapproved on other grounds in Nickerson v. Stonebridge Life
Ins. Co., supra, 63 Cal.4th at p. 377, fn. 2.) Yet, the evidence
shows Stonebridge recklessly disregarded Nickerson’s health and
safety: Stonebridge (1) refused to provide Dr. Nguyen’s letter to
the peer reviewer and refused to recognize that Nickerson
required hospitalization for 109 days; (2) declined coverage on the
grounds the hospitalization at the Long Beach VA Hospital was
not the most economically and medically appropriate site for
Nickerson’s treatment which ignores the fact that hospital care
was free of charge for Nickerson and, as Hammer acknowledged,
that VA hospitals did not hospitalize patients unnecessarily; (3)
required that Nickerson’s care be “acute” to be covered,
notwithstanding the policy did not specify this predicate to
coverage; and (4) expected that Nickerson should have returned
home despite his doctors’ conclusion he could not be safely
discharged. We reject Stonebridge’s attempts to minimize its
conduct by arguing that the only harm Nickerson suffered was
his inability to purchase a new van. This argument ignores not
only that Stonebridge’s practice caused Nickerson to suffer
personal injury, but also that the van, outfitted to meet his needs,
is essential to Nickerson’s safety and well being.
       In addition to its treatment of Nickerson, the record reveals
Stonebridge’s indifference to the health and safety of others
through its practice of using the hidden “Necessary Treatment”
limitation to deny other policyholders’ claims and by preventing
full communication between peer reviewers and treating
physicians. Stonebridge’s argument that it is not a health
insurer does not alter our conclusion. Its practices affect
insureds’ hospitalization decisions. (Cf. Sarchett v. Blue Shield of
California (1987) 43 Cal.3d 1, 11 [dilemma faced by insured:




                                18
follow recommendation of physician and risk later denial of
coverage or reject doctor’s advice and risk foregoing needed
treatment].) This factor weighs in favor of a finding of
reprehensibility.
       (iii) The target of the conduct is financially vulnerable.
       The third factor, “whether . . . the target of the conduct had
financial vulnerability” (State Farm, supra, 538 U.S. at p. 419), is
ordinarily “relevant only if financial vulnerability made the
target more vulnerable to the defendant’s wrongful conduct or
exacerbated the harm, such as where the harm caused by the
defendant’s conduct was economic. [Citations.]” (Bullock v.
Philip Morris USA, Inc., supra, 198 Cal.App.4th at pp. 561-562,
citing Gore, supra, 517 U.S. at p. 576 [“infliction of economic
injury, especially when done intentionally through affirmative
acts of misconduct [citation] or when the target is financially
vulnerable, can warrant a substantial penalty”].) Nickerson is
clearly financially vulnerable: he is a permanently disabled 58-
year-old paraplegic and a former marine whose only source of
income is a paltry military pension. Stonebridge insists that
Nickerson’s income was not affected by its decision to deny him
his policy benefits because his pension was unaffected by the
hospital stay and his medical treatment was free. Stonebridge
argues Nickerson is not financially vulnerable because, quoting
from Amerigraphics, supra, 182 Cal.App.4th at page 1562, he did
not “need[] the money to survive,” and reiterates that the only
harm Nickerson actually suffered was his inability to purchase a
new van. Such argument trivializes Nickerson’s plight.
Nickerson has extremely limited financial resources and needed
the proceeds from his Stonebridge policy to replace his 10-year-
old, specially modified van, which vehicle had 250,000 miles on it




                                 19
and was unsafe. Merely because Nickerson could survive without
the policy proceeds does not mean Stonebridge’s conduct did not
affect his solvency or that he was financially invulnerable. This
factor weighs in favor of reprehensibility.
       (iv) Stonebridge’s conduct involved repeated actions; it
               was not an isolated incident.
       This fourth factor considers whether the tortfeasor was
recidivist, i.e., whether its conduct involved repeated actions or
was an isolated incident. (State Farm, supra, 538 U.S. at p. 419.)
Reprehensibility is “influenced by the frequency and profitability
of the defendant’s prior or contemporaneous similar conduct.”
(Johnson v. Ford Motor Co. (2005) 35 Cal.4th 1191, 1207.)
“Action taken or omitted in order to augment profit represents an
enhanced degree of punishable culpability . . . .” (Exxon Shipping
Co. v. Baker (2008) 554 U.S. 471, 494.) Hence, in reviewing
punitive damages, due process allows courts to consider the
defendant’s “illegal or wrongful conduct towards others that was
similar to the tortious conduct that injured the plaintiff or
plaintiffs. . . . [A] civil defendant’s recidivism remains pertinent
to an assessment of culpability.” (Johnson v. Ford Motor Co.,
supra, at p. 1204.) “[A] recidivist may be punished more severely
than a first offender [because] repeated misconduct is more
reprehensible than an individual instance of malfeasance.”
(Gore, supra, 517 U.S. at p. 577.)
       Stonebridge does not appeal from the directed verdict
finding that its policy’s “Necessary Treatment” definition was a
limitation of coverage that was unenforceable. The evidence
shows that Stonebridge had a business practice of employing that
same “Necessary Treatment” definition to deny claims for
hospitalization or emergency room visits submitted by other




                                20
insureds in addition to Nickerson.2 Thus, Stonebridge repeatedly
relied on an unenforceable provision to deny coverage to its
insureds. Additionally, Stonebridge utilized the same bad faith
claims-handling practice against others that it used against
Nickerson. Neither Hammer nor anyone she knew at
Stonebridge ever requested a medical peer reviewer contact the
treating physician, and Stonebridge’s vice president of claims
testified that the claims-handling procedure utilized by Hammer
was authorized at the corporate level. Thus, Stonebridge had a
practice of obstructing communication between outside reviewers
and the insureds’ treating doctors. Stonebridge clearly placed its
interests above that of its insureds and repeatedly profited both


2      Stonebridge asserts without any citation to the record that
the trial court permitted Nickerson to admit into evidence
“unauthenticated records” of Stonebridge’s denials of claims to
225 other Californians based on the “Necessary Treatment”
definition (Exhibits 33 & 36) “over Stonebridge’s objection.” We
are unable to locate any place in the record where Stonebridge
objected to admission of these exhibits and Stonebridge cites us
to none. In fact, Exhibit 36 is Stonebridge’s own response to
interrogatories. Accordingly, even were we to conclude the
evidence was inadmissible -- a determination we do not
make -- Stonebridge has forfeited any objection to the admission
of these exhibits. (Platzer v. Mammoth Mountain Ski Area (2002)
104 Cal.App.4th 1253, 1260.)

      Stonebridge also suggests that the evidence does not
support a finding of recidivism by inviting us to reevaluate
Exhibits 33 and 36, admitted into evidence. We have reviewed
the record, including the exhibits Stonebridge cites. They show
that Stonebridge repeatedly utilized the same “Necessary
Treatment” provision to deny claims to other insureds.




                               21
from the sale of such unlawful insurance policy clauses to
Nickerson and others, and from its wrongful claims-handling
practices. Indeed, Stonebridge did not appeal from the jury
verdict of liability on the bad faith cause of action. Manifestly,
the denial of coverage here was the result of a practice repeatedly
utilized, and not an isolated incident. This factor weighs in favor
of a finding of a high degree of reprehensibility.
       We reject out of hand Stonebridge’s suggestion that the
trial court improperly permitted the jury to punish it for its
handling of other insureds’ claims. California has the
“constitutional freedom to use punitive damages as a tool to
protect the consuming public, not merely to punish a private
wrong.” (Johnson v. Ford Motor Co., supra, 35 Cal.4th at p.
1206.) “To consider the defendant’s entire course of conduct in
setting or reviewing a punitive damages award . . . is not to
punish the defendant for its conduct toward others. An enhanced
punishment for recidivism does not directly punish the earlier
offense; it is, rather, ‘ “ ‘a stiffened penalty for the last crime,
which is considered to be an aggravated offense because a
repetitive one.’ ” ’ [Citation.] . . . By placing the defendant’s
conduct on one occasion into the context of a business practice or
policy, an individual plaintiff can demonstrate that the conduct
toward him or her was more blameworthy and warrants a
stronger penalty to deter continued or repeated conduct of the
same nature.” (Id. at pp. 1206–1207, fn. 6.)
       Stonebridge argues that this reprehensibility factor is
absent here because the record lacks any evidence that it was
aware that the “Necessary Treatment” definition was
unenforceable at the time it denied Nickerson’s and others’
claims for that reason. Thus, Stonebridge argues, it did not




                                22
enforce a policy provision it knew was unenforceable. It goes
without saying that if Stonebridge seeks to do business in
California it must follow California law. (See Cal. Code Regs., tit.
10, § 2695.1, subd. (e) [governing unfair or deceptive acts or
practices in the business of insurance and stating, “All licensees,
as defined in these regulations, shall have thorough knowledge of
the regulations contained in this subchapter”].) It has long been
the law in California that “Any provision purporting to limit
coverage must be ‘ “conspicuous, plain and clear.” ’ [Citation.]”
(Holcomb v. Hartford Casualty Ins. Co. (1991) 230 Cal.App.3d
1000, 1006; accord, State Farm Mut. Auto Ins. Co. v. Jacober
(1973) 10 Cal.3d 193, 201-202.) Merely because those prior
similar incidents did not result in an earlier finding of bad faith
does not entitle Stonebridge to keep this clause in the policy with
impunity until a court finds it is unenforceable. Historical
evidence shows prior similar incidents in which Stonebridge
relied on the “Necessary Treatment” definition to limit coverage.
The focus of this reprehensibility factor is on “the frequency and
profitability of the defendant’s prior or contemporaneous similar
conduct.” (Johnson v. Ford Motor Co., supra, 35 Cal.4th at p.
1207; Exxon Shipping Co. v. Baker, supra, 554 U.S. at p. 494.)
The evidence shows that Stonebridge did profit repeatedly
thereby. This reprehensibility factor weighs against the insurer.3

3     Stonebridge argues that the discovery sanction order and
instruction to the jury that it did not comply with two court
orders to produce documents cannot be used to support a
reprehensibility finding because its litigation conduct was not the
subject of the bad faith claim upon which the punitive damages
award was premised. (De Anza Santa Cruz Mobile Estates
Homeowners Assn. v. De Anza Santa Cruz Mobile Estates (2001)
94 Cal.App.4th 890, 918.) Regardless of whether the jury



                                23
      (v)     The harm was the result of intentional deceit, not
              mere accident.
      Turning to the fifth factor, the harm Nickerson suffered as
the result of Stonebridge’s conduct was not accidental, but the
result of a deceitful practice designed to deny him his policy
benefits. The jury found Stonebridge engaged in fraud, defined in
the instructions thusly, “ ‘Fraud’ means that
Stonebridge . . . intentionally misrepresented or concealed a
material fact and did so, intending to harm . . . Nickerson.” Thus,
the jury found Stonebridge engaged in “intentional
misrepresentation, deceit, or concealment” (Civ. Code, § 3294,
subd. (c)(3), italics added), and so Stonebridge’s conduct was
necessarily not accidental.4


improperly folded this fact into its calculation of the punitive
damage award, we do not consider Stonebridge’s litigation
conduct in our de novo determination of whether the remitted
punitive damage award is constitutionally defensible under the
due process clause.
4      In challenging this reprehensibility factor, Stonebridge
relies on Amerigraphics, supra, 182 Cal.App.4th 1538.
Amerigraphics held that the defendant Mercury’s offensive
claims-handling conduct “ultimately involved only one insured”
and the evidence fell short of demonstrating the insurer
defendant’s conduct constituted “intentional malice.” (Id. at
p. 1563.) The court reasoned although the insurers’ claims-
handling was egregious, the evidence did not “suggest that
Mercury was guided by this goal from the outset.” (Ibid.)
Stonebridge’s reliance is misplaced. Unlike Amerigraphics,
Stonebridge’s denial of coverage was the result of a concerted
practice of wrongfully relying on an unenforceable policy
provision and bad faith claims-handling practice that affected
others. Stonebridge’s denials either predated or were



                                24
       Stonebridge contends there is no evidence it committed
fraud, with the result there is no basis for the predicate finding
justifying any punitive damage award. (Civ. Code, § 3294, subd.
(a).) We disagree. In the context of punitive damages, “[a]ll that
is required is that the fraud must equate to the conduct which
gives rise to liability – in this case bad faith. [Citation.]”
(Notrica v. State Comp. Ins. Fund (1999) 70 Cal.App.4th 911,
947-948.) Civil Code section 3294 defines fraud as “an
intentional misrepresentation, deceit, or concealment of a
material fact known to the defendant with the intention on the
part of the defendant of thereby depriving a person of property or
legal rights or otherwise causing injury.” (Civ. Code, § 3294,
subd. (c)(3).) The defendant must have “actively sought an injury
to” the plaintiff’s rights, and “not [be] merely indifferent to” those
rights. (Simon, supra, 35 Cal.4th at p. 1181.)
       We are guided by the basic rules of appellate review
(Gyerman v. United States Lines Co. (1972) 7 Cal.3d 488, 492,
fn. 1) that do not limit us to the evidence specified in closing
argument. Accordingly, the historical evidence shows first that
Stonebridge limited the scope of its promise of coverage by
burying it in the definition of “Necessary Treatment,” which
constitutes a concealment designed to increase Stonebridge’s
profits by depriving policy holders of their policy benefits.
Second, Stonebridge’s practice was never to authorize peer
reviewers to communicate with treating physicians, thus
intentionally concealing material information from the claims’
functional decision-maker so as to limit the amount Stonebridge


contemporaneous with its denial of Nickerson’s claim. Stated
otherwise, this was Stonebridge’s goal from the outset.




                                 25
would have to pay out on its policies.5 With particular reference
to Nickerson, Stonebridge deliberately withheld Dr. Nguyen’s
letter from its peer reviewer. As Stonebridge requested his
medical records, Nickerson would reasonably understand that his
physician’s treatment decisions would be considered by the peer
reviewer. Stonebridge was required to fully inquire into possible
bases that might support Nickerson’s claim. (Egan v. Mutual of
Omaha Ins. Co. (1979) 24 Cal.3d 809, 819.) Instead, in
withholding Dr. Nguyen’s letter from the outside reviewer,
Hammer screened the mail to be sent to the reviewer and made
what is essentially a medical decision that the letter contained no
new information. Insurers may not ignore the opinion of treating
physicians absent a showing the physician’s judgment is either
“plainly unreasonable, or contrary to good medical practice.”
(Sarchett v. Blue Shield of California, supra, 43 Cal.3d at p. 13.)
By obstructing unfettered communication between the treating
physician and the reviewer, Stonebridge deprived Nickerson of
his legal right to his policy proceeds.
       Stonebridge disagrees that its failure to check the box on
the transmittal form allowing the peer reviewer to speak with the
treating physician constituted fraud. Stonebridge argues the box
refers only to the “ ‘type of review’ ” requested and otherwise it


5     In its supplemental briefs, Stonebridge points to Hammer’s
testimony that the insurer does not have a policy of prohibiting
reviewing doctors from consulting with treating physicians.
Nonetheless, the jury was entitled to infer that Stonebridge had a
custom and practice of never checking the box allowing the peer
reviewer to consult with the treating physician given Hammer’s
testimony that neither she nor anyone at Stonebridge had ever
requested a reviewer contact the treating physician.




                                26
had no obligation to ensure that the peer reviewer speak with the
primary care physician. Stonebridge adds that in any event the
peer reviewer received all the medical records of Nickerson’s
hospital treatment.
       However, the box authorizing this communication exists on
the transmittal form and so the failure to check it precludes
contact and erects a barrier to the free flow of pertinent
communication. “ ‘Jurors, not appellate justices, hear the
evidence and determine the facts. Properly instructed, they are
the primary arbiters of acceptable behavior between an insurer
and its insured. It is they, with their collective understanding of
the limits of what decent citizens ought to have to tolerate, who
are charged with assessing the degree of reprehensibility and
meting out an appropriate financial disincentive for untoward
claims practices. Their authority is not unbridled. However, our
role in reviewing the jury’s work is a deferential one.’ ”
(Amerigraphics, supra, 182 Cal.App.4th at p. 1560.) Here,
substantial evidence supports the jury’s finding Stonebridge
committed fraud as defined in Civil Code section 3294,
subdivision (c)(3) to justify punitive damages in the first place.
In turn, this evidence demonstrates the fifth reprehensibility
factor, namely that “the harm [Nickerson suffered] was the result
of intentional . . . deceit,” and not mere accident. (State Farm,
supra, 538 U.S. at p. 419.)
       To summarize, four of the five aggravating factors of
reprehensibility are present here. Based on Stonebridge’s
conduct, we conclude its culpability is sufficiently reprehensible
as to warrant the imposition of sanctions to punish and deter.
(State Farm, supra, 538 U.S. at p. 419.)




                                27
       b. Comparable civil penalties
       Considering the third guidepost next, it requires us to
consider “the difference between the punitive damages awarded
by the jury and the civil penalties authorized or imposed in
comparable cases.” (State Farm, supra, 538 U.S. at p. 418.) The
trial court here relied on penalties imposed by the Department of
Insurance of $10 million and $3.6 million. While we may
consider both civil penalties actually imposed and those
authorized in comparable cases (Boeken v. Philip Morris, Inc.
(2005) 127 Cal.App.4th 1640, 1699), the penalties the trial court
considered are not analogous to this situation because they
involved the wrongful rescission of entire medical insurance
policies, not the wrongful restriction of coverage. Rather than
pointing us to a penalty that parallels this case, Nickerson
concedes that this guidepost “is of limited utility,” where
Stonebridge is only liable for breach of a common law tort duty.
(Simon, supra, 35 Cal.4th at p. 1184.) Therefore, we do not
consider this guidepost in “the calculus of the constitutional
maximum of punitive damages.” (Amerigraphics, supra,
182 Cal.App.4th at p. 1566.)
       c.    The ratio of punitive damages to actual or potential
harm
       (i)   The legal principles
       Turning to the second of the Gore guideposts, the ratio
between punitive and compensatory damages is “a central feature
in [the] due process analysis.” (Exxon Shipping Co. v. Baker,
supra, 554 U.S. at p. 507, italics added.) It is likewise the central
issue in this appeal. Nickerson contends that the punitive
damage award should be fixed at greater than the 10:1 ratio the
trial court employed. Stonebridge contends in its briefs that a




                                 28
ratio of 10:1 was excessive under the State Farm guidelines and
the facts of this case. (State Farm, supra, 538 U.S. at p. 418.)
       Punitive damages must bear a “ ‘reasonable relationship’ ”
to compensatory damages or to the plaintiff’s actual or potential
harm. (Gore, supra, 517 U.S. at pp. 575, 580; State Farm, supra,
538 U.S. at pp. 424-426; accord, Bullock v. Philip Morris USA,
Inc., supra, 198 Cal.App.4th at p. 563.) “[C]ourts must ensure
that the measure of punishment is both reasonable and
proportionate to the amount of harm to the plaintiff and to the
general damages recovered.” (State Farm, supra, at p. 426.)
       The Supreme Court has “consistently rejected the notion
that the constitutional line is marked by a simple mathematical
formula,” and “reiterate[d its] rejection of a categorical approach.”
(Gore, supra, 517 U.S. at p. 582.) Although repeatedly declining
to establish a ratio beyond which a punitive damage award could
not exceed (State Farm, supra, 538 U.S. at pp. 424-425), the high
court found “instructive” decisions approving ratios of four to one,
and recognized that in the past, “few awards exceeding a single-
digit ratio between punitive and compensatory damages, to a
significant degree, will satisfy due process.” (Id. at p. 425.)
       In California, our Supreme Court discerned the following
presumption from the high court’s endorsement of single-digit
ratios: “ratios between the punitive damages award and the
plaintiff’s actual or potential compensatory damages significantly
greater than 9 or 10 to 1 are suspect and, absent special
justification (by, for example, extreme reprehensibility or
unusually small, hard-to-detect or hard-to-measure compensatory
damages), cannot survive appellate scrutiny under the due
process clause.” (Simon, supra, 35 Cal.4th at p. 1182, italics
added, fn. omitted.) Although “a ratio significantly greater than




                                 29
single digits ‘alerts the court[] to the need for special justification’
[citations]” (ibid.) “the presumption of unconstitutionality applies
only to awards exceeding the single-digit level ‘to a significant
degree.’ ” (Id. at p. 1182, fn. 7, quoting from State Farm, supra,
538 U.S. at p. 425, italics added.)
        Yet, multipliers of less than nine or 10 “are
not . . . presumptively valid under State Farm . . . [e]specially
when the compensatory damages are substantial or already
contain a punitive element. . . . [Citation.]” (Simon, supra,
35 Cal.4th at p. 1182, first italics added.) Our Supreme Court
disagreed that a multiplier of four times the compensatory
damages was the “ ‘outer constitutional limit,’ ” because State
Farm declared that “ ‘these ratios are not binding,’ but only
‘instructive.’ [Citation.]” (Id. at pp. 1182-1183; quoting from
State Farm, supra, 538 U.S. at p. 425.) Our “ ‘function is to police
a range, not a point’ [citation].” (Simon, supra, at p. 1183.)
        The message to be gleaned is that the due process analysis
is flexible and depends on the circumstances in determining
proportionality. (See State Farm, supra, 538 U.S. at p. 425; Gore,
supra, 517 U.S. at p. 582; Simon, supra, 35 Cal.4th at p. 1189.)
As State Farm explicated, “because there are no rigid
benchmarks that a punitive damages award may not surpass,
ratios greater than those we have previously upheld may comport
with due process where ‘a particularly egregious act has resulted
in only a small amount of economic damages.’ [Citations.]
(positing that a higher ratio might be necessary where ‘the injury
is hard to detect or the monetary value of noneconomic harm
might have been difficult to determine’). The converse is also
true, however. When compensatory damages are substantial,
then a lesser ratio, perhaps only equal to compensatory damages,




                                  30
can reach the outermost limit of the due process guarantee. The
precise award in any case, of course, must be based upon the
facts and circumstances of the defendant’s conduct and the harm
to the plaintiff.” (State Farm, supra, at p. 425, quoting Gore,
supra, at p. 582; see Simon, supra, at p. 1182.) In short,
“whether punitive damages must be limited to the amount of
compensatory damages, or any other amount, to satisfy due
process depends on the reviewing court’s consideration of the
three guideposts and the defendant’s financial condition, and the
facts and circumstances in each case.” (Bullock v. Philip Morris
USA, Inc., supra, 198 Cal.App.4th at p. 565.)
       (ii) Based on these principles, the trial court’s remittitur
falls within the maximum permitted by due process.6
       Simon involved a defendant who was found to have
committed promissory fraud that stymied the plaintiff’s attempt
to purchase an office building from the defendant. (Simon, supra,
35 Cal.4th at p. 1166.) The jury awarded the plaintiff $5,000 in
compensatory damages and $1.7 million in punitive damages.
(Ibid.) The Supreme Court applied the Gore guideposts and
concluded only one of the five reprehensibility factors was present
(id. at p. 1181), and the compensatory award was “quite small,”
consisting of only economic damages that measured the actual
harm done to the plaintiff and containing no punitive element (id.
at p. 1189). Simon determined that the “nature and size of the
compensatory award . . . militates for a maximum award at the
top of, but not significantly beyond, the single-digit range,” and

6     Clearly, the jury’s award here, which amounts to a ratio of
543:1 is “ ‘breathtaking’ ” and “far outside the ‘single-digit
neighborhood’ [citation] suggested by the high court in State
Farm.” (Simon, supra, 35 Cal.4th at p. 1183.)




                                31
concluded a ratio of 10 to 1 was consistent with due process.
(Ibid.) The Supreme Court explained, “[i]n some cases, the
defendant’s financial condition may combine with high
reprehensibility and a low compensatory award to justify an
extraordinary ratio between compensatory and punitive
damages. [Citation.]” (Id. at p. 1186.)
       That is exactly what occurred here: Stonebridge’s conduct
evinces a higher level of reprehensibility than in Simon; four out
of the five reprehensibility factors are present here. Nickerson
received a small amount of compensatory damages for his
personal injury, for which the monetary value was difficult to
determine because, as the trial court noted, Nickerson was “stoic”
during his testimony. Nickerson’s $35,000 tort award contains no
punitive element as that award was to compensate him for his
emotional distress, not to punish Stonebridge. Unlike State
Farm, where the plaintiffs were fully compensated for their
economic injury before the lawsuit was brought and so their
substantial emotional distress award was solely punitive in
nature (State Farm, supra, 538 U.S. at p. 426), Nickerson’s
$35,000 award only compensates him for the personal injuries he
suffered from Stonebridge’s bad faith. (See also Walker v.
Farmers Ins. Exchange (2007) 153 Cal.App.4th 965, 974
[plaintiffs recovered substantial economic damages and
emotional distress damages containing a punitive element].)
       Based on our application of the Gore guideposts to the facts
and circumstances of this case, Stonebridge’s reprehensible
conduct that resulted in only a relatively small economic damage
award, and Stonebridge’s $368 million net worth, a significant
ratio of punitive to compensatory damages comports with due
process. We hold the trial court properly remitted the jury’s




                                32
award to the outside constitutional limit of a 10:1 ratio of
punitive to compensatory damages.
       Nickerson and Amicus Curiae, United Policyholders, argue
that in view of the small size of the compensatory damages
awarded Nickerson, a ratio of something larger than the 10:1 in
the remittitur is called for. They point to the trial court’s concern
that where Stonebridge’s conduct was highly reprehensible, a
multiplier of 10 to 1 may function simply as a cost of doing
business. Thus, they argue, the court should have fixed a larger
ratio to achieve a more effective deterrent. While we agree with
Nickerson and Amicus Curiae that Stonebridge may fold this
award into its cost of doing business, we also agree with the trial
court that we are constrained by case law and the Constitution.
The nature and size of Nickerson’s compensatory damage award
does not justify a punitive damage award beyond the
constitutional maximum. While Stonebridge’s financial condition
is an essential consideration to be factored into our analysis, it
alone cannot justify exceeding what due process will allow. We
have considered these facts in our analysis. We conclude that
10:1 is the maximum constitutionally defensible ratio.
       d. The Brandt fees
       As noted, pursuant to the parties’ stipulation, the trial
court fixed the amount of Brandt fees at $12,500 and awarded
that amount, but did not include those fees as compensatory
damages when it calculated the punitive damage award. Our
Supreme Court has since held that Brandt fees awarded by the
trial court after the jury has rendered its verdict are properly
included as compensatory damages in the ratio of compensatory
to punitive damages under the due process clause analysis.
(Nickerson v. Stonebridge Life Ins. Co., supra, 63 Cal.4th at pp.




                                 33
371 & 377.) Accordingly, pursuant to the Supreme Court’s
decision (id. at p. 368), we conclude that the Brandt fees should
be included as compensatory damages in the denominator of the
ratio under the due process clause of the Fourteenth Amendment.
       e. Additional considerations
       To alter the ratio of punitive to compensatory damages,
Nickerson contends the trial court erred in failing to measure the
punitive damage award against additional categories of
compensatory damages, i.e., uncompensated potential harm and
the policy benefits. We disagree. First, Nickerson was fully
compensated for his emotional distress injuries, as he
acknowledged in closing argument, and he does not demonstrate
what potential harm went uncompensated. (See Simon, supra,
35 Cal.4th at p. 1174 [appellant identified $400,000 in
uncompensated harm].) Second, the trial court properly declined
to include the policy benefits in its ratio calculation as punitive
damages are not authorized in contract actions. (Major v.
Western Home Ins. Co. (2009) 169 Cal.App.4th 1197, 1224.)
       Stonebridge asserts that its net worth “cannot justify an
otherwise unconstitutionally permissible ratio.” As noted, under
California law, one of “the essential factor[s] in fixing an amount”
of a punitive damage award is “the defendant’s financial
condition” so as to “serve these goals [of punitive damage awards]
without exceeding the necessary level of punishment.” (Simon,
supra, 35 Cal.4th at p. 1185.) “ ‘[O]bviously, the function of
deterrence . . . will not be served if the wealth of the defendant
allows him to absorb the award with little or no discomfort.’
[Citation.] ‘[P]unitive damage awards should not be a routine
cost of doing business that an industry can simply pass on to its
customers through price increases, while continuing the conduct




                                34
the law proscribes.’ [Citation.]” (Id. at p. 1185.) Stonebridge’s
net worth of $368 million does not justify an impermissible ratio,
but it certainly factors into the determination of the maximum
ratio tolerated by the Constitution.
                           DISPOSITION
       The order denying the motion for judgment
notwithstanding the verdict is affirmed. The order granting new
trial is vacated. The trial court is directed to modify the June 13,
2011 judgment by reducing the punitive damage award to
$475,000. As modified, the judgment is affirmed. Nickerson is to
recover costs.
       CERTIFIED FOR PUBLICATION



                                           ALDRICH, J.



We concur:



             EDMON, P. J.



             STRATTON, J.





      Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.




                                 35
