$21 Million Verdict Against Allstate for Abusive Conduct Upheld by Arkansas Supreme Court

Jan. 28, 2011 Noel E. Oman - Arkansas Online LITTLE ROCK ”” The Arkansas Supreme Court on Thursday affirmed the decision in a case in which a Pulaski County jury found that an insurance company defamed a radiologist, and the high court reinstated $15 million in punitive damages the presiding judge had reduced to $6 million. The 5-2 decision, awarding Dr. Jon Dodson $21 million in compensatory and punitive damages in his case against Allstate Insurance Co., capped a legal odyssey spanning three trials over 14 years in Pulaski County Circuit Court. Dodson originally sued Allstate and two Allstate agents in 1997, alleging they defamed him by telling people who were insured through Allstate or filing claims against the company that Dodson provided unqualified physical therapy at his office and that it amounted to fraud. The lawsuit also said the insurer and its agents said Dodson overcharged for his treatment, that his medical practice in Little Rock and Pine Bluff was illegal, that the intent was to damage his professional reputation and that they intentionally damaged his business relationship with a third party. Allstate and its agents denied the allegations and filed a counterclaim, alleging Dodson “engaged in numerous deceitful, fraudulent and illegal acts,” that included Dodson failing to use licensed physical therapists and misrepresenting the treatment he provided, according to the 34-page opinion written by Justice Robert Brown. Allstate dropped its counterclaim before the first trial, held in September 1999. Dodson, similarly, dropped his claim against the two agents before the trial ended. The jury found for Allstate. On appeal, the Supreme Court ordered a new trial, agreeing with Dodson’s point that Circuit Judge Ellen Brantley erred in not allowing him to use Allstate’s withdrawn counterclaim as impeachment evidence. The second trial began in January 2004, but Brantley called a mistrial after a juror aired her opinion of the case to other jurors during the trial. Brantley eventually granted a summary judgment in favor of Allstate. But the state’s high court overturned the summary judgment and returned the case for a third trial, which was held in May 2009. The jury in that trial awarded Dodson $6 million in compensatory damages and $15 million in punitive damages, which the trial judge reduced to $6 million. In the latest appeal, Allstate claimed that Brantley gave two instructions to jurors that “in effect directed the jury to rule in Dodson’s favor,” Brown wrote. One instruction told jurors Dodson was subject to the requirements of the Arkansas Medical Practices Act, and not the Arkansas Physical Therapy Act. The second instruction said Dodson and other doctors, as a matter of law, were exempted from the Arkansas Physical Therapy Act. Those instructions amounted to the trial judge commenting on evidence and “impermissibly” adopting Dodson’s theory of the case, according to Allstate, which said Brantley’s instructions also were “incorrect statements of law.” Dodson said Allstate waived its right to appeal on that point because it didn’t specifically object to them at trial. The high court sided with Dodson, but added that both instructions accurately reflected law. Allstate also contended on appeal that Brantley erred in allowing Dodson’s insurance industry expert, Gary Frye of Nevada, to testify concerning the insurer’s nationwide practice of “deliberately low balling small insurance claims for bodily injury and taking advantage of financially vulnerable personal-injury victims.” Allstate called the testimony “irrelevant, inflammatory and improper,” Brown wrote. The Supreme Court, however, is “of a mind that Frye’s testimony sufficiently related to Allstate’s court of conduct,” Brown wrote. The high court also disagreed with the insurer’s argument that the evidence didn’t support the punitive damages. “The evidence presented in this case was such that a jury could have concluded that the acts committed by Allstate were pursued with a conscious indifference for Dodson and with deliberate intent to injure him.” Meanwhile, the Supreme Court agreed with Dodson that the original $15 million in punitive damages were “appropriate and not excessive and that the trial court should be reversed on this point.” Chief Justice Jim Hannah, joined by Justice Donald Corbin, dissented. They said the special jury instructions were “improper and deprived Allstate of a fair trial by essentially telling the jury what decision to reach,” Hannah wrote. They also said the record didn’t show Allstate was the cause of Dodson’s lost earnings and that Frye’s testimony was “wholly irrelevant because at issue in this case were statements of local employees” and “his opinions of alleged national policy only confused the jury further.” In the Supreme Court, the case is 10-257, Allstate Insurance Company v. Jon H. Dodson, M.D.