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Aetna Life Insurance Company v. Lavoie
United States Supreme Court
475 U.S. 813 (1986)
Margaret and Roger Lavoie (plaintiffs) had medical insurance through Aetna Life Insurance Company (Aetna) (defendant). In bad faith, Aetna refused to pay for some of Margaret’s medical expenses. The Lavoies sued Aetna in state trial court, seeking payment and punitive damages. The trial court dismissed the bad-faith claim. The Lavoies appealed to the Alabama Supreme Court, which reversed and remanded the trial court’s dismissal. On remand, the jury awarded the Lavoies $3.5 million in punitive damages, one of the largest punitive-damages awards ever awarded in a bad-faith case. Aetna appealed, and the Alabama Supreme Court affirmed the award in a five-to-four decision. Justice Embry cast the deciding vote. Aetna later learned that Justice Embry had filed an action in a county court in Alabama against Blue Cross-Blue Shield (Blue Cross), alleging a bad-faith failure to pay claims. Aetna filed a motion challenging Justice Embry’s participation in Aetna’s case. The state supreme court unanimously denied Aetna’s motion for recusal. Aetna later obtained a copy of Justice Embry’s deposition transcript in the Blue Cross case and learned that Justice Embry had expressed frustration with insurance companies. Justice Embry had also authored the opinion in Aetna’s case while the Blue Cross case was pending. Aetna moved for leave to file an application for rehearing. The state supreme court denied the motion. Blue Cross then settled its case with Justice Embry and paid him $30,000, which was deposited directly into his personal bank account. Aetna appealed to the United States Supreme Court.
Rule of Law
Holding and Reasoning (Burger, C.J.)
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