Utah Supreme: Denying Claim Over Nude Photos May Cost Insurer Nearly $3M

UMIA Insurance refused to accept an $800,000 settlement in a malpractice suit against a plastic surgeon who shared nude before-and-after photographs of a patient’s body with a Fox News affiliate.

The insurer could pay more than three times that amount under a decision Thursday by the Utah Supreme Court.

The court ruled that the trial court erred by dismissing Dr. Renato Saltz’s petition for punitive damages against UMIA on top of the $500,000 in compensatory damages and $987,877.62 in attorney fees that a Salt Lake County jury had awarded him. Punitive damages generally cannot exceed three times the amount of actual damages in Utah courts.

“A reasonable jury could conclude that UMIA ‘manifest[ed] a knowing and reckless indifference toward, and a disregard of, [Saltz’s rights],” the court said, quoting a Utah statute.

Conilyn Judge sued Saltz after he provided the Fox News affiliate with photographs of her body from neck to mid-thigh for a story on plastic surgery. She had signed a release agreeing to be photographed on the condition that her identity not be revealed and consented to an on-camera interview. Fox News in 2008 broadcasted an edited version of the photos, with black bars obscuring the breasts and genitals, in a story about how to choose a competent plastic surgeon.

Saltz received a letter from Judge’s attorney a month later. She filed a lawsuit against the doctor and Fox News in early 2009, seeking “millions of dollars” in damages, according to the court’s opinion.

Saltz had purchased a professional liability policy from UIMA with a $1 million limit. He also had a general liability insurance policy with The Hartford.

Fox agreed to settle the case for $300,000, but UMIA refused Judge’s offer to settle with Saltz for $800,000. It offered $100,000 instead.

The Salt Lake County trial court dismissed Judge’s lawsuit in 2016, after her ex-husband testified that she had appeared in public wearing a bikini.

Judge appealed, but UMIA withdrew its settlement offer in the meantime. In 2016, the Utah Supreme Court reversed the trial court and revived Judge’s claim.

This time, she demanded $1 million to settle the case. UMIA told Saltz that his policy did not cover Judge’s claim and suggested that he ask the Hartford to reconsider its decision denying coverage.

Saltz obtained his own counsel and negotiated a settlement that required him to pay $500,000 out of his own funds, with The Hartford paying an additional $500,000 to Judge.

Saltz sued UMIA alleging breach of contract and bad faith.

His attorney, Julianne P. Blanch with Parsons Behle & Latimer in Salt Lake City, said Thursday that the doctor asked for punitive damages because the insurer’s behavior was egregious. UMIA did not tell Saltz that there was a coverage issue until after eight years of litigation.

“He felt he had been abandoned at his time of biggest need,” she said.

While Utah courts have set a 3-to-1 ratio as a “guidepost” for punitive damage awards, Blanch said there is no hard-and-fast rule. She said that she had not yet conferred at length with her client and can’t say how large of an award they will seek.

Even without punitive damages, the claim has already cost UMIA $1,487,877.62 because of the jury award of compensatory damages and attorney fees. If punitive damages are added at three times actual damages, the cost of the claim comes to nearly $3 million.

Blanch said the decision’s greatest impact may be that it clarifies a 1971 decision titled State Farm Mut. Auto Ins. Co. v. Kay. In that case, the court held that a plaintiff can show that they were prejudiced — a condition for pursing a bad faith claim — if the insurer’s action had deprived the insured of an opportunity to prepare for trial or effect a settlement.

In the Saltz case, the Supreme Court went further. It held “that an insurer has a duty to accept a settlement offer at or below policy limits if there is a substantial likelihood of an excess verdict.”

An insurer’s duty of good faith does not require the insurer to ignore its own interests in defense of the insured,” the opinion says, citing case law. “But an insurer cannot ‘gamble with or sacrifice the insured’s interest simply to protect itself.'”

The court upheld the jury verdict finding that UMIA had breached its duty of good faith, but reversed the trial court’s dismissal of Saltz’s request for punitive damages and remanded the case so the amount can be determined. The court also held that Saltz is entitled to his attorney fees for the cost of appeal.

Editors note: Photo is for illustrative purposes only.