Punitive damages were originally codified in the Field Code. In Morgan v. J-M Manufacturing Company, Inc., [1] the court vacated a $15 million punitive damages award because there was insufficient evidence to support the award. Equally, defendants are inclined to label settlements compensatory, not punitive, so as not to concede that they engaged in egregious behavior. What are the major Homeowners liability exclusions? 1 Similar to the post by Chip Merlin on this blog days ago, clients (and potential clients) rarely recognize how difficult it is to win a "bad faith" insurance case and be awarded damages . However, there is still the possibility of additional exposure beyond the shared limit in a multi-claim scenario. On appeal, the South Carolina Court of Appeals notably did not enforce the states punitive damages cap because Target had neglected to plead the cap as a defense during trial.16 The appellate court also did not address the large ratio of punitive damages to compensatory damages in upholding the $4.5 million punitive damages award. Is it possible to get liability insurance for corporate fraud and bad corporate governance? The fact that . damages of up to five times the compensatory damages or $350,000, with the Did the defendant knew about the victims financial vulnerabilities and take advantage of that knowledge? These awards are not intended to compensate the plaintiff for any harm they have suffered. Thus, whether punitive damages are insurable in Indiana may not be a yes or no question. As a result, businesses naturally seek to mitigate their exposure to punitive damages in civil litigation by procuring insurance, but such insurance may be hard to come by. The purpose of punitive or exemplary damage awards is to punish the defendant for outrageous misconduct and by "making an example" out of the tortfeasor to discourage other people from committing torts. As with an uninsured motorist claim, most states disallow UIM coverage to pay a punitive damage award. Idaho The cap is $250k or three times the compensatory damages, whichever is greater. Therefore, the treble damages in 47 O.S.2011, 10-103 are punitive for the purpose of the exclusion in the policy. Punitive damage values are very subjective. Alabama The cap is $500k or three times the compensatory damages, whichever is greater. It's raining liability lawsuits is everybody suing everybody these days? Attorney Kirk Pasich has an op-ed in the Los Angeles Daily Journal (subscription required) arguing that, under California law, insurers may be obligated to indemnify their policyholders for punitive damages awards. Insurance, for example, may satisfy the underlying purpose of a statute originally intended to provide compensation to tort victims. One common misconception that deserves demystification is the frequency of punitive damage awards in the US. Punitive damages, exemplary damages and civil penalties . But the policy is grounded in the legal showing of "fraud, oppression or malice" required under California law for a punitive award. However, in 2003, the Supreme Court of the United States explained in State Farm v. Campbell that the Fourteenth Amendment prohibits grossly excessive or arbitrary punishments. Punitive damages must be reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered.. The simplest way to buy insurance for punitive damages is to request a clause or endorsement in the CGL policy that affirmatively states that punitive damages are covered by the policy.18 Such a clause may incur additional premium, but including it will ensure that the policy is unambiguous in its intent to cover punitive damages. So, if you were awarded $1 million in compensatory damages, you could not be awarded more than $3 million in punitive damages. In order to obtain such an award against a . The Supreme Court of Appeals of West Virginia explained the analysis as follows: " [i]n an excess suit, the recovery of punitive damages initially awarded in an underlying negligence action depends upon whether an insurance carrier may be held liable for punitive damages under the language of its insurance contract. Like California, prior to 2003 Colorado provided no initial bar to a plaintiff's request for punitive damages. When the plaintiff is seeking punitive damages from both the employer/principal and the employee/agent, use CACI No. When assessing the reasonableness of a punitive damages award, one factor examined by the courts is the ratio of punitive damages to compensatory damages. This article provides an overview of some of the basic concepts of punitive damages and attempts to demystify some common assumptions. Of the remaining 70%, there were ten verdicts over $50 million that had no punitive damages component and 58 verdicts over $10 million with no punitive damages. Nevertheless, given the subjective nature of punitive damages as well as their propensity to inflict real and lasting financial damage on a defendant, it is natural for businesses of all sizes to desire reliable insurance protection for both compensatory and punitive damages. What are contract damages? in California, on "public policy" and point to California Insurance Code Section 533. In California, Arizona, and Florida, punitive damages cannot be awarded against public entities. See the discussion below. By contrast, there will be no money remaining on the puni-wrap policy since it will have been completely eroded by the shared limit of the first claim. Alaska The cap is $250k or three times the compensatory damages, whichever is greater. Even where there are no caps on punitive damages in a given state, there is Supreme Court guidance on the reasonableness of punitive damage awards (see above). The terms punitive damages and exemplary damages are used synonymously. Appellate courts routinely use this guidance to reduce the size of excessive punitive damage awards. However, in some cases, punitive damages are awarded in insurance bad faith cases that arise under an insurance policy. Why do the self-employed need public liability insurance? If the insurer was merely negligent, then the policyholder may recover the value of their denied claim and other . Most of these states require that 50%75% of the punitive damages award be paid to the state. Connecticut has its own unique rule: Punitive damages are capped at the cost of litigation, including attorneys fees. (See Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1154-1155 [noting that Civil Code section 3294(b) does not authorize an award of punitive damages against an employer for the employees wrongful conduct. There are, however, risks to opting for this seemingly straightforward option. In addition, and as will be addressed later, punitive damages are not always covered by liability insurance. U.S. Supreme Court rulings in the past have upheld that fines must be "reasonable and proportionate" to the harm caused by the defendant's actions, but depending on the situation this can be a substantial amount. Punitive damages are commonly asked for in medical malpractice, product liability, and more severe injury lawsuits. The downside to procuring a puni-wrap policy is that the insured may need to buy two policies in order to procure the comprehensive coverage, and will also need to pay an additional, albeit much smaller, premium for the puni-wrap policy. However, other courts approve insurance coverage for punitive damages, From a practical perspective, puni-wrap policies are infrequently triggered because the vast majority of personal injury claims in the US settle and do not go to trial. The general justification underlying the award of punitive damages is that they serve as punishment to the wrongdoer and as a deterrent to the wrongdoer and others. Regular readers of this blog can probably spot the flaw in Mr. Pasichs reasoning already: under California law, punitive damages cannot be awarded against a corporation unless corporate management authorized or ratified the wrongful conduct. A personal injury lawyer at Citywide Law Group can help you recover the compensation you deserve. Colorado, Connecticut, Florida, Georgia, Indiana, Kansas, Nevada, New Jersey, It is clear that the topic of punitive damages is a meaty one, and this article only brushes the surface. Likewise, if a state elects more conservative legislators and judges, there may be new legislation proposed to introduce new caps on damages. The insurers argued that Walmart overpaid the settlement to avoid this outcome and force its insurers to pay for the entire sum. Like so many other states, the issue may be more complex and less clear than it is sometimes portrayed. Punitive damages are damages that are designed to punish the defendant for their conduct. California Civil Code Section 3294 allows a jury to award punitive damages to the plaintiff in a personal injury case. Most important, depending on which law applies to the policy, a court may choose not to enforce the provision regarding insurance for punitive damages because of the public policy considerations delineated above. In addition, even when a state allows for punitive damage coverage, the court hearing the case and deciding the issue may determine it is against public policy for that court to apply the law of another state if doing so would contravene the public policy of the court deciding the issue. legislation imposing caps on exemplary In addition, a court upholding a large ratio may depend on the size of the award itself. . The following presents an overview of the damage caps in place at the time of this writing. For example, in a California employment case, a warehouse worker sued for lost earnings and mental suffering due to disability bias.14 The jury awarded him $70,000 in compensatory damages and $550,000 in punitive damages. Are punitive damages insurable in OK? In addition, four states prohibit insurance coverage for punitive damage awards attributable to the direct wrongful conduct of an insured defendant, but allow coverage for punitive damages where the punitive damages are awarded for vicarious liability.17 Finally, the law is unclear in three states and Washington, DC, creating much uncertainty for insured defendants in those states as to whether or not there will be coverage for punitive damages. Essentially, the insurer must have deliberately tried to either harm or defraud the policyholder. In the legendary McDonalds hot coffee case from 1994,11 a 79-year-old woman was awarded $200,000 in compensatory damages and $2.7 million in punitive damages against McDonalds after she suffered third-degree burns from coffee that spilled on her lap. Judges, there may be new legislation proposed to introduce new caps exemplary. 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