Last week, I wrote about a driver who was using his cell phone when he caused a tragic fatal accident in Texas. A jury there found him liable for $1.8 million dollars in compensatory damages and $20 million dollars in punitive damages. Clearly, the jury was angry with this distracted driver and wanted to tell him and other drivers to hang up and focus on driving. This case provides an opportunity to discuss punitive damages.
Compensatory damages compensate an injured individual for losses like medical bills, lost wages and pain and suffering and compensatory damages are generally covered by insurance. Punitive damages are awarded to punish bad behavior, punitive damages focus on retribution and deterring future bad conduct. Punitive damages are often not covered by liability insurance policies. This means that the defendant, the individual or corporation being sued, remains directly liable for the amount of the punitive damages. As is clear from that Texas case, the amount of any punitive damages award is often completely unpredictable. The extremely high amount of some of these punitive damages awards has raised constitutional issues which have been addressed in the last few years by the United States Supreme Court.
For example, in the Exxon Valdez case, the Supreme Court overturned a $5 billion dollar punitive damages award. That case was governed by specific maritime law because it involved the massive oil leak which occurred after the Exxon Valdez ran aground off the coast of Alaska. The Supreme Court recognized that punitive damages were warranted but it noted that unpredictable and unnecessary punitive awards violate a core notation of our law, that is, that we ought to employ a sense of fairness in dealing with one another. A penalty like punitive damages should be reasonably predictable in its severity so that anyone, even a bad person or corporation, can look ahead with some ability to know what the stakes are when choosing one course of action over another. Because of the variety of cases and since there are no standard damages in negligence cases, the amount of medical bills, lost wages and pain and suffering vary greatly, the Supreme Court did not set a specific dollar amount on punitive damages. Rather, the Court decided to link punitive damage to the amount owed for compensatory damages using a ratio or a multiple. In the Exxon Valdez case, the Court considered a one to one ratio to be a fair limit of punitive damages. The compensatory award in that case designed to compensate many citizens who became ill, lost property values and lost wages, all from the oil spill, was in excess of $280 million dollars so the punitive damages award remained a very significant dollar amount.
In another line of cases, the Supreme Court examined punitive damages under the due process clause of the United States Constitution. In one of those cases, the Supreme Court decided that it would be unconstitutional to award $4 million dollars in punitive damages when the injured party was awarded only $4,000 in compensatory damages. In order to abide by our constitution, the Court felt that there should be some ratio between punitive damages and compensatory damages which would be a ratio of perhaps one to one or slightly higher, depending on a variety of factors including the egregiousness of the conduct.
These cases maybe welcome news to individuals or corporations who choose to behave badly because these cases set some limits and provide some predictability of punitive damages. However, these cases also mean that punitive damages are here to stay. They are legal and they are available to injured parties when those injuries are suffered because of egregious conduct by individuals and corporations.
Punitive damages will be of no concern to most individuals and most companies because they do exactly what our Supreme Court did in deciding these issues: they employ a sense of fairness in dealing with one another. It seems to me that our behavior should, at a minimum, display that sense of fairness. Those who choose to behave to the contrary, including those distracted or drunk drivers who cause accidents, may indeed become liable for punitive damages. Let’s be fair and considerate to our fellow citizens and let’s be careful out there.
John A. Orlando, Esquire is a trial attorney who can be reached by email at firstname.lastname@example.org or by phone at (610) 897-2576 or (215) 864-7176.