Vegas Lawyer

Punitive Damage Awards.

The issue of punitive damage awards has been in the news recently because the United States Supreme Court recently visited the issue when it overturned a 145 million dollar award for punitive damages which was originally awarded in a bad faith insurance claim against State Farm Mutual Automobile Insurance Company. See State Farm Mutual Automobile Insurance Co. v. Campbell, 123 S. Ct. 1513 (2003). The U.S. Supreme Court sent the case back to the Utah Court to determine a more reasonable amount when it found that the 145 million dollar punitive damages award violated the Fourteenth Amendment's Due Process Clause prohibiting "the imposition of grossly excessive or arbitrary punishments on a tortfeasor." The United States Supreme Court gave the following factors to consider in the determination of an appropriate punitive damages award: "(1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases." Although the U.S. Supreme Court did not set forth a "bright-line ratio" that a punitive damages award could not exceed, the Court did warn that "few awards exceeding a single-digit ratio between punitive and compensatory damages . . . will satisfy due process." Other factors in this landmark case involved whether a large punitive damages award should be upheld when there is only economic harm as opposed to physical harm. This means it may be possible to distinguish this holding where the harm was for bad faith on the part of the insurance company as opposed to a case where the punitive damages award rested solely on egregious conduct which caused physical harm. Still, the State Farm case shows that punitive damages awards which are over the compensatory damage awards by a double-digit multiplier are likely to face a constitutional challenge. Visit the Vegas Lawyer site to contact a Nevada Attorney and to get information on many legal issues including punitive damage awards.