US Supreme Court Decision Changes Landscape for Tort Liability
IVsource.net
12 May 2003

A recent -- and quite probably landmark -- US Supreme Court decision limiting the size of punitive damage awards could have major implications for US business.  The decision is likely to affect automotive tort liability cases quite positively for manufacturers, and alter the trade-offs that car-makers must perform in order to bring advanced driver assistance systems to the market.

In a 6-3 decision, the court overturned a $145M award of punitive damages against State Farm Mutual Automobile Insurance.  It also set the clearest guidelines yet for how such awards may be calculated.

Punitive damages are awards used by US courts to punish and deter corporate wrongdoing.  Many consider the level of these awards to be set at outrageously high levels, reflecting an apparent attitude of juries who perceive that big corporations don’t care about the little guy.

Experts consider the recent Supreme Court decision to be highly significant in altering the landscape for punitive damages in favor of businesses.

The decision overturned an opinion by the Utah Supreme Court, which awarded $145M in punitive damages against State Farm for what a lower court had called a pattern of "trickery and deceit" occurring in various states.

In that case, the punitive award was 145 times the $1M awarded in "compensatory" damages, such as pain and suffering.  The Supreme Court majority found on Monday that the $145M award was "excessive" and violated the due process clause of the constitution.

Legal experts said Monday's opinion went further than did a 1996 case involving BMW, which had previously set guidelines for punitive damage awards.

In an opinion written by Justice Anthony Kennedy, yesterday's majority said the ratio between punitive and compensatory awards should not exceed single digits.  In cases where the compensatory award was substantial, a ratio of 1:1 might be more appropriate, the court said.

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