U.S. Supreme Court Limits Punitive-Damage Awards

Bloomberg ^ | 4/7/3 | Greg Stohr and Laurie Asseo

[WaveThatFlag]

The U.S. Supreme Court put new limits on punitive damages, striking down a $145 million award State Farm Mutual Automobile Insurance Co. was told to pay a Utah couple in a dispute over an accident claim.

The 6-3 ruling said the U.S. Constitution in most cases limits punitive damages to 10 times the harm suffered by the plaintiff. The punitive award against State Farm was 145 times the $1 million the couple had won for mental anguish they suffered when the insurer wouldn't settle a claim against them.

[Mamzelle]

re: The Campbells said State Farm trained employees to take advantage of the most vulnerable consumers and destroyed documents concerning the policy. )))

Now, I wonder why this is written as it is. "The Campbells said--" It would imply that there is some doubt that this is actual fact. The reporter is being careful, for fear of getting himself into trouble. I'd like to know if this assertion was proven, or only suggested. At least, if there was a finding as to this fact, why would something so significant be left out of the story?

CP writes: ...then subject them to losses due to a bonus program and try to destroy the records of it later, then yes, you have acted fraudulently.

Well, I believe this is not a tort, but a very serious crime. Help me out here, isn't destroying evidence very serious? These guys are in jail now, right?

Incentives to vigorously defend are not in themselves fraud. Inconvenient to plaintiff's lawyers, but not a crime. Yet.

[Chancellor Palpatine]

The insurer does not have a right to gamble with its insured's money when a demand is made within the policy limits unless it elects to proceed and pay any excess. Doing it to fulfill a quota compounded it, and lying about the existence of the quota and destroying documents relating to that made it reprehensible.

As to why the customer had such a low limit policy, I can tell you that State Farm is the king of selling crap policies without recommending upping the limits. My company sends me things about this all the time, and as a result, I'm the most insured SOB on earth.

[Mamzelle]

I have superb insurance with a trustworthy company. I sure would like them to stay in business, and would like to continue to be able to afford the premiums.

[Mamzelle]

This is a good finding, do you think?

[Chancellor Palpatine]

You advertise your product as one which protects the assets of your customer. You collect premiums for that, often for many years.

When a claim comes up, and you have an opportunity to resolve the matter within the terms of the policy, you decline to do so, opting to roll the dice with your insured's assets - because after all, it isn't going to cost you any more money than the limits, and you can always get lucky and beat it. Once you lose (and lose big), you make it difficult for your customers to collect the excess, in the hopes that they'll just go away, and gambling on a certain percentage doing that.

Yep, it looks fraudulent to me as a matter of civil law.

[Mamzelle]

re: The insurer does not have a right to gamble with its insured's money when a demand is made within the policy limits unless it elects to proceed and pay any excess. )))

Hmm. How is this right enforced? Is is a statute (I think that's when a specific law is legislated, written down in kind of a rule book), or is it case law (I've been told this comes down through appeals), or tradition? You speak with confidence about "rights"--I don't understand what sort of right you mean.

Now, just as a citizen with only sense for my tool, it would seem very dangerous to force an insurance company to function the way you suggest we have a "right" to expect. If an insurance company cannot quarrel with a demand for payment, it will not be in business very long. I'd like to understand how this works?

[lawgirl]

As a lawyer, I can say YES YES YES! It's great! I am not even going to evaluate the legal theory behind it (LOL) - I am just thrilled with the ruling. I worked over a year for a plaintiff's firm until I was forced to quit over an ethics situation, and I can't believe the vipers that make up the trial lawyers. (as a generalization, of course.)

I am now begging for a job and nearly broke, but not sorry I quit.

[FirstTomato]

My immediate thought was that this is a good thing, but the fact that it met with dissent from such ideologically different Justices concerns me.

[republicofdavis]

I think the more interesting question is why Rehnquist didn't

[Mamzelle]

Just reading as a citizen, the judgement seems to be against cruel and unusual compensation, so I suppose it's good? Punitives still look huge, and this case hinges on that "mental anguish" caterwauling, which is pain and suffering, and not addressed.

I still look for everyone's premiums to increase, and the dishonest to prosper over the honest. At some point, we're all going to be uninsured. Then the lawyers won't love any of us anymore...

You'd think that the "golden goose" story could persuade some of them to slow down on their gorging.

If there are no limits, there will shortly be no insurance.

I hope you find good work, soon.

[Chancellor Palpatine]

The courts had held that insurers had fiduciary duties and that they therefore had a duty of good faith toward their customers long ago. They were split on whether that extended to claimants.

Since then, those duties of good faith had been statutorily codified, and the overall result has been that insurers were less free to arbitrarily deny claims or to throw up spurious policy defenses in order to roll the dice.

[NCLaw441]

I think Thomas et al dissented based upon states' rights arguments. The matter is not one properly before the US Supreme Court. States can make their own laws on these matters.

[nicollo]

Your 83:

This decision will only serve to normalize punitive damages at a specific value. Most unfortunate. The sad thing is that legislatures have entirely punted on this issue. Punitive damages should be abolished.

Economic damages desparately need legislative definition, as well. It's been done in some cases, but it is entirely lacking elsewhere.

I, too, hate to see the Courts walk where legislatures fear to tred.

[FreedomCalls]

But, as we learned from the Court last week, if you're a poor dumb crook, who swipes a few CDs three times, the Court says the punishment of life imprisionment does *Not* have to be proportional to the actual damages, under the three strikes laws.

Theft of a CD is not a felony and therefore would not fall under the "three strikes" rule. However, using a gun to take a CD from someone is a felony and would fall under the "three strikes" rule. If you use a gun, the implication is that you will kill the person if he/she does not comply. Under those circumstances, life imprisonment in exchange for the very real threat of killing someone is highly proportional.

[FreedomCalls]

The 8th Amendment prohibits excessive fines. Since punitive damages are, by definition, a form of punishment imposed on the defendant by a court (a branch of the government), this prohibition would be applicable, I would think.

The one reform that would put an end to the punitive damages scam is for the punitive damages to be treated as a fine and the proceeds be given to the state. No percentage cut for the trial lawyer, no lottery jackpot for the plaintiff. Remember the plaintiff is already being compensated for actual damages.

[APBaer]

The Supreme Court Cases on the three strikes rule had nothing to do with using a gun.

*California charged respondent Andrade with two felony counts of petty theft with a prior conviction after he stole approximately $150 worth of videotapes from two different stores. Under California's three strikes law, any felony can constitute the third strike subjecting a defendant to a prison term of 25 years to life. The jury found Andrade guilty and then found that he had three prior convictions that qualified as serious or violent felonies under the three strikes regime."
The opinion is LOCKYER v. ANDRADE at:

http://supct.law.cornell.edu/supct/html/01-1127.ZS.html

[APBaer]

"There is nothing conservative in this ruling."

I agree, and wonder where some of these posters come off calling themselves "conservatives."

[FreedomCalls]

Andrade was out on bond from the first theft when he committed the second. That would make it a felony even without a gun. Stupid is as stupid does.