By: Jaimee Nardiello, Esq.
Damages in civil law suits are generally compensatory in nature.
They are meant to compensate the injured party for actual losses. These may be economic losses, such as loss of earnings or medical expenses, or non-economic losses, such as pain and suffering and loss of enjoyment of life.
When the conduct of a particular defendant is intentional or reckless, the injured party may be entitled to a punitive damage award. Punitive damage awards are generally found in cases involving assault, fraud, deceit or recklessness. The purpose of the punitive damage award is to discourage such conduct by the defendant and others in the future. The beneficiary of the award is the plaintiff, the party who was injured and received compensatory damages.
The Supreme Court of the United States in a 2003 decision entitled State Farm Mutual Automobile Insurance Co. v. Cambell had occasion to examine a punitive damage award for reasonableness. A Utah jury awarded a plaintiff $1,000,000.00 in compensatory damages and $145,000,000.00 in punitive damages finding that State Farm acted in bad faith when it failed to settle third-party claims against Mr. Cambell within his policy limits after an automobile accident. The Supreme Court speaking in general terms stated that the amount of punitive damages awarded must be in a reasonable ratio to the compensatory damages. The punitive damage award against State Farm was substantially reduced to reflect reasonableness.
The courts of New York have followed the guidelines of the U.S. Supreme Court in limiting punitive damage awards to a single digit multiple of the amount awarded as compensatory damages. In general, courts will not permit a verdict to stand for punitive damages, which is more than nine times the compensatory damage award. However, in a recent case against an unscrupulous lawyer, who was found liable for unjust enrichment, misappropriation and tortuous interference, the court permitted a multiple of ten to one because the lawyer’s conduct was so reprehensible.
Courts subsequent to State Farm v. Cambell have recognized that there are instances where certain conduct is egregious yet compensatory damages are minimal. In such cases the courts have indicated that a higher multiple between punitive and compensatory damages may be acceptable. Nevertheless, it appears that the courts of the State of New York have uniformly accepted the single digit ratio established by the U.S. Supreme Court in State Farm v. Cambell.