Trial lawyers are mistaken if they interpret a new ruling by the U.S. Supreme Court as an endorsement of outlandish, multimillion-dollar awards for punitive damages in product liability, personal injury and medical malpractice cases.
The ruling makes clear that states may limit such awards if they are so excessive they deprive defendants of their legal rights.By a 7 to 1 vote, the high court upheld the award of more than $1 million to a town employee in Roosevelt, Ala., who paid health insurance premiums to an agent who pocketed the money, leaving her a $3,800 bill to pay when she was hospitalized for an infection. Most of the award was for punitive damages against the insurance company, which said it knew nothing of the scam.
The ruling was a disappointment to business and insurance groups. They hoped the court would lay down guidelines on punitive awards and set standards for judicial review. One critic accused the court of declaring "open season" on manufacturers.
Yet the record shows that public sentiment is running against the strike-it-rich excesses of sky-high damage suits. Ten states, including Alabama, have set dollar limits on punitive damages; seven now require that state treasuries share in punitive damage awards; 19 have tightened the rules of evidence.
Consumer groups oppose limits on punitive damages. They contend that fear of punishment promotes safety. But the capricious nature of such awards can discourage development of new devices and techniques. It can result in over-testing by doctors to avoid malpractice suits.
Some say rich insurance companies can well afford to pay - so why worry. They conveniently forget that those costs are passed along to all of us in higher prices, higher fees and higher insurance rates.
It's one thing to compensate a victim for economic losses. It's something else, as Justice Sandra Day O'Connor points out, to let juries inflict "potentially devastating penalties wholly at random."