Supreme Court Vacates $290M Punitives; Case ReconsideredIn Light Of State Farm Washington

Insurance and business groups are lauding a decision by the U.S.Supreme Court to vacate a $290 million product liability punitivedamage award.

In the case of Ford Motor Co. v. Romo, the high courtordered the Supreme Court of California to reconsider the punitivedamage award in light of the recent decision in the case ofState Farm v. Campbell.

In the State Farm case, the U.S. Supreme Courtoverturned a $145 million punitive damage award against theBloomington, Ill.-based company, saying it was unfairly punishedfor actions that were legal in the jurisdictions where theyoccurred and for conduct that was unrelated to issues on which itwas being sued.

The high court also said that the $145 million punitive damageaward unfairly exceeded the compensatory award of about $1 million.In general, the Supreme Court said, punitive damages should exceedthe compensatory award by a multiple that is in the singledigits.

In the Ford v. Romo case, the $290 million punitivedamage award was 58 times higher than the $5 million compensatoryjudgment.

“The courts action shows that the plaintiffs lawyers goldengoose for punitive damages is now dead,” said Victor Schwartz,general counsel for the Washington-based American Tort ReformAssociation.

“Plaintiffs lawyers cannot longer try a corporation for itsgeneral bad behavior,” he added.

“They have to focus on what happened to the clients in the case,which is the fair way to proceed,” he said.

David Snyder, assistant general counsel with theWashington-based American Insurance Association, said the recentSupreme Court decisions will make the civil justice system morefair, rational and predictable.

The decisions, he said, take the “jackpot potential” out ofsmall cases, which now must rise or fall on their own merits.

“The public is the real winner because legitimate cases canstill go forward with the possibility of significant damage awards,but nuisance and nonsensical cases may not,” Mr. Snyder said.

Ken Schloman, Washington counsel for the Downers Grove,Ill.-based Alliance of American Insurers, called the decision a“step forward to bringing common sense to the civil justicesystem.”

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, May 26, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.