Lawyers are hopeful that last week's decision by the U.S.Supreme Court to review an Oregon punitive damage award will helpreduce even further the soaring cost of civil litigation toinsurers. The court is expected to hear oral arguments in the casein November or December.

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The case is being reviewed against the background of two new,more conservative judges on the top court and passage last year inCongress of the Class Action Fairness Act of 2005–designed toreduce abuses by helping defendants move cases to the federal courtsystem.

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Three years ago, in a case involving State Farm, the SupremeCourt set constitutional boundaries on the ratio courts can use toreward punitive damages as against compensatory damages.

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Lawyers said the high court's decision to review Phillip MorrisUSA vs. Williams could help reduce the soaring cost of punitivedamage awards.

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“The most recent Supreme Court decision, in the State Farm case,held that the ratio of punitive damages to compensatory damagesshouldn't generally exceed single digits, 9-1, and the Oregon casein question here vastly exceeds that ratio,” said Darren McKinney,a representative for the American Tort Reform Association.“Needless to say, we are hopeful that the Supreme Court will thistime make it much clearer as to what its thinking is on punitivedamages.”

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In the State Farm case, a Utah jury had assessed compensatorydamages of $1 million and punitive damages of $145 million. Thecase dealt with State Farm's initial refusal to settle a claim fora policyholder. The Supreme Court later reversed that, with JusticeAnthony Kennedy holding for the majority that the punitive damageswere “neither reasonable nor proportionate to the wrongcommitted.”

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In the latest case, the Oregon Supreme Court upheld a juryverdict that granted the widow of a longtime smoker $821,485.50 incompensatory damages and $79.5 million in punitive damages–a97-to-1 ratio.

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“I think this is a critical opportunity to help lower courts,”said Lori Nugent, who chairs the enterprise risk practice group atCozen O'Connor in Chicago.

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Frequently, she said, “we see lower courts struggling with thecomparative weight to place on the reprehensibility guideposts andthe ratio guideposts.” (See infographic.) “They also frequentlystruggle with whether reprehensibility goes to the horrible natureof the conduct or to the mental state of the individuals involvedwith the plaintiffs,” as well as grappling with “the weight andadmissibility of evidence pertaining to nonparty injuries. Thisdecision could address all of these issues.”

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