Top Court Curbs Damages
At a time when Congress and many state legislatures are battling over tort reforms that will limit damage awards, the U.S. Supreme Court moved on its own this month, issuing a decision intended to clarify the constitutional boundaries in such cases.
In State Farm v. Campbell, the high court ruled 6-3 that the $145 million punitive damage award issued in a Utah decision in which compensatory damages were $1 million was excessive, and that it violated the Due Process Clause of the 14th Amendment.
While failing to lay down a definitive standard for such awards, the court clearly indicated that the disparity between compensatory and punitive damages was way too large in this case, and indicated that a "single-digit" ratio would be more likely to pass constitutional muster. Although tort reform advocates want a monetary cap imposed on punitive damages, most insurers and risk managers should be able to live with the guideline set down by the high court.
While we would prefer to see elected lawmakers setting such standards, in the absence of comprehensive legislative action on the federal or state level, we welcome the Supreme Court's intervention. And we applaud the fact that no arbitrary damages cap was introduced–just the suggestion of a reasonable, constitutional ceiling. This should give the state courts room to hand down punishments to fit the crime, while restraining them from going overboard.
Reproduced from National Underwriter Edition, April 21, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.
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