Will other states follow?
On July 19, the Pennsylvania Supreme Court issued an important decision that demonstrates the increasingly fertile landscape for punitive damages. In a decision in The Bert Co. v. Turk, et al., [J-59A-2022 and J-59B-2022] __ Pa. __ (July 19, 2023), the court considered the narrow issue of how a punitive damage awards can be measured when they are assessed against multiple defendants.
While the direct effect of this case is still to be determined, it is an example of one way attorneys can push for increased punitive damages verdicts. It highlights the need to alert clients of the potential for punitive damage exposure, and the available insurance options and guidance that we can provide.
Some background will assist in discussing this decision. Compensatory damages are awarded to make a plaintiff whole and remedy the injury he or she suffered, and they are often awarded against multiple “joint and several” defendants. This means all defendants are equally liable for the full amount of the compensatory damage award to the plaintiff, and any defendant can be obligated to pay any portion of the amount, up to 100%. Of course, the plaintiff cannot collect the full amount from each defendant – he or she is only entitled to the amount of the award one time, not the amount of the award multiplied by the number of defendants. But the point is, all defendants are accountable for the full compensatory damage award.
In contrast to compensatory damages, punitive damages are awarded against a defendant based on the egregiousness of the defendant’s conduct, and are not strictly limited to the harm suffered by the plaintiff. Punitive damages are intended to punish bad actor defendants, and deter them and others from committing similar actions. In considering whether or not the amount of a punitive damage award is reasonable and proper, one factor is the ratio of the punitive damage award to the compensatory damage award.
The Bert Co. v. Turk, et al. case addressed the ratio of punitive damages to compensatory damages. In doing so, the Pennsylvania court noted that the U.S. Supreme Court has not drawn a bright-line rule as to the maximum allowable ratio of punitive damages to compensatory damages. Rather, individual facts and circumstances, including harm suffered by the plaintiff, the actions of the defendant, and how much compensatory damages were awarded will all be weighed when considering the ratio of punitive damages to compensatory damages. However, certain U.S. Supreme Court decisions have indicated that “single-digit” ratios are proper in most circumstances (i.e., punitive damages of less than 10 times compensatory damages).
In a question of first impression in Pennsylvania, and one which the U.S. Supreme Court has never considered, the court looked at how to calculate punitive damages awarded against multiple defendants. At the trial court level, the plaintiff was awarded $250,000 in compensatory damages, which all four defendants were jointly and severally liable for. The jury then imposed punitive damages against the four defendants, in the amount of $300,000 against Defendant A; $500,000 against Defendant B; $500,000 against Defendant C; and $1.5 million against Defendant D. The ratio of punitive damages to compensatory damages was 1.8 to 1 for Defendant A; 2 to 1 for each of Defendants B and C; and 6 to 1 for Defendant D. All of these ratios are within the single-digit guideline.
However, when the total punitive damages imposed across all defendants (a combined $2.8 million) was compared to the total compensatory damages ($250,000), the ratio was 11.2 to 1, over the single-digit guideline. The defendants challenged this ratio as improper under U.S. Supreme Court precedent. After a detailed analysis, the court concluded that the proper approach is to consider the punitive damages on a per-defendant, rather than per-judgment, basis. It cited various legal precedents and reasoning for this decision and held that the punitive damages awarded were appropriate.
Importantly, the court also ruled that a court can consider the potential harm that a plaintiff could have suffered as a result of the defendants’ actions in weighing a punitive damage award, which would not be accounted for in compensatory damages that only reflect actual harm suffered. While this is consistent with Supreme Court precedent, it confirms that courts can look to unrealized risk in analyzing the proper amount of punitive damages. This allows a plaintiff to argue that punitive damages should be measured not just against the actual harm which is remedied by compensatory damages, but also what could have occurred.
This decision underscores the potential for punitive damages to be imposed against corporate defendants, and more broadly, the way that plaintiff attorneys will leverage creative strategies to pursue excess damages. It has been clear for some time that plaintiff attorneys will seek to capitalize on jury willingness to award punitive damages, and this will likely include splitting punitive damages among multiple defendants in order to depress the ratio between punitive damages and compensatory damages. When they can, plaintiff attorneys will also use speculative or nonspecific potential harm which a plaintiff did not actually suffer in order to argue that punitive damages should be awarded and that such damages should not be bound by any strict ratio to compensatory damages.
For a very helpful and timely review of the punitive damage landscape, including coverage options, please see the Related Content on punitive damages.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
