Tort Reform: Punitive Damages

High insurance premiums, large (sometimes huge) jury verdicts, catastrophic tragedies resulting from lack of due care, and fear that attorneys may be getting too rich is prompting a lot of people and legislators to cry reform

Unfortunately, many of the persistent and some of the influential voices are in the process of demanding that the baby be discarded with the bath water-or worse.

For example, limiting the amount of recovery for pain and suffering to victims of tragedies who may be forced to spend the remainders of their lives in torture and anguish because of someone’s foolish or gross neglect neither solves any problems nor meets the humane requirement that such victims should be entitled to full relief for their injuries-to the extent that money can provide that relief.

Similarly, limiting attorneys’ fees is no solution because capable attorneys may then refuse to handle complicated or chancy cases or claims which require huge amounts of talent, time and litigation expense to pursue. Limitations on attorneys’ fees would frequently harm injured people as much as attorneys.

Despite the publicity being sponsored by special interest groups and worrywarts, there is no reason for public panic. There is, instead, cause for sober reflection upon both the cause and effect of injury-producing events. The threat of litigation and large damage awards has unquestionably resulted in greater care in everyone’s activities. Ralph Nader is entitled to much credit for this public benefit. Similarly, court erosion of the old legal doctrine of “buyer beware” has also brought refreshing new dimensions to advertising, selling and promotional activities.

On the other hand, there have been “runaway” jury verdicts and court awards. Many of those hit the headlines when they are first decided, but the cases go unnoticed when the awards are later reduced on appeal or settled for fractions of the original verdict or judgment amounts. Also, some of the huge judgments are fully justified by the particular facts and circumstances involved.

There is one area in the legal process where creative thought may be warranted. That involves punitive damages. The concept of punitive damages has evolved upon the philosophy that when the party responsible for an injury has either been grossly negligent or has acted out of malice or willful and wanton disregard for the rights of the injured party, more than compensating damages should be awarded against the wrongdoer.

The theory behind the award for punitive damages is to punish the offender and deter him and others from future similar conduct. The punishment-deterrent purpose is therefore intended for the benefit of society in general.

With that general purpose in mind, the obvious question is: Why should the injured party recover the punitive damages in addition to damages necessary to compensate for his losses? Also, should punitive damage awards be eliminated or limited?

I suggest that thought be given to the idea that, instead of eliminating or limiting the amount of punitive damages, the award should not go entirely to the injured party (who has otherwise been compensated) but perhaps to a special fund instead. Monies in the fund could then be paid to persons who have sustained injuries, but who were unable to recover because those responsible had no insurance or were otherwise unable to pay the award against them.

The change in beneficiaries of punitive damages might also be coupled with some reasonable limitation upon attorneys’ fees payable for recovery of the punitive damage portion of any award.

This concept would continue the time-honored punishment-deterrent benefit of punitive damages while, at the same time, utilizing portions of punitive damage award recoveries for the benefit of eligible but uncompensated victims.

At least it’s something to think about.

Update Note: Several months after this Brief was published the Colorado legislature adopted the suggestion-in part. It passed a law providing that one-third of any punitive damage award must be paid into the Colorado State General Fund. Section 13-21-102(4), C.R.S. (1986 Cum. Supp.). The author apologies if this Brief contributed to the adoption that law! The State General Fund should not benefit from anyone’s injuries or efforts.

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