South Carolina Decision Highlights Need to Act On Punitive Damages
October 20, 2009
A recent South Carolina lawsuit highlights the problem of allowing emotionally-charged juries to award punitive damages with no guideposts. The case involved a man who claimed his medical insurance was wrongly rescinded. The jury originally awarded $186,000 for actual damages and a bad faith rescission claim. Sounds reasonable. But the jury tacked on an additional $15 million in punitive damages.
The South Carolina Supreme Court stepped in and reduced the punitive damages to $10 million, which it claimed was 9.2 times the “potential harm” the plaintiff suffered. But the punitive damages need to bear some relation to the actual harm, not some back-of-the-envelope calculation. Even using the Court’s absurdly high 9.2 ratio, the punitive damage award should have been no higher than $1.7 million.
Even more ominously, in a footnote the Court concluded that although punitive damage awards in South Carolina “have been on the low end of the single-digit-ratio spectrum…that does not mean the constitution requires this to be so.” In other words, the Court practically invited aggressive trial lawyers to shoot for ridiculously high punitive awards down the road.
All of which makes it even more urgent for South Carolina’s legislature to enact a pair of bills that would limit punitive damages to three times compensatory damages or $250,000. This would give runaway juries (and judges) the guidance they need to make reasonable determinations in awarding punitive damages.