NCPA - National Center for Policy Analysis

Plaintiffs' Lawyers Are Exploiting Loopholes In Punitive Damage Limits

October 28, 2002

All sorts of limitations have recently been placed on punitive damages -- prompting creative lawyers to emphasize pain-and-suffering damages as the route to collecting big bucks for themselves and their clients.

Pain and suffering focuses on harm done to the patient. Punitive damages are meant to address the conduct of the defendant. However, some legal experts say it's another question whether juries in practice have in mind a certain settlement, and will use a disguised punitive damages award to get there.

  • Recent U.S. Supreme Court decisions have encouraged judges to scrutinize punitive awards -- while damages for pain and suffering, and other awards that compensate plaintiffs for other losses, are treated with deference.
  • In addition, punitive damages have recently become subject to the federal income tax, while pain-and-suffering awards have not.
  • Many states that do allow punitive damages have enacted fixed caps or limited the permissible ratio between compensatory and punitive damages.
  • Other states have diverted some portion of punitive awards to their treasuries.

Experts suggest that it is easy for plaintiffs to exaggerate psychic injury and that the judicial system offers scant guidance in this area -- other than that the award must "not shock the judicial conscience."

Source: Adam Liptak, "Pain-And-Suffering Awards Let Juries Avoid New Limits," New York Times, October 28, 2002.


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