What are Punitive Damages?

What are Punitive Damages?

If you’ve been injured in an accident at the hands of another, you may be wondering about the damages you could be awarded in a jury verdict or negotiated settlement. Texas has three types of damages available in personal injury lawsuits based on another’s misconduct: economic, noneconomic, and punitive.

Economic damages are designed to compensate you for the actual cost of what you’ve lost due to injury. They include past and future medical expenses and lost income and more. 

Noneconomic damages are intended to compensate you for “physical pain and suffering, mental or emotional pain or anguish, loss of consortium, disfigurement, physical impairment, loss of companionship and society, inconvenience, loss of enjoyment of life, injury to reputation, and all other nonpecuniary losses.”

These two damages are called compensatory damages. They’re designed to put you back in the position you were before the injury occurred.

The third type of damages is punitive damages, which are also called exemplary damages under Texas law.

When Are Punitive Damages Available?

When Are Punitive Damages Available?

Punitive damages are not intended to compensate you for your losses. Rather, they are designed to punish the defendant for their misconduct and to deter others from engaging in similar behavior. However, they are only available in certain cases.

Texas law allows punitive damages to be awarded if the defendant acted with fraud, malice, or gross negligence:

  • Fraud is a “deceitful practice or willful device, resorted to with intent to deprive another of [their] right, or in some manner to do [them] an injury.” 
  • Malice “means a specific intent by the defendant to cause substantial injury or harm” to the plaintiff. 
  • Gross negligence is committing an act that displays a conscious indifference to the safety of others. 

A plaintiff must prove that punitive damages are warranted by “clear and convincing evidence.” This standard of proof is higher than that of a normal personal injury case. It means the evidence leaves the jury with a firm belief or conviction that the plaintiff’s allegations are true.

Are there Caps on Punitive Damages?

A jury may not award a plaintiff an excessive amount of punitive damages. There are two ways the law places limits, or caps, on punitive damages – statutory and constitutional.

Statutory Limits

In Texas, a plaintiff may not recover more punitive damages than the greater of:

  • Two times the amount of their economic damages plus the amount of noneconomic damages, not to exceed $750,000; or
  • $200,000.

For example, assume the jury awards $75,000 in economic damages and $300,000 in noneconomic damages. The cap would be $75,000 times two (2x economic damages) plus $300,000 (noneconomic damages). Therefore, the cap would equal $450,000 — because it is greater than $200,000.

Generally, this limitation does not apply when the defendant’s misconduct involved the intentional commission of a serious felony.

Constitutional Limits

On occasion, a defendant may claim that the amount of a jury’s award of punitive damages is unconstitutional.

Under the Fourteenth Amendment, grossly excessive or arbitrary punishments against a defendant are prohibited. In State Farm Mut. Automobile Ins. Co. v. Campbell, the United States Supreme Court explained the analysis. 

The court provided three relevant factors when considering the constitutionality of a punitive damages award: 

  1. Reprehensibility of the defendant’s conduct;
  2. The ratio of punitive damages to compensatory damages; and
  3. Difference between punitive damages awarded and state statutory limits on them.  

In the case, State Farm provided automobile insurance to Curtis Campbell in the state of Utah. Curtis caused a car accident where a person died, and another was permanently disabled. Despite State Farm investigators concluding and third-party witnesses stating that Curtis was responsible for the accident, State Farm nevertheless contested liability, refused to settle for its policy limit, and went to trial. 

It did not go well, and Curtis ended up suing State Farm for bad faith, fraud, and intentional infliction of emotional distress. Ultimately, Curtis prevailed and was awarded $1 million in compensatory damages and $145 million in punitive damages. In the trial, great emphasis was placed on State Farm’s misconduct nationwide, not just with respect to Curtis.

Upon review, the Supreme Court applied the three factors. For the first factor, the court found that while State Farm’s conduct was not praiseworthy, most of the misconduct demonstrated at trial occurred in other states and not with Curtis’ case. It could not justify awarding punitive damages to deter conduct that did not cause Curtis harm.

For the second factor, the court noted that few awards “exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process.” In this case, the ratio was 145 to one. The court barely discussed the third factor because the $145 million “dwarfed” Utah’s $10,000 fine for grand fraud.

All three factors weighed in favor of unconstitutionality, so the court held that the $145 million punitive damages award was excessive.

Experts in Damages

Economic and noneconomic damages are difficult enough to prove. Punitive damages are even more challenging. Our Houston injury attorneys are experienced in providing the right type of evidence to help get you all the damages you are entitled to in your personal injury lawsuit. Contact Attorney Brian White Personal Injury Lawyers today at (713) 500-5000.