News Release

STUDY SHOWS IMPORTANCE OF FINANCIAL CASES IN PUNITIVE DAMAGES DEBATE

PERSONAL INJURIES GET THE HEADLINES BUT ONLY HALF OF THE PUNITIVE AWARDS

WASHINGTON, D.C., June 16 ­ Although personal injury disputes­ for example, those concerning asbestos or medical devices­have dominated the long--running debate over tort reform and punitive damages, a new study from RAND's Institute for Civil Justice finds that about half of all punitive awards by civil juries in state trial courts involve financial injuries arising from contractual or commercial relationships rather than instances of bodily harm.

Punitive damage awards of any kind are relatively infrequent events, for the most part, occurring in less than 4 percent of all civil jury verdicts, according to previous ICJ research. However, in financial injury cases there is a 1 in 7 chance of a punitive award, and those awards represent a large share of the total damages. Specifically, punitive damages account for more than half the total damages awarded in all financial injury cases, including those cases in which there is no punitive award.

The study, by Erik Moller, Nicholas M. Pace and Stephen J. Carroll, is the first close analysis of trends and patterns in punitive awards for financial injuries. It comes as Congress is considering limiting punitive awards (many states already have caps in place and other states are weighing them) and includes estimates of the effects of capping punitive damage awards at some multiple of compensatory damages.

Carroll is scheduled to discuss the findings at a forthcoming hearing of the Senate Judiciary Committee.

The research draws on a unique ICJ jury verdict database that covers punitive damage cases during the period 1985--1994 in California; New York State; Cook County, Illinois (Chicago); the St. Louis metropolitan area; Harris County, Texas (Houston); and during the period 1992--1997 in Alabama. The jurisdictions represent a diverse sample of legal standards, attitudes and behavior, geographic locations, and demographics, and collectively account for about a quarter of the U.S. population. Key findings (in 1992 dollars throughout):

• Excluding Alabama, punitive damages were awarded in about 14 percent of all financial injury verdicts in these jurisdictions, with most awards occurring in insurance, employment, and real property disputes, in that order. The average (mean) award ranged from $2.1 million in real property cases to $7.9 million in insurance cases. Punitive damage awards tend to be larger, relative to the compensatory award, in insurance cases than in other types of financial injury cases.

• In Alabama, punitive damages were awarded in 17 to 32 percent of financial injury verdicts with an average award of $540,000 to $945,000.

• In the jurisdictions studied, punitive damages were awarded most often in Alabama, California, and Harris County; average awards were considerably higher in California, Cook County, and Harris County.

• Excluding Alabama, for which data on pre--1992 awards are not available, the total number of punitive awards in financial injury cases across all the jurisdictions decreased between the periods 1985--1989 and 1990--1994, both absolutely and as a percentage of the overall number of financial injury jury verdicts. However, the average award amount rose from $3.3 million to $7.6 million between these periods and punitive damages as a percentage of all damages increased from about 44 percent to almost 60 percent

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• In Alabama, punitive damages make up 80 to 86 percent of all damages awarded in financial injury verdicts, a considerably higher percentage than elsewhere.

• Caps on punitive damage awards would have had substantial effects on the cases studied. Excluding Alabama, if punitive damage awards had been capped at the amount of compensatory damages, the total punitive damages awarded would have been reduced by 66 percent. The corresponding figure for Alabama would have been 90 percent. Higher caps would have had smaller, though still substantial, effects: A cap at three times compensatory damages would have reduced the amount of punitive damages awarded in the non--Alabama cases by 40 percent and would have reduced the amount of punitive damages awarded in the Alabama cases by 82 percent.

RAND is a private, not-for-profit organization that helps improve public policy through research and analysis. The Institute for Civil Justice is devoted to objective, non-partisan, empirically based analyses of civil justice policy.