The Big News That Everybody Missed
Last week, the US
Supreme Court threw out a substantial punitive damages award against State Farm
Mutual, and the accompanying statements issued by the court could
have some far-reaching positive consequences on several industries, but due to
the developments in Iraq, the news seems to have gone unnoticed…
To keep it simple, the high court ruled by a 6-3 vote that a $145 million punitive damage
award stemming from a car accident,
was excessive, relative to the $1 million in compensatory damages.
Writing for the majority, Justice Kennedy said that “courts must ensure that the
measure of punishment is both reasonable and proportionate to the amount of harm
someone suffers. The court also said that “in practice, few awards
exceeding a single-digit ratio between punitive punitive and compensatory
damages, will satisfy due-process (procedural right).” In other words, ratios
above 9 to 1 could potentially be unconstitutional — “could” being the operative word
here.Â
By issuing these strong statements, it now appears that the Supreme Court
is getting involved in the whole tort-reform debate and letting the public know
where it stands on the issue. And the case may have some positive effects on
companies that are plagued by pending law suits against them. Some of the
potential beneficiaries are insurance, financial services, and drug makers.