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Punitive Damages in Products Liability Lawsuits

What is products liability?

Products liability is an area of law dealing with litigation against manufacturers and sellers of defective products when such products cause personal injury or property damage to consumers. If the consumer proves that the product was defective and that it caused the injury or loss, the consumer is entitled to damages.

What types of damages are awarded in products liability cases?

In the context of products liability litigation, damages means a monetary award to compensate an injured person for medical expenses, lost wages and the pain and suffering associated with the injury. In addition, the courts can award punitive damages, also called exemplary damages. Punitive damages are awarded to punish the manufacturer or seller that caused the injury when the court finds that the misconduct of the manufacturer or the seller was outrageous. The courts try to deter similar conduct in the future by awarding punitive damages. Punitive damages are aimed at deterrence and retribution.

In what types of product liability cases have punitive damages been awarded?

The courts have awarded punitive damages in cases involving aircraft, motor vehicles, household items, cosmetics, drugs, medical devices, and asbestos-containing insulation products. Although punitive damage awards often make the headlines, a 1995 U.S. Department of Justice study concluded that punitive damages are seldom awarded in products liability cases. In the 360 product liability cases reviewed during the 12-month study, punitive damages were awarded in only three cases.

How is the amount of punitive damages determined?

The jury determines the amount of a punitive damage award. However, the trial judge has authority to reduce or increase the award. In 2003, the U.S. Supreme Court considered the issue of punitive damages in a case involving an insurance company’s bad faith, fraud, and intentional infliction of emotional distress. The jury had awarded the insured and his wife $2.6 million in compensatory damages and $145 million in punitive damages. The trial court reduced the awards to $1 million in compensatory damages and $25 million in punitive damages. The Supreme Court listed three factors to consider in setting a punitive damage award. These factors are: the degree of reprehensibility of the defendant’s misconduct; the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and the difference between the jury’s punitive damages award and civil penalties imposed in similar cases. The Supreme Court concluded that an award exceeding a single-digit ratio between punitive and compensatory damages would usually violate due process. On remand, the trial court used a nine-to-one ratio between compensatory and punitive damages. The final award in the case was $1 million in compensatory damages and $9 million in punitive damages.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.


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