Limiting Punitive Damages

March 20, 1992

One of the most hotly contested issues at the General Assembly this session has been a proposal to impose on victims harsh burdens of proof and evidence in order to collect punitive damages from corporate wrongdoers.

It would require that plaintiffs not only prove that a company engaged in heinous conduct, but that a manager or principal of the company involved committed, knew about or sanctioned that wrongdoing. Awards would have to be commensurate with the harm caused.

Proponents claim this bill would add a measure of predictability to punitive damage awards, which on occasion are outrageous. That is a proper business concern. But it has already been largely accomplished through a recent judicial ruling. In a landmark decision last month, the Maryland Court of Appeals raised the hurdle for plaintiffs by elevating the burden of proof. The court said a jury now has to find by "clear and convincing" evidence that the defendant acted with actual malice -- in full knowledge of and disregard for the harm. This pivotal change will make it much harder for plaintiffs to collect excessive damage awards.

Supporters of the bill think the Court of Appeals ruling doesn't go far enough. That may be so, because mitigating circumstances should be a consideration. But we still think their bill goes too far. Punitive awards are designed to punish and deter corporate wrongdoing. Shouldn't there be some degree of punishment even if managers or principals were ignorant of safety hazards or product defects? Though harm is caused by a lower-level employee, aren't employers ultimately responsible?

The reason for assessing punitive damages is to send a strong message that the behavior in question carries the risk of serious monetary liability. This bill, by severely limiting the scope of allowable punitive damages while simultaneously reducing the size of awards, would defeat the purpose these damages are intended to serve. Can a suitable compromise be arranged?

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