Punitive Damages Standards Act


The Punitive Damages Standards Act establishes a standard for liability for punitive damages, raises the burden of proof to clear and convincing evidence, allows a bifurcated trial on the question of whether the defendant is liable for punitive damages, limits the amount of a punitive damages award to twice the amount of the plaintiff’s actual compensatory damages, limits vicarious liability for punitive damages, and precludes imposition of punitive damages when a product or service was approved by a government agency or complies with government regulations. Because the laws governing punitive damages vary among the states, a legislator planning to introduce a punitive damages bill should first obtain information about his or her state’s laws.

Punitive Damages Standards Act

Section 1. {Title}

This Act shall be known and may be cited as the Punitive Damages Standards Act.

Section 2. {Definitions}

For the purposes of this Act, the meaning of the terms specified shall be as follows:

(A) “Clear and convincing evidence” means evidence which leaves no serious or substantial doubt about the correctness of the conclusions drawn from the evidence. It is more than a preponderance of evidence, but less than beyond a reasonable doubt.

(B) “Compensatory damages” means damages intended to make good the loss of an injured party and no more. The term includes general and special damages and does not include nominal, exemplary or punitive damages.

(C) “Malice” means either conduct which is specifically intended by the defendant to cause tangible or intangible serious injury to the plaintiff or conduct that is carried out by the defendant both with a flagrant indifference to the rights of the plaintiff and with a subjective awareness that such conduct will result in tangible serious injury.

(D) “Nominal damages” are damages that are not designed to compensate a plaintiff and are less than $500.

(E) “Product” means any object possessing intrinsic value, capable of delivery either as an assembled whole or as a component part or parts, and produced for introduction into trade or commerce.

(F) “Punitive damages” includes exemplary or vindictive damages and means damages awarded against a party in a civil action because of aggravating circumstances in order to penalize and to provide additional deterrence against a defendant to discourage similar conduct in the future. Punitive damages do not include compensatory damages or nominal damages.

(G) “Service” means all activities engaged in for other persons for a consideration, which activities involve predominantly the performance of a service as distinguished from manufacture or sale of a product and that are regulated, approved, or licensed by a government agency.  Services include, but are not limited to financial services and the provision of insurance.

Section 3. {Pleading Punitive Damages }

(A) An award of punitive damages must be specifically prayed for in the complaint.

(B) The plaintiff shall not specifically plead an amount of punitive damages, only that such damages are sought in the action.

(C) The prayer for punitive damages shall be stricken prior to trial by the court, unless the plaintiff presents prima facie evidence sufficient to sustain an award of punitive damages under this Act to the court at least 30 days prior to trial.

Section 4. {Procedure for Award of Punitive Damages}

(A) All actions tried before a jury involving punitive damages shall, if requested by any defendant, be conducted in a bifurcated trial before the same jury.

(B) In the first stage of a bifurcated trial, the jury shall determine liability for compensatory damages and the amount of compensatory damages or nominal damages.  Evidence relevant only to the issues of punitive damages shall not be admissible in this stage.

(C) Punitive damages may be awarded only if compensatory damages have been awarded in the first stage of the trial. An award of nominal damages cannot support an award of punitive damages.

(D) In the second stage of a bifurcated trial, the jury shall determine if a defendant is liable for punitive damages.

(E) Evidence of a defendant’s financial condition or net worth is not admissible in the proceedings on punitive damages.

(F) In determining the amount of punitive damages, the trier of fact shall consider, to the extent relevant, the following:

(1) The nature and reprehensibility of the defendant’s wrongdoing;

(2) The severity of the harm suffered by the plaintiff as a result of the defendant’s conduct, including whether the harm was physical rather than economic in nature;

(3) The extent to which the plaintiff’s own conduct contributed to the harm;

(4) The duration of the conduct, the defendant’s awareness, and any concealment by the defendant;

(5) The profitability of the conduct to the defendant;

(6) Whether previous judgments or settlements in cases involving the same or different parties and the same conduct or course of conduct that is involved in the present claim have resulted in awards of punitive damages, payment of damages in lieu of future punitive damages, or waivers of the right to recover punitive damages, such that an award of punitive damage in the present case would result in duplicative or excessive punishment;

(7) Whether an award of punitive damages in the present case would potentially impair the ability of successful plaintiffs in other pending cases to obtain satisfaction of any award of compensatory damages that might be made in the favor of the claimants in those pending cases.

(8) Any criminal penalties imposed on the defendant as a result of the conduct complained of by the plaintiff; and

(9) The amount of any civil fines assessed against the defendant as a result of the conduct complained of by the plaintiff.

(G) If a verdict is rendered awarding punitive damages, the trial court shall carefully review the decision of the trier of fact, considering all relevant evidence, including the factors identified in paragraph F above, to ensure that the award does not exceed an amount necessary for the sake of example and to punish the defendant. Trial courts are to reflect in the record their reasons for interfering with a jury verdict, or refusing to do so, on grounds of excessiveness of damages.

(H) The amount of punitive damages shall be reduced pursuant to the contributory or comparative fault principles of the law of this state. In any action in which there are two or more defendants, an award of punitive damages must be specific as to each defendant, and each defendant is liable only for the amount of the award made against that defendant.

Section 5. {Proof Required for Award of Punitive Damages}

Punitive damages may only be awarded if the plaintiff proves by clear and convincing evidence that his or her harm was the result of actual malice. This burden of proof may not be satisfied by proof of any degree of negligence including gross negligence.

Section 6. {Ceiling for Punitive Damages Award}

(A) No award of punitive damages shall exceed two times the amount of the plaintiff’s actual compensatory damages or [SET $ AMOUNT], whichever is greater. If the defendant is an individual or a business with 50 or fewer full-time employees, no award of punitive damages shall exceed two times the amount of the plaintiff’s actual compensatory damages or [SET $ AMOUNT], whichever is less.

(B) Awards of judgment interest, attorneys’ fees, and civil penalties shall not constitute actual compensatory damages for purposes of determining a punitive damages ratio under this subsection.

Section 7. {Vicarious Liability}

(A) The culpability of a defendant for punitive damages whose liability is alleged to be vicarious shall be determined separately from that of any alleged agent, employee, or representative.

(B) Notwithstanding paragraph (A) of this subsection, punitive damages may be awarded against a defendant based on vicarious liability for the acts or omissions of an agent or employee only if the finder of fact determines by special verdict based on clear and convincing evidence that one or more of the following has occurred:

(1) The act or omission was committed by a person employed in a management capacity while that person was acting within the scope of employment;

(2) The defendant was reckless in hiring, supervising, or training the agent or employee and that recklessness was the proximate cause of the act or omission that caused the loss or injury; or

(3) The defendant authorized, ratified, or approved the act or omission with knowledge or conscious or reckless disregard that the act or omission may result in the loss or injury.

(C) Nothing in this subsection shall be construed to expand or increase the scope of vicarious liability for punitive damages under state law.

(D) For purposes of this subsection, “a person employed in a management capacity” means an employee with authority to set policy and exercise control, discretion, and independent judgment over a significant scope of the employer’s business.

Section 8. {Regulatory Compliance}

(A) A defendant shall not be liable for punitive damages if:

(1) The product alleged to have caused the harm was designed, manufactured, packaged, labeled, sold, or represented in relevant and material respects in accordance with the terms of an approval, license or similar determination of a government agency; or

(2) The product was in compliance with a statute of this State or the United States, or a standard, rule, regulation, order, or other action of a government agency pursuant to statutory authority, where such statute or agency action is relevant to the event or risk allegedly causing the harm and the product was in compliance at the time the product left the control of the manufacturer or seller.

(3) The act or transaction forming the basis of the claim involves terms of service, contract provisions, representations, or other practices authorized by, or in compliance with, the rules, regulations, standards, or orders of, or a statute administered by, a government agency.

(B)  This section shall not apply if the claimant establishes that the defendant at any time before the event that allegedly caused the harm did any of the following:

(1) Sold the product or service after the effective date of an order of a government agency to remove the product from the market, to withdraw its approval of the product or service, or to substantially alter its terms of approval of the product or service in a manner that would have avoided in the claimant’s alleged injury; or

(2) Intentionally, and in violation of applicable regulations, withheld from or misrepresented to the government agency information material to the approval or maintaining of approval of the product or service, and such information is relevant to the harm which the claimant allegedly suffered; or

(3) Made an illegal payment to an official or employee of a government agency for the purpose of securing or maintaining approval of the product or service.

Section 9. {Availability of Punitive Damages}

Nothing contained in this Act is to be construed as to creating any claim for punitive damages which is not now present under the law of this state.

Section 10. {Severability Clause}

Section 11. {Repealer Clause}

Section 12. {Effective Date}

This Act shall be effective as to any civil suit for damages commenced on or after the date of enactment of the Act regardless of whether the claim arose prior to the date of enactment.

Originally Approved by the ALEC Board of Directors in 1995.

Reapproved by ALEC Board of Directors on January 28, 2005.

Amended by the ALEC Board of Directors on January 9, 2014.