Tuesday, January 7, 2014

When Are Punitive Damages Appropriate?

Generally, an award for punitive damages requires the offending party to have some form of “intent” in their conduct.     

"Punitive damages" are special punishment fees a party may have to pay for egregious acts.  Punitive damages, when applied, are paid in addition to the money a party must pay as compensation for the damages their acts caused.  In 2008, the United States Supreme Court said that punitive damages "are aimed not at compensation but principally at retribution and deterring harmful conduct."  Exxon Shipping Co. v. Baker, 554 U.S. 471, 492, 128 S. Ct. 2605, 2621, 171 L. Ed. 2d 570 (2008).

The various characterizations of conduct allowing recovery of punitive damages include:

(1) Malice—express or implied, Arizona Publishing Co. v. Harris, 20 Ariz. 446, 181 P. 373 (1919); Magma Copper Co. v. Shuster, 118 Ariz. 151, 575 P.2d 350 (App.1977);
(2) Spite or ill will, State Farm Mutual Insurance Co. v. St. Joseph's Hospital, 107 Ariz. 498, 489 P.2d 837 (1971);
(3) Evil intent or bad motive, Smith v. Chapman, 115 Ariz. 211, 564 P.2d 900 (1977); McNelis v. Bruce, 90 Ariz. 261, 367 P.2d 625 (1962);
(4) Gross negligence, Gila Water Co. v. Gila Land and Cattle Co., 30 Ariz. 569, 249 P. 751 (1926); Iaeger v. Metcalf, 11 Ariz. 283, 94 P. 1094 (1908);
(5) Wanton, reckless or willful acts, Lutfy v. R.D. Roper & Sons Motor Co., 57 Ariz. 495, 115 P.2d 161 (1941);
(6) Intentional misconduct, Id.; Wetzel v. Gulf Oil Corp., 455 F.2d 857 (9th Cir.1972);
(7) Fraud, Jenkins v. Skelton, 21 Ariz. 663, 192 P. 249 (1920);
(8) Oppression, Id.; Salt River Water Users' Association v. Giglio, 113 Ariz. 190, 549 P.2d 162 (1976); Jerman v. O'Leary, 145 Ariz. 397, 701 P.2d 1205 (App.1985);
(9) Extreme, aggravated or outrageous conduct, Lerner v. Brettschneider, 123 Ariz. 152, 598 P.2d 515 (App.1979);
(10) Conduct involving an unreasonable risk of causing distress, Wetzel v. Gulf Oil Corp., supra.;
(11) Reckless disregard for or indifference to the rights, interests or safety of others, Smith v. Chapman, supra.; Salt River Water Users' Association v. Giglio, supra; Sellinger v. Freeway Mobile Homes Sales, Inc., 110 Ariz. 573, 521 P.2d 1119 (1976); Neilson v. Flashberg, 101 Ariz. 335, 419 P.2d 514 (1966); McNelis v. Bruce, supra; Schmidt v. American Leasco, 139 Ariz. 509, 679 P.2d 532 (App.1983);
(12) Criminal acts or conduct, Puz v. McDonald, 140 Ariz. 77, 680 P.2d 213 (App.1984);
(13) Acts done in bad faith, Huggins v. Deinhard, 127 Ariz. 358, 621 P.2d 45 (App.1980).

Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 330-31, 723 P.2d 675, 679-80 (1986). 

Each of the above stated characterizations involve some form of legally recognized intent.  This intent may be true, actual intent or it may be imputed, or assigned. In other words, this intent, also known as an "evil mind" "may be 'manifested in either of two ways. It may be found where defendant intended to injure the plaintiff. It may also be found where, although not intending to cause injury, defendant consciously pursued a course of conduct knowing that it created a substantial risk of significant harm to others.'”  Nardelli v. Metro. Grp. Prop. & Cas. Ins. Co., 230 Ariz. 592, 604, 277 P.3d 789, 801 (Ariz. Ct. App. 2012), Citing Rawlings v. Apodaca, 151 Ariz. 149, 162, 726 P.2d 565, 578 (1986).

In summarizing all the required elements for punitive damages, the Supreme Court of Arizona demonstrated the importance of this evil mind, stating:

The key [to punitive damages] is the wrongdoer's intent to injure the plaintiff or his deliberate interference with the rights of others, consciously disregarding the unjustifiably substantial risk of significant harm to them. Rawlings v. Apodaca, 151 Ariz. [at] 161, 726 P.2d at 577. While the necessary “evil mind” may be inferred, it is still this “evil mind” in addition to outwardly aggravated, outrageous, malicious, or fraudulent conduct which is required for punitive damages.

Thompson v. Better-Bilt Aluminum Products Co., Inc., 171 Ariz. 550, 556, 832 P.2d 203, 209 (1992).

Thus, while the level of intent is considered in tortious acts, a person may still subject themselves to punitive damages if the wrongful acts were so outrageous that they “disregarded” a “substantial risk” of “significant harm.”


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