Third Circuit Applies 1:1 Ratio for Punitive Damages Where Compensatory Damages Were Substantial and Defendants’ Conduct Not Especially Reprehensible

Jurinko v. Medical Protective Co., 2008 WL 5378011 (3d Cir., December 24, 2008) – In this insurance bad faith case, the Third Circuit Court of Appeals revisited the oft-litigated question of the proper ratio between compensatory and punitive damages, reducing the punitive award from a 3.13:1 ratio to a 1:1 ratio.  Reviewing the facts in light of the guideposts established by the U.S. Supreme Court in State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408 (2003) (degree of reprehensibility of defendant’s conduct; disparity between the actual or potential harm and the award; and disparity between punitive damages awarded and civil penalties authorized or imposed in comparable cases), the court found the $6.25 million punitive damage award to be excessive.

The court counseled that the precise award in any case must still be determined on its facts regarding the specific conduct at issue and the harm caused to the plaintiff, but found that where the harm was only moderately reprehensible, the compensatory award was substantial ($1.66 million), and the disparity between the award and the potential civil penalties was huge (1250:1), due process required no greater than a 1:1 ratio for punitive damages.

Note: This article was published in the January 2009 issue of the New Jersey eAuthority.