Oregon Supreme Court Rules Punitive Damages Excessive

In a victory for an insurance company accused of acting in bad faith, the Oregon Supreme Court ruled that a $20.7 million jury award for punitive damages in a fatal traffic accident in 1987 was excessive.

The case also set a guideline for most lawsuits involving punitive damages by deciding that four times the actual damages should be the limit in Oregon.

Farmers Insurance Co. of Oregon argued the punitive damages awarded to the mother of the victim were excessive because they were 24 times the $863,274 the jury had awarded in compensatory damages. With accrued interest in compensatory damages during the lengthy appeal, the punitive damages became worth about 16 times the compensatory damages.

Punitive damages are intended to punish a defendant for action considered especially irresponsible or blameworthy, and most of that money goes to the state. Compensatory damages are calculated to reimburse a victim for actual losses.

But the U.S. Supreme Court has been moving to limit punitive damages and state courts have been following its lead.

John Munson caused the accident in October 1987 while making a turn into the Stonefront Tavern parking lot in Salem while driving with a blood alcohol level more than twice the legal limit. He was driving a truck belonging to Helen Foley when he struck a car driven by Marc Goddard, who was killed. In a deposition, Munson said Foley came to pick him up at taverns when he was too drunk to drive.

Goddard’s mother, Margie Goddard, sued Munson for wrongful death, and Farmers defended him but failed to settle the claim within policy limits, despite indications from Goddard that she was willing to settle for those limits.

Munson then sued Farmers for acting in bad faith, and assigned his claim to Margie Goddard, who won the jury award.

Farmers appealed the $20.7 million in punitive damages as excessive, and it was reduced by the Oregon Court of Appeals.

Margie Goddard appealed, and in a unanimous opinion written by Justice W. Michael Gillette, the Oregon Supreme Court affirmed the Court of Appeals ruling with a modification that sent the case back for a new trial to decide the punitive damages — unless Goddard agreed to accept an amount of four times the compensatory damages, or nearly $3.5 million.

Gillette wrote that the U.S. Supreme Court has decided that “grossly excessive” punitive damages violate the due process clause of the 14th Amendment because they “serve no legitimate purpose and constitute arbitrary deprivations of property.”

He noted the U.S. Supreme Court has identified three “guideposts” to determine whether those damages are excessive — the degree of reprehensibility of the misconduct, the disparity between the actual or potential harm and the punitive damages, and the difference between awards in comparable cases.

The Oregon Supreme Court concluded that, “as a very general rule of thumb, the federal constitution prohibits any punitive damages award that significantly exceeds four times the amount of the injured party’s compensatory damages, as long as the injuries caused by the defendant were economic, not physical.”

In a separate case decided the state Supreme Court sent a Miranda warning case back to the state Court of Appeals.

The Supreme Court said the Court of Appeals had relied on an earlier Supreme Court ruling that had been reversed when deciding an appeal by a man who made incriminating statements to police before he was advised of his Miranda rights to remain silent and consult an attorney.

The Supreme Court said the Court of Appeals should decide at what point any statements to police were made under compelling circumstances and should be suppressed.