Politics & Government

House may cap damage awards

Is a $15 million court judgment too much? Or is $350,000 enough to make the point?

Consider the case of Jerome Mitchell Jr.

The then-17-year-old Florence resident wanted to give blood but was told he couldn't; he was HIV positive.

His parents' insurance company - convinced Mitchell had defrauded it by not disclosing his illness - told the family it would not cover his medical bills.

That decision, the Mitchells contended in a lawsuit against the Fortis insurance company, amounted to a death sentence. In 2004, a jury agreed, awarding Mitchell $186,000 in actual damages.

And the jury also awarded $15 million in punitive damages.

State lawmakers say such punitive awards, although exceptionally rare, are bad for business.

This week, House lawmakers will debate whether to cap the amount that juries can award individuals and businesses as punishment for the bad behavior by others.

In the Mitchell case, the S.C. Supreme Court agreed Fortis "demonstrated an indifference to Mitchell's life and a reckless disregard to his health and safety."

But the state's highest court still reduced the punitive damages awarded.

The bill before lawmakers would not outlaw punitive awards. But it would limit them to $350,000.

"Punitive damages are about punishing somebody, not about making them whole or compensating them for a loss," said House Speaker Bobby Harrell, R-Charleston, a sponsor of the bill.

Harrell said he has no problems with individuals being awarded money for the economic and noneconomic losses that they suffer, including pain and suffering.

But capping punitive damages is an important economic development tool to attract businesses to the state, he said.

"This protects businesses from being put out of business by one lawsuit," said Cam Crawford, executive director of the S.C. Civil Justice Coalition, which represents the business community in tort and workers' compensation issues. "(Punitive damages) is the most important business litigation issue to corporations and even to small businesses."

Most Southeastern states -including North Carolina, Georgia and Florida - cap punitive damages.

Supporters say the House bill would bring South Carolina in line with those states, capping punitive damages at three times the amount of the compensatory damages awarded or $350,000 - whichever is greater. Compensatory damages are losses a victim can prove in court, such as the loss of income. Those are not capped in most cases.

"Punitive damages is something a business looks at when it's deciding whether to do business here," said state Rep. Jim Harrison, R-Richland, an attorney and sponsor of the bill. "We don't want to be at a disadvantage."

However, trial attorneys and some Democrats say they doubt companies pay much attention to whether punitive damages are capped. Additionally, they say big punitive damage awards rarely happen in the Palmetto State, making the bill pointless.

"There's a lot of rhetoric around the nation and in South Carolina about lawsuit abuse. But the data in South Carolina doesn't bear that out," said Mike Hemlepp, executive director of the S.C. Association for Justice, formerly the S.C. Trial Lawyers Association. "We don't have out-of-control jury verdicts."

Hemlepp points to data from the state's three largest counties, - Charleston, Greenville and Richland - that showed 136 personal injury verdicts in 2007 and 2008. Punitive damages were awarded in seven of those cases. Five of those awards were less than $7,000 each.

"Punitive damages are rare, and they're tough to prove," Hemlepp said, adding juries must decide a defendant is guilty of reckless disregard for the safety and rights of others in order to award punitive damages.

"We just don't see exorbitant lawsuits in South Carolina, much less exorbitant damages," said state Rep. Todd Rutherford, D-Richland, an attorney who said he has heard of S.C. cases where a child was killed and punitive damages did not top $900,000.

But big damage awards do sometimes happen, both sides concede.

The oft-mentioned example is the case of Florence's Jerome Mitchell Jr.

Crawford, whose group represents businesses, said the insurer should have been punished for its behavior but the jury's $15 million punitive damages award was exorbitant.

Hemlepp, who represents plaintiffs, disagrees, arguing the insurer behaved egregiously and was held accountable.

Opponents of the cap also point out anyone slapped with a punitive damages award can appeal the verdict in court. Fortis fought the judgment. The Supreme Court eventually reduced the $15 million damage award to $10 million.

This House bill, if passed, would mark the second time in five years S.C. has capped civil jury awards.

In 2005, the Legislature capped pain-and-suffering awards at $350,000 for medical malpractice lawsuits. Medical malpractice insurance was becoming too expensive for doctors, lawmakers who supported that bill said at the time.

Harrell said it is time to provide more relief to business by shielding businesses from big punitive damage awards.

"It makes sense to cap them."