“How Companies Should Minimize Their Punitive Damage Award Risk"

Swift Currie attorney Rebecca Strickland authored an article published by Today’s General Counsel providing guidance for, “How Companies Should Minimize Their Punitive Damage Award Risk.”

The article highlighted the escalating size of punitive damages, which are intended to punish misconduct by defendants but are spiraling to new levels and increasing companies’ punitive damage award risk. The insurability of punitive damages varies across states, with only five states outright prohibiting their insurance. In the remaining 45 states, insurance policies may cover punitive damages, potentially shifting the burden from defendants to insurers, which raises questions about whether punitive damage awards effectively achieve their intended goal of punishing misconduct.

Strickland underscored the strategic considerations and potential pitfalls associated with punitive damages in jury trials, emphasizing the need for careful management of litigation tactics and jury perceptions in legal strategies. The discussion targeted the impact of increasing punitive damages on insurance premiums and corporate strategies to manage this risk. Higher punitive damages ultimately lead to higher insurance costs, potentially prompting insurers to limit coverage or withdraw from certain markets.

For individual companies, Strickland suggested notifying insurers about potential claims as soon as possible and exploring settlement options, such as high-low agreements to manage punitive damage risks effectively.

“Corporations, their insurers and their counsel should work together to identify creative opportunities to mitigate punitive damage award risk,” advised Strickland. She also suggested that corporations might support legislative initiative that limit punitive damages for further protection.

Click here to read the full article.