Punitive Damages In Idaho: A Rare And Effective Tool

Idaho is like the vast majority of US States in that it allows citizen juries to award punitive damages in appropriate circumstances. The seminal national study about punitive damages reinforces a truth most of us who practice civil trial law in Idaho understand.  Punitive damages are rarely awarded and when they are awarded it is appropriate.

Idaho Law Limits When Punitive Damages Are Awardable

Punitive damages are only allowed in limited situations.  In Idaho, the law only allows punitive damages when a plaintiff can “prove, by clear and convincing evidence, oppressive, fraudulent, malicious or outrageous conduct.”  Such damages are rarely sought or awarded because in a regular breach of contract or personal injury case they are not appropriate.

The Idaho Supreme Court only allows a jury to impose  punitive damages when a defendant has engaged in an “extreme deviation from reasonable standards of conduct.”  The Court knows that punitive damages serve the legitimate and important public policy interest of deterring egregious behavior by reducing the economic incentive to engage in that behavior.  “[A]n award of punitive damages serves the dual function of deterrence and expressing society’s outrage. In contrast, compensatory damages are defined as damages that `will compensate the injured party for the injury sustained, and nothing more; such as will simply make good or replace the loss caused by the wrong or injury.’”

The purposes which may make a punitive damage award appropriate are not satisfied by an award of purely compensatory damages.”  Punitive damages can only be considered when a defendant acts with an extremely “harmful state of mind,” like malice, oppression, fraud or gross negligence.

Evidence Supporting A Punitive Damages Award Must Be Evaluated By Both The Trial Judge And The Jury

Before an Idaho litigant can seek an award of punitive damages, he has to ask the judge for permission.   The Judge can only grant permission if, after looking at and evaluating the evidence the court decides there is a “reasonable likelihood of proving facts at trial sufficient to support an award of punitive damages.”  This is one of three times a litigant has to show why punitive damages are appropriate. 

In this first instance, the court acts as a gatekeeper to the assertion of a claim.  In the second instance, the court after all the proof is in has to allow the jury to evaluate the claim.  In the third instance, the jury has to evaluate the claim.  And in the fourth instance, the trial judge has to evaluate whether a juries’ decision to actually award damages is within the bounds of the law.  

National Data Supports Idaho’s Use of Punitive Damage Awards

The seminal national report on punitive damages shows Idaho’s use of such awards is both normal and effective.  Among the findings in the national report are:

  • Punitive damages are rarely sought and rarely awarded (5 percent of civil cases, 3 percent of tort cases with plaintiff winners).  Most punitive damage awards are quite modest ($64,000 median in civil cases; $55,000 median in tort cases).
  • History shows that the imposition or threat of punitive damages has caused corporations to take dangerous products and services off the market and operate more safely.  Manufacturers support caps on punitive damages because caps allow them to precisely budget their potential liability as a cost of doing business.  However, if it becomes cost-effective for companies to simply pay victims and their families for deaths or injuries rather than fix the problem, the essential function of punitive damages to deter unsafe corporate conduct is undermined.
  • Since the 1990s, the U.S. Supreme Court has been placing arbitrary limits on punitive damages remedies.  Moreover, in addition, 38 states have passed laws that impede consumers’ ability to seek punitive remedies. Legislative restrictions include: 1) outright bans on punitive damages; 2) damages caps; 3) mandatory apportionment of punitives to state funds; 4) heightened burdens of proof; and 5) bifurcated trials.
  • Many who have pushed for restrictions on consumers’ ability to seek punitive damages, including major companies pushing for caps on damages and other liability limits, do not hesitate to demand punitive damages when they feel their own interests have been compromised.
  • Federal and state tax laws generally allow corporations to deduct punitive damages payments. Allowing companies to deduct punitives as “ordinary and necessary business expenses” effectively rewards and subsidizes grossly irresponsible or intentional behavior, undermining their purpose to deter egregious misconduct.

Idaho Code Has One, Perhaps Unconstitutional, Limit on Punitive Damages

The procedural limitations on Idaho’s use of punitive damages arguably make substantial sense,  But the Idaho Legislature has adopted a “cap” on punitive damages that has no solid logic.  The law limits punitive damages to  “the greater of two hundred fifty thousand dollars ($250,000) or an amount which is three (3) times the compensatory damages.”  This severely limits the potential for the deterrence effect of punitive damages in some cases. If the plaintiffs actual damages are relatively small, but the behavior by the wrongdoing entity is very lucrative, a punitive award will not have a deterrent effect.     

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