Third Circuit Reduces Punitive Award on Constitutional Grounds to Reach a 1:1 Ratio Between Punitive and Compensatory Damages

January 8, 2009
by JOHN GULLACE
Client Alert Newsletter Forecast 2009

In Jurinko v. Medical Protective Co., the United States Court of Appeals for the Third Circuit recently held that a jury's punitive damage award in a bad faith claim against an insurer was unconstitutionally excessive in light of recent U.S. Supreme Court decisions and reduced the award by more than $4 million. The Third Circuit applied the rule of thumb that where a substantial compensatory award has been rendered, the punitive damages should not exceed the amount of the compensatory damages, although the Court went on to hold that there may be circumstances where a larger punitive damages award is appropriate and constitutional. The Third Circuit's decision builds upon a line of Supreme Court cases limiting punitive damages, including Philip Morris USA v. Williams, a 2007 decision in which Manko, Gold, Katcher & Fox represented amicus curiae. Although the Supreme Court has yet to mandate a one to one ratio between compensatory and punitive damages, absent exceptional circumstances, the decision in Jurinko indicates that large punitive damage awards will likely face an increasingly hostile audience on appeal.