When are punitive damages awarded in the US?
Punitive damages punish and deter conduct that is malicious, oppressive, fraudulent, or grossly reckless - beyond ordinary negligence. The plaintiff usually must prove the aggravating conduct by clear and convincing evidence. They are awarded on top of compensatory damages, not as a substitute.
What is the punitive-to-compensatory ratio guidepost?
In State Farm v Campbell (2003) the Supreme Court held that few punitive awards exceeding a single-digit ratio (roughly 9:1) to compensatory damages will satisfy due process, and that a ratio closer to 1:1 may be the outer limit where compensatory damages are substantial. BMW v Gore (1996) set the three guideposts: reprehensibility, ratio, and comparable penalties.
Do states cap punitive damages?
Many states cap punitive damages by a fixed dollar amount, a multiple of compensatory damages, or both. For example, some states limit punitives to the greater of a set figure or 2-3x compensatory damages. A minority of states restrict or bar punitive damages entirely. Verify your state's statute.
What are the three BMW v Gore guideposts?
(1) The degree of reprehensibility of the defendant's conduct - the most important factor; (2) the ratio between punitive and compensatory damages; and (3) the difference between the punitive award and civil or criminal penalties for comparable conduct. Courts use these to test whether an award is constitutionally excessive.
Are punitive damages taxable?
Generally yes. Under federal tax law, punitive damages are taxable income even when the underlying claim is for physical injury, unlike compensatory damages for physical injury which are usually excluded under IRC section 104. Consult a tax professional.