Punitive Damages in Ohio: When a Defendant's Conduct Is Bad Enough

Published October 15, 2012 · Injury Law Basics

Most of what an injury case recovers is compensation: medical bills, lost income, and the pain and limitation the injury caused. Once in a while a defendant's conduct is so bad that the law allows more. Punitive damages are the extra award meant to punish a wrongdoer and warn others, and this year's cases have put them in the news more than once. Here is how they work in Ohio.

Compensation versus punishment

Compensatory damages make the injured person whole, to the extent money can. Punitive damages, sometimes called exemplary damages, have a different purpose. They are not measured by the victim's loss. They are measured by how blameworthy the defendant's conduct was and how much it takes to punish and deter it.

Because the purpose is punishment, Ohio law makes punitive damages harder to get than ordinary damages, limits their size, and controls how the jury hears about them. The governing statute is R.C. 2315.21.

What you must prove

Under R.C. 2315.21(C), punitive damages are not recoverable from a defendant in a tort action unless the defendant's actions or omissions demonstrate "malice or aggravated or egregious fraud," or the defendant, as an employer or principal, knowingly authorized, participated in, or ratified such conduct by an employee or agent.

"Malice" in this context does not require that the defendant wanted to hurt you. The Supreme Court of Ohio defined it in Preston v. Murty, 32 Ohio St.3d 334 (1987), as either hatred, ill will, or a spirit of revenge, or, more commonly in injury cases, "a conscious disregard for the rights and safety of other persons that has a great probability of causing substantial harm." The difference between negligence and malice is the difference between a driver who glances at the radio and drifts out of the lane and a driver who gets behind the wheel with a blood-alcohol level twice the legal limit. The first was careless. The second knew the risk and chose it.

The burden of proof is higher, too. R.C. 2315.21(D)(4) requires the injured person to prove entitlement to punitive damages by clear and convincing evidence, a standard above the ordinary "more likely than not" that governs the rest of a civil case.

The separate trial phase

Punitive damages are tried in a second phase. Under R.C. 2315.21(B)(1), when a plaintiff seeks both compensatory and punitive damages and any party asks, the trial must be bifurcated: the first stage decides only whether the plaintiff is entitled to compensatory damages and how much, and evidence relating solely to punitive damages is kept out. If the jury finds for the plaintiff, the second stage takes up punitive damages before the same jury.

Earlier this year the Supreme Court of Ohio held that this bifurcation requirement is mandatory when a defendant requests it, as we explained in Nursing Home Neglect Trials Just Changed: What Mandatory Bifurcation Means for Families. The practical effect is that evidence of a defendant's wealth, prior misconduct, or corporate indifference generally waits until the jury has already decided the defendant is liable.

The caps

Ohio caps punitive damages. Under R.C. 2315.21(D)(2):

• Against most defendants, the court may not enter judgment for punitive damages exceeding two times the compensatory damages awarded against that defendant.
• Against a small employer (generally one with no more than 100 full-time employees, or 500 in manufacturing) or an individual, the limit is the lesser of two times compensatory damages or 10 percent of the defendant's net worth when the wrong was committed, up to a maximum of $350,000.
• Attorney's fees awarded as a result of a punitive-damages claim do not count toward the cap.

The cap does not apply where the defendant acted purposely or knowingly and has been convicted of a felony with that mental state based on the same conduct. R.C. 2315.21(D)(6). The jury is never told about the caps; the court applies them after the verdict. R.C. 2315.21(F).

The individual cap matters in drunk-driving cases. A jury may be outraged by an intoxicated driver, but if the driver is an individual with a modest net worth, the punitive award will be limited to 10 percent of that net worth, which may be a small number. That is one reason the compensatory case, where the real money usually is, must be built carefully. We explained the separate caps on pain-and-suffering damages in Ohio's Caps on Pain-and-Suffering Damages, Explained.

Where punitive damages come up in injury cases

Drunk and reckless driving. The most common setting. A driver who chooses to drive while intoxicated, or who races through a residential neighborhood, is the kind of defendant juries are willing to punish. Where a drunk driver kills someone, the family's wrongful-death claim may carry a punitive component.

Insurance bad faith. An insurer that refuses to pay a claim without a reasonable justification can be liable for punitive damages. The $10 million Belmont County verdict we wrote about in Ohio Jury Hits Insurer With $10 Million for Bad Faith After Fatal Crash included $2 million in punitive damages.

Nursing home neglect and corporate indifference. Cases where a company knew of a danger to residents, customers, or workers and chose profits over safety.

Intentional assaults. Where the defendant meant to cause harm, malice is usually easy to show, although collecting from an individual defendant can be another matter.

Who pays: the insurance problem

Here is the catch that surprises many clients. Ohio public policy does not allow a person to insure against his own punitive damages, so the drunk driver's auto policy will not pay the punitive award. The driver pays it personally, which brings the net-worth cap and the practical problem of collection back into play.

There is an important exception. In 2010 the Supreme Court of Ohio held that attorney's fees awarded alongside a punitive verdict against a drunk driver are covered by the driver's liability policy, as we discussed in Drunk-Driver Crash Victims Win: Insurers Must Cover Attorney Fees Awarded With Punitive Damages. The fee award, which can be substantial, is a real and collectible benefit of pursuing punitive damages even when the punitive award itself is hard to collect.

Punitive damages are also generally unavailable against government defendants. R.C. 2315.21(E) makes the statute inapplicable to actions against the state in the Court of Claims and to actions against political subdivisions, which have their own limits.

What this means for you

• Punitive damages require proof, by clear and convincing evidence, that the defendant acted with malice, meaning a conscious disregard for the safety of others, not mere carelessness.
• They are capped at twice the compensatory award, and at a smaller amount against individuals and small employers.
• They are decided in a separate trial phase, and the defendant's insurer usually will not pay them, although it may have to pay the attorney's fees that come with them.
• Because the compensatory award drives both the recovery and the cap, the foundation of every punitive case is a thoroughly documented injury claim.