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Insurance Journal

‘Game Changer’: Florida Supreme Court Ruling Could Chill Punitive Damages Claims

By William Rabb | January 13, 2022


Punitive damages, long the scourge of businesses named in lawsuits, and a tricky issue for insurers, may soon be much harder to come by in Florida after a recent opinion handed down by the state Supreme Court.

“This will definitely chill plaintiffs’ requests for punitive damages,” said Robert Jarvis, a professor at Nova Southeastern University College of Law in Fort Lauderdale.

In a 6-1 decision posted Jan. 6, the high court approved an appellate procedure rule change that will allow interlocutory appeals on whether lawsuits can include demands for punitive damages. The rule will take effect April 1. Until then, litigants have had to wait until the end of a trial to appeal punitive damage claims.

The practical effect of the new rule may be that the appeal, now to be allowed during the midst of a lower court lawsuit, could take months. That will add delays to litigation and will ultimately discourage many plaintiffs from seeking punitive damages and pressing ahead with trials, some attorneys said.

Defendants in lawsuits will like it when an appeals court bars punitive damages, and plaintiffs will smile when the damages are allowed to be considered, said Curry Pajcic, a Jacksonville plaintiffs’ lawyer. But despite the outcome, “It’s going to increase the cost of litigation” for both sides, he said.

A tort-reform advocate called the ruling a “game changer” that would help prevent rifts that often arise between insureds and insurers when hefty punitive damage awards are at stake. Many liability policies, per statute, will not cover punitive damages. That often prompts policyholders to settle suits prematurely, said William Large, president of the Florida Justice Reform Institute. In many cases, the insured will hire outside counsel to handle that.

William LargeWilliam Large

“Prior to this rule change, parties had to wait until the conclusion of a trial to address the issue with an appellate court,” Large said. “Seldom did parties get to have an appellate review, because of insureds’ pressure on insurers to settle the case. Finally, defendants and insurers will be afforded the due process they have been lacking.”

A deterrent to punitive awards could potentially affect insurers in bad-faith claims. In some cases, insurance companies can be held liable for punitive damages if a court finds they behaved in a particularly egregious manner, according to an article by Orlando-area attorney Sean Schulz.

The Supreme Court’s new rule is striking because the court took the initiative on its own, attorneys said. Instead of the usual path for procedural rules – responding to a request from the Florida Bar or an action by the Legislature – the court in this case was the initiator that asked a Bar committee in 2020 to draft the rule.

“They used the Bar as fig leaf,” Jarvis said. “This was so unnecessary. No one was clamoring to change the interlocutory rules on punitive damages.”

The move is another example of Florida’s government and its governor-appointed justices taking a pro-business, pro-insurance, anti-plaintiff turn to the right in recent years, Jarvis argued.

“The courts, especially at the Supreme Court and the appellate courts, have become very hostile to punitive damages,” he said.

Justice Jorge Labarga wrote a sharp dissent to the ruling. Labarga, appointed by Gov. Charlie Crist in 2009, wrote that the “drastic change” will result in needless delays.

Justice LabargaJustice Labarga
“Of particular concern are tort cases involving personal injury, where claims for much needed medical and economic relief will stall until the question of punitive damages is resolved,” Labarga wrote. “Access to our judicial system with claims authorized by law should not be impeded by unnecessary delay and resulting additional expense.”

He quoted from the Florida Bar committee that drafted rule, which noted that no other state has a similar procedure. While the committee and the Bar’s board of governors approved the change, the committee did so grudgingly, Labarga said.

In years past, the committee had declined to recommend the interlocutory rule change. But this time, the Bar members indicated they felt directed by a mandate from the Supreme Court, he said.

Labarga also pointed out that the majority of the justices had professed support for the change due to a concern about the privacy of litigants’ finances. State law forbids discovery of a defendant’s net worth until after punitive damages claims have been pleaded in court. Now, if an appeals court bars punitive damage claims, the plaintiffs cannot proceed with discovery of financial information.

Labarga noted that finances can easily be shielded by a confidentiality order, without abandoning the long-standing and efficient procedure the courts have relied upon.

Others said that businesses’ and jurists’ concerns over punitive damages may be overblown. Florida law already limits punitive awards, in most cases, to no more than three times the amount of compensatory damages or $500,000, whichever is greater. In cases in which the defendant knew the injurious activity was dangerous and pursued it purely for financial gain, punitives are limited to four times the compensatory amount, or $2 million.

In cases of deliberate intent to harm the victim, the law puts no cap on punitive damages.