News & Views - Faraci Lange » punitive damages

Punitive Damages [Part 2]

Joseph Regan — Thu, 29 Sep 2011 11:27:13 +0000

Within the past 15 years or so, the U.S. Supreme Court has issued several opinions setting out restrictions on punitive damages. Because punitive damages can be viewed as a taking of property, they implicate the Due Process Clause of the U. S. Constitution. The first of these cases, and perhaps the most interesting, was BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996). Dr. Ira Gore purchased what he thought was a brand new BMW, only to find out months later that the vehicle had been damaged slightly when being transported, and had been repaired and repainted prior to its delivery to him. He was not told about the repairs, and only learned the vehicle had been repainted months after the transaction. BMW had an internal policy of selling those vehicles as new without informing the dealer or purchaser, when the cost to repair was less than 3% of the value of the vehicle. The paint job on the Gore vehicle cost less than $1,000. Nonetheless, an Alabama jury found that BMW had engaged in fraud and awarded Dr. Gore $4,000 in compensatory damages, and $4,000,000 in punitive damages. Though the Alabama Supreme Court later reduced the amount to $2,000,000, even that number was a bit too breathtaking for the U. S. Supreme Court. In sending the case back to the Alabama courts, the Supreme Court issued several guidelines for all states to follow on the issue of punitive damages. The court held that such an award must bear a relationship to the nature of the conduct, must bear some reasonable ratio to the amount of compensatory damages (here the ratio was 1,000:1!), and take into account existing state civil and criminal penalties for similar conduct. In subsequent cases, the Supreme Court has held that only in extraordinary cases will punitive damages exceeding double digit ratios to compensatory damages be considered appropriate.

The interesting case of Fordham-Coleman v. National Fuel Gas Distribution Corporation, 42 A.D.3d 106 (4^th Department, 2007) decided by the Appellate Division, Fourth Department (which covers Western New York), upheld a potential claim for punitive damages in connection with the wrongful death of a woman who froze to death in her home after being denied natural gas service by the National Fuel Gas Distribution Corporation in Buffalo. As winter began, the decedent had been told (erroneously) that she would have to satisfy a judgment for failure to pay a prior gas bill before service could be turned on. Later, through a series of bureaucratic snafus, her application for heat was simply ignored and she was found dead in her home several months later, a victim of hypothermia. The Appellate Division, citing among other things the defendant’s apparent violation of important state regulations regarding utility service, reversed a lower court’s ruling that punitive damages could not be award under the circumstances. The court held that a jury was entitled to hear the case and award punitive damages if under the facts the jury found them to be warranted.

Bottom Line: Each case must be evaluated on its own merits. However, punitive damages, though rarely awarded, can be rendered in addition to compensatory damages under circumstances where a jury finds the defendant’s conduct to be so outrageous or so willful, wanton or reckless that it needs to be punished and deterred.

Punitive Damages

Joseph Regan — Wed, 14 Sep 2011 10:52:00 +0000

Periodically, a client will ask about punitive damages. The topic often arises in situations where the other party’s negligence had the potential to create much greater harm than actually occurred. Example: A company’s defectively designed product which could have caused death or serious injury did not, but only due to sheer luck. The client learns that they are not entitled to recover for an injury that could have occurred, only for what did occur. Most clients accept this, but are genuinely concerned that something worse does not happen to someone else. This sometimes leads to questions about punitive damages.

Punitive damages are distinct from compensatory damages, which are awarded to compensate the injured party for his/ her losses. Punitive damages cannot be awarded without some recovery for compensatory damages. They are assessed in addition to compensatory damages as an expression of a jury’s outrage over the conduct of the defendant. However, ordinary negligence, even gross negligence, will not result in recovery of punitive damages.

Recovery of punitive damages is difficult in New York, and there are public policy reasons for that. Even though it is the plaintiff who recovers the punitive damages, they are assessed against a party not for the sake of the plaintiff, but for the good of the public at large. Behavior leading to punitive damages must border on the criminal. Punitive damages are thought to serve a number of purposes: to punish the defendant, to act as a deterrent, and to serve as a warning to others. A jury may award punitive damages against a party who consciously disregards the rights of others or engages in conduct that is so reckless that it amounts to the same thing. However, the conduct does not have to be intentional; if a jury decides that it is willful, wanton or reckless, it may award punitive damages.

Even if a jury awards punitive damages, however, they may be difficult to recover from a party without money. This is because liability insurance policies in New York State will not cover them. There are sound public policy reasons behind this, although to a person unable to recover punitive damages from an impecunious defendant the policy reasons may seem rather thin. However, if one could insulate oneself from punitive damages by insuring against them, the purpose behind punitive damages would be lost. A company knowingly putting dangerous drugs on the market might feel less compelled to change things knowing that any punitive award is fully covered by someone else and not the company’s own bottom line. However, lack of insurance coverage can make an award of punitive damages against a party without the ability to pay something of a hollow victory.

Upcoming Appeal in Rochester Should Settle Whether New York Public Health Law §2801-d Claims can Coexist with Common Law Negligence Claims Brought By Injured Nursing Home Patients

Steve Schwarz — Fri, 19 Sep 2008 19:04:54 +0000

New York Public Health Law §2801-d provides a statutory remedy to nursing home patients for injuries suffered as a result of the deprivation of certain rights or benefits granted by contract, or by applicable federal and state law. The statute mandates an award of compensatory damages of no less than twenty-five percent of the nursing facility’s daily rate for each day the patient’s injury exists. In addition, it provides for punitive damages and attorneys’ fees in appropriate circumstances.

It was the intent of the Legislature to supplement the rights of nursing home patients under existing law. Subsection (4) of the statute specifically states that “[t]he remedies provided in this section are in addition to and cumulative with any other remedies available to a patient, at law or in equity or by administrative proceedings.” Public Health Law §2801-d(4). Moreover, unlike common law claims, the Legislature provided that the amount of any damages recovered by a patient under the statute “shall be exempt for purposes of determining initial or continuing eligibility for medical assistance [Medicaid]” and “shall neither be taken into consideration nor required to be applied toward the payment or part payment of the cost of medical care or services available under” Medicaid. Public Health Law §2801-d(5). Thus, any damages recovered by a patient under the statute do not affect Medicaid eligibility and are not subject to recoupment by Medicaid. This is not the case with damages recovered in ordinary negligence or medical malpractice claims.

Two cases from same court with different results

In 1995, the New York State Appellate Division Fourth Department held in Goldberg v. Plaza Nursing Home Comp., Inc., 222 AD2d 1082 (4^th Dept. 1995) that patients were not entitled to a remedy under §2801-d if they had a viable common law negligence claim arising out of the same injury. This result was followed by most other courts in the state for seven years until 2002, when the same court decided Doe v. Westfall Health Center, 303 AD3d 102 (4^th Dept. 2002). Doe was a notorious case in which a comatose nursing home patient was raped and impregnated by one of her care givers. The lower court had dismissed the plaintiff’s claim under Public Health Law §2801-d, relying on Goldberg. On appeal, the Fourth Department reversed the trial court and reinstated the plaintiff’s Public Health Law claim. In doing so, the Court specifically overruled Goldberg “insofar as we determined therein that summary judgment dismissing the Public Health Law cause of action was appropriate despite doubt concerning the efficacy of the remaining common law cause of action.”

Doe v. Westfall – Almost universally followed since 2002

Since 2002, when the Fourth Department decided Doe, the other three Judicial Departments of the New York State appellate court have all held – expressly or implicitly – that the private right of action granted to nursing home patients by Public Health Law §2801-d may be brought together with claims of negligence and/or medical malpractice arising out of the same injury. These cases are consistent with the apparent intent of the Legislature to provide remedies in §2801-d(4) that “are in addition to and cumulative with any other remedies available to a patient.” Zeides v. Hebrew Home for the Aged at Riverdale, Inc., 300 AD2d 178 (1^st Dept. 2002); Ward v. Eastchester Health Care Center, LLC, 34 AD3d 247 (1^st Dept. 2006); Young v. Patterson, 17 AD3d 667, 667-668 (2^nd Dept. 2005); Fleming v. Barnwell Nursing Home and Health Facilities, Inc., 309 AD2d 1132 (3^rd Dept. 2003).

In addition, there are at least nine published and unpublished lower court cases supporting this view. See Morisette v. Terence Cardinal Cooke Health Care Center, 8 Misc.3d 506 (NY Co 2005); Pasqua v. Bon Secours New York Health System, Inc., 13 Misc.3d 1036 (Bronx Co 2006); Sullivan v. Our Lady of Consolation Geriatric Care Ctr., 236 NYLJ 119 (Suffolk Co 2006); Washington v. Asfaw, 15 Misc.3d 1107A (NY Co 2007); Passet v. Menorah Nursing Home, Inc., 16 Misc.3d 1117A (Kings Co 2007); Marshall v. Leppard, 17 Misc.3d 1103A (Nassau Co 2007); Bush v. Cobble Hill Health Center, Inc., 17 Misc.3d 1135A (Kings Co 2007); Osborne v. Rivington House, 19 Misc.3d 1132A (NY Co 2008); and Yakkay v. Asher, 239 NYLJ 59 (NY Co 2008). The Morisette case, in particular, contains an outstanding discussion of the legislative history and intent behind §2801-d. Morisette, 8 Misc.3d at 509-514.

Fourth Department should clarify this issue in Kash v. Jewish Home of Rochester

This issue will again be presented to the Appellate Division Fourth Department in Kash v. The Jewish Home of Rochester, which is scheduled for oral argument in early December of 2008. The Kash case involves claims for negligence and medical malpractice against the nursing home and its staff doctors who initially allowed a patient to fall twice and then failed to detect the spinal cord injury suffered by the patient as a result. The patient became permanently paralyzed before the spinal cord injury was finally diagnosed days after her second fall. The trial court denied plaintiff’s motion to amend the complaint on the ground that the Goldberg case bars claims under §2801-d where the plaintiff also has a viable claim for negligence. In so holding, the trial court implicitly found that the Doe case did not overrule Goldberg in all instances.

Limitations of a common law remedy due to the effect on Medicaid eligibility

Neither Goldberg nor Doe discussed the explicit benefit conferred by the Legislature in §2801-d that any damages recovered from the nursing home under the statute shall not be considered toward the patient’s future Medicaid eligibility. This is a major benefit of the §2801-d claim since without it, most plaintiffs who recover damages will lose their Medicaid eligibility and become private pay patients.

Plaintiff in Kash, represented by Faraci Lange, LLP of Rochester, New York, has focused on this aspect of the §2801-d claim in her appeal. Plaintiff is attempting to demonstrate that if nursing home patients are confined to bringing common law claims alone, they will be deprived of the benefit of those claims because of Medicaid eligibility rules. Such a result would be absurd. Any monetary damages recovered by a patient under a common law claim would in effect be paid right back to the same nursing home where the patient’s injury occurred, only at the higher private pay rate. Conceivably, nursing homes could benefit financially from their own neglect. According to plaintiff’s appeal in Kash, this is expressly why the Legislature enacted §2801-d – to encourage private rights of action by nursing home patients in order to discourage nursing home patient abuse. A vital component of that remedy is § 2801-d(5), which was meant to avoid the conceivably anomalus result of putting more money into the pockets of nursing home whose patients are neglected or abused.