The issue of punitive damages arises in certain motor vehicle accidents. This unique set of damages is available only in extraordinary circumstances and when a particular sets of facts allow. The law on punitive damages has been codified in North Carolina statute Chapter 1D.
Punitive damages are often confused with damages for pain and suffering. To be clear, pain and suffering fall into their own set of damages known as “general damages” and are not considered punitive in nature. General damages are awarded for injuries to which an exact dollar amount cannot be calculated, such as pain, suffering and the inability to perform certain functions. When damages can be calculated to an exact dollar amount, such as with medical bills or auto repair bills, they are referred to as “special” or “actual” damages. These two types, general and special, are compensatory damages, the purpose of which is to compensate the victim for their injuries and all the damages that follow.
Punitive damages can be distinguished as damages designed to “punish a defendant for egregiously wrongful acts and to deter the defendant and others from committing similar wrongful acts.” NC Gen. Stat. §1D-1. It is important to note that not only is the purpose of punitive damages to punish the defendant for an act already committed, but also to deter both the defendant and others from committing similar acts in the future. Punitive damages can actually be awarded in addition to general and special damages.
When are Punitive Damages Available?
As discussed above, the purpose of awarding punitive damages is to “punish a defendant for egregiously wrongful acts and to deter the defendant and others from committing similar wrongful acts.” NC Gen. Stat. §1D-1. In order to achieve this end, you must first show that you are entitled to compensatory damages, meaning that the at-fault driver performed a wrongful act that caused your damages. In addition, the claimant must show that either one or any combination of the following factors were present and related to the injury for which compensatory damages were awarded: fraud, malice, or willful or wanton conduct.
Malice is defined in the statute as “a sense of personal ill will toward the claimant that activated or incited the defendant to perform the act or undertake the conduct that resulted in harm to the claimant.” NC Gen. Stat. §1D-5(5). Malice is not always express and can be implied through the circumstances surrounding the wrongful act.
Willful or wanton conduct is defined as the “conscious and intentional disregard of and indifference to the rights and safety of others, which the defendant knows or should know is reasonably likely to result in injury, damage, or other harm.” NC Gen. Stat. §1D-5(5). The statute continues to explain that willful or wanton conduct means more than gross negligence. What the law is looking for here is an act that shocks the conscious. Common examples include impaired driving and various forms of racing.
Fraud in North Carolina is defined as an intentional misrepresentation of a past or future fact made with knowledge of its falsity with intent to deceive, on which an individual reasonably relied to his or her detriment. Fraud, however, is less common in automobile accidents than malice and willful or wanton conduct.
Each one of the factors is said to be an “aggravating factor.” The law views these as elevated wrongful acts that stretch beyond negligence. Each of the aggravating factors must be proved by clear and convincing evidence, which is a higher standard of proof than that involved in most civil claims. Typically, in order to meet the standard, you must prove that it is substantially more likely than not that the at-fault driver committed one of the aggravating factors discussed above. For more on standards of proof, check out our article on the topic.
Factors in Determining Punitive Damages
When determining the amount of punitive damages, NCGS § 1D-35 lists several factors that are considered when determining a punitive damage amount. The following factors listed below are generally considered:
1. The reprehensibility of the defendant’s motives and conduct.
2. The likelihood, at the relevant time, of serious harm.
3. The degree of the defendant’s awareness of the probable consequences of its conduct.
4. The duration of the defendant’s conduct.
5. The actual damages suffered by the claimant.
6. Any concealment by the defendant of the facts or consequences of its conduct.
7. The existence and frequency of any similar past conduct by the defendant.
8. Whether the defendant profited from the conduct.
9. The defendant’s ability to pay punitive damages.
NC Gen. Stat. § 1D-35(2)a-i.
The ninth factor raises an interesting point regarding insurance. North Carolina case law indicates that punitive damages are insurable unless there is explicit language excluding punitive damages. This is true even if the insurance policy excludes damages that are awarded as “penalties” generally. Collins & Aikman Corp. v. Hartford Accident & Indem. Co., 335 N.C. 91.
Essentially, this means that if punitive damages are awarded, they may be covered under the at-fault party’s insurance if they are not specifically excluded by clear language in the insurance policy. However, if punitive damages are not covered under the policy, the defendant will be personally liable, which raises the issue of collectability if the defendant does not have significant assets or the ability to personally pay for those damages.
Important Note: It is important to distinguish between the factors listed directly above and the three factors previously mentioned that warrant the availability of punitive damages. The three factors which open up the opportunity for punitive damages (fraud, malice, and willful or wanton conduct) must be found in addition to a preliminary finding of liability. It is only then that punitive damages are available to a claimant. Once a determination is made that punitive damages are available, the other nine factors are then used to determine the amount to be awarded.
Limitations on Recovery
If a personal injury case proceeds to trial and punitive damages are available in your case, the amount of punitive damages to be awarded is determined separately from the amount of compensation for all other damages. NC Gen. Stat. 1D-25(a). To take it a step further, the at-fault driver may even request that the bodily injury portion of the claim and the punitive portion be bifurcated. Essentially, this will result in two small hearings to determine the bodily injury portion and the punitive damages.
With this being said, the total amount for punitive damages that can be awarded is capped in North Carolina. The punitive damages award cannot exceed three times the amount of compensatory damages or two hundred fifty thousand dollars ($250,000), whichever is greater. If a verdict for punitive damages is greater than either one of those two amounts, the judge must reduce the award and enter judgment for punitive damages in the maximum amount. NC Gen. Stat. 1D-25(b). Let’s look at the following two examples that help illustrate how the punitive damage cap works.
Example 1: Let’s assume that you are injured and awarded $100,000 for your bodily injury claim and $700,000 in punitive damages. In this example, your punitive damages would be reduced pursuant to statute to $300,000, as three times the compensatory damages (300,000) would be greater than $250,000.
Example 2: Let’s now assume that you were injured in an accident and received a $50,000 award for your bodily injury and $600,000 in punitive damages. In this example, your punitive damages would be reduced to $250,000, as three times your compensatory damages would only be $150,000. Therefore, the statutory amount of $250,000 is greater.
Does the Punitive Cap Always Apply?
The cap on punitive damages does not always apply. For instance, the cap does not apply where punitive damages are awarded for injury or harm arising from a defendant’s operation of a motor vehicle while impaired. In other words, if the at-fault driver was impaired or under the influence of drugs or alcohol, then the statutory cap will not apply.
If you have questions about punitive damages after reading this article, we recommend speaking to North Carolina Personal Injury lawyer about how this type of damages may affect your case. Check out our Lawyer Locator tool.