Punitive Damages Test

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In 1989, Exxon’s supertanker grounded on a reef off Alaska spilling millions of gallons of crude oil. The accident occurred after the tanker’s captain—who had a history of alcohol abuse and whose blood still had a high alcohol level 11 hours after the spill—inexplicably exited the bridge, leaving a tricky course correction to unlicensed subordinates.

To obtain a judgment awarding punitive damages, the plaintiff must establish that:

    The insurer lacked an arguable or legitimate basis for denying the claim, and
    The insurer committed a wilful or malicious wrong, or acted with gross and reckless disregard for the insured’s rights. [State Farm Mut. Auto. Ins. Co. v. Grimes, 722 So. 2d 637, 641 (Miss. 1998)

Punitive damages may not be awarded unless both of these prongs are satisfied. [Mitchell v. State Farm Fire & Cas. Co., 954 F.3d 700 (5th Cir. 2020)] There is no bright-line test, but consistent with due process, punitive damages must be both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered.