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How to Put Fear of Insolvency Into a Defendant\n\nFor more than fifty six years I have personally seen the fear in the \nfaces of corporate executives faced with a suit claiming wrongful \nconduct and punitive damages. Even those who knew that they had acted \nproperly and fairly and that the allegations of the suit were totally \nspurious, the fear and trembling engendered by a suit seeking punitive \ndamages is patent.\n\nThe defendant who should be leading a charge like General Patton acts \nmore like Prime Minister Neville Chamberlain. Defendants seem to prefer \nto appease a plaintiff rather than litigate good and viable defenses. \nUnless counsel advises a 100% chance of total victory \u2013 a statement no \ntrial lawyer will ever make \u2013 the defendant does not want to go to trial\n and is willing to pay more than it owes to avoid the potential of a \nserious punitive damage judgment.\n\nContrary to common belief the chances of a suit seeking punitive damages\n actually obtaining an award of punitive damages is very small.\n\nDefendants often, incorrectly, concentrate on trial verdicts and \noverlook that almost all civil litigation matters result in out-of-court\n settlements. Verdicts are important but punitive damage verdicts are \nmore like the tip of the proverbial iceberg than evidence of a trend. \nPractical evidence indicates that the small number of trials affect \ndecisions in the vast majority of lawsuits that do not proceed to trial.\n\nVerdicts are taken as important signals to the litigants. It is \nimportant to first understand the basic dynamics of a lawsuit. Most of \nthe work in pre-trial litigation is designed to provide the litigants \nwith enough information to allow them to reach an amicable settlement. A\n large punitive damages verdict skews the evidence available to the \nlitigants and causes plaintiffs to demand more than their cases are \ntruly worth and defendants to pay more than they should to resolve a \nsuit seeking punitive damages.\n\nUnder basic American litigation practice the plaintiff has the opening \nstrategic advantage. A plaintiff with a weak case places the defendant \nin the position of having to defend himself (and therefore incurring \nlegal costs), or else the defendant will be liable for the full claim on\n a default judgment. Even a defendant facing a suit that has no merit \nand no chance of success before a court will often be willing to pay an \namount that is less than his prospective defense costs to settle the \ncase and \u201cmake it go away.\u201d Appeasement of the plaintiff is, to a \ncorporate defendant, seen to be economically the best solution.\n\nMost often a defendant is willing to pay a settlement up to the amount \nof his defense costs in order to avoid having to respond to the \nplaintiff's complaint.\n\nThe Supreme Court's rulings in\xa0State Farm Mutual Automobile Insurance \nCo. v. Campbell, 123 S.Ct. 1513, 155 L.Ed.2d 585 (U.S. 2003) limits, by \ndue process, the multipliers that can be applied when setting punitive \ndamages.\n\nIn addition, the uncertainty posed by the prospect of unlimited punitive\n damages, combined with the relative probability of a punitive damage \naward if a case goes to jury trial, provide litigants who demand \npunitive damages with potent leverage against risk-averse defendants, \nlike insurance companies or candidates for the presidency, and tip the \nbalance in settlement bargains in favor of litigants with weak or even \nfrivolous cases.\n\n\n Go to the Insurance Claims Library \u2013 \nhttp://zalma.com/blog/insurance-claims-library.