A lawsuit brought by the former head of Marvel Entertainment made headlines around the country last November when it resulted in a $50 million jury verdict against Is
aac Perlmutter’s wealthy Palm Beach neighbor and Federal Insurance Co.
But it was a sidebar to that litigation that had some tort-reform advocates and Florida defense attorneys concerned. The Florida Supreme Court in June answered a certified question from the lower court, settling conflictin
g rulings from state appellate courts about how much evidence evidence for punitive damages should be presented early in litigation proceedings.
The high court’s June 11 ruling in the Perlmutter vs. Federal Insurance litigation has effectively lowe
red the threshold on punitive damages, making it clear that plaintiffs—at early stages of the litigation—do not have to meet the higher evidence bar required at trial, defense attorneys said.
Punitive damages are never covered by insurance policies, and punitive amounts are limited by Florida statutes to no more than three times the amount of c
ompensatory damages. But punitive damages can influence compensatory damages as well as the course of litigation. The Perlmutter opinion may now me
an more pressure from insurance carriers on their clients to settle some lawsuits earlier, in order to avoid protracted litigation, hefty defense costs, and big damage awards.
“Insurers defending claims in Florida will need to reassess their early case evaluation protocols, recogni
zing that the motion to amend is now a far less reliable checkpoint for screening out marginal punitive damages theories,” Orla
ndo insurance defense attorney Brett Carey, with the Rumberger Kirk law firm, told Insurance Journal.
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He added that defense lawyers must now “be more vigilant in identifying cases with punitive damages potential at the outset and in developing strategies la
ter in litigation, such as aggressive dispositive motions, to address that exposure before trial.”
The state Supreme Court ruling also means that defendants in lawsuits will face early expo
sure to discovery of their financial worth, “which is a powerful litigation tool that can create significant settlement pressure,” Carey noted.
Ed Holloran and Caroline Calavan of the Quarles & Brady law firm agreed in a recent blog post.
Other lawyers said the ruling could make it harder for defendants and their insurers to derail aspects of litigation before they get to the trial stage.
“Defendants can no longer insist that the trial court evaluate the proffer through the clear-and-convincing lens or resolve conflicts in the evidence at the amendment hearing,” the Freeman Mathis & Gary law firm wrote in JD Supra.
The Perlmutter ruling is not without its limits, though, attorneys said.
The Supreme Court emphasized that “the trial court still serves a gatekeeping function and mu
st review the punitive damages request in the context of the underlying claims,” Carey pointed out.
Trial courts retain a gatekeeping role, but that role is now limited to determining whether the cl
aimant’s evidence supplies a reasonable evidentiary basis for punitive damages, not whether punitive liability has already been established by clear and convincing evidence, the Quarles firm lawyers noted.
