Subject: High Court Will Get Chance to Put Limits On Punitive Damages
Date: Published: 9/28/90 (68 lines)
Source: Wall Street Journal. Copyright Dow Jones & Co. Inc.

    Fit Punishment?  
    High Court Will Get
    Chance to Put Limits
    On Punitive Damages
    ---
    Business Groups Are Citing
    `Due Process' Guarantee
    In Case Slated Next Week
    ---
    Surprise! No Insurance Policy
    ----
    By Stephen Wermiel
    Staff Reporter of The Wall Street Journal

    BIRMINGHAM, Ala.  -- In 1981, Lemmie Ruffin sold an
 insurance policy to Cleopatra Haslip's employer.  Now, that
 simple transaction has led the Supreme Court to confront one
 of the most critical legal issues involving American
 business:  whether the Constitution requires limits on
 punitive damages.
    On one side is Mr. Ruffin's former employer, Pacific
 Mutual Life Insurance Co., located in stylish Newport Beach,
 Calif., with $1.58 billion in premiums last year.  On the
 other is 59-year-old Mrs. Haslip, the former $8,800-a-year
 librarian for Roosevelt City, a poor, largely black suburb in
 the old steel mill region west of here.
    In 1982, only months after the insurance policy was
 purchased, Mrs. Haslip found herself with a kidney infection
 -- and uninsured for $3,500 in medical bills.  In a lawsuit
 charging that Mr. Ruffin, as a Pacific Mutual agent, had
 defrauded her and three co-workers, a Birmingham jury ordered
 Pacific Mutual to pay $1,077,978, with most of it intended to
 punish the company.
    In its new term, which begins Monday, the Supreme Court
 will use the case to decide whether, under the 14th
 Amendment's "due process" guarantee, juries must be given
 standards to guide their decisions on when and how much
 punitive damages are appropriate.  The case is scheduled to be
 argued next Wednesday.
    For business, which complains bitterly that unreasonable
 punitive jury verdicts are running rampant, the case will be
 one of the most closely watched of the year.  Briefs have been
 filed by the pharmaceutical, wholesale, insurance, medical,
 accounting and news industries, as well as the Business
 Roundtable, U. S. Chamber of Commerce and American Corporate
 Counsel Association.
    "American business faces a world of unended, unbounded
 threat of punitive damages with no guidelines that are really
 tangible," says Victor Schwartz, a Washington lawyer who is
 counsel to the Product Liability Alliance, a coalition of
 manufacturers, wholesalers and trade groups.
    Mr. Schwartz argues that "the threat of punitive damages
 keeps good products off the market," even slowing development
 and marketing of an AIDS vaccine, defibrillators and other
 medical devices.  And, he says, companies find "their credit
 is threatened if they have big damage judgments pending
 against them," because in most states insurance doesn't cover
 punitive damages, and companies must cover the expense
 themselves.  In a small company, that could be fatal.

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