Determining the Financial Condition of an Insurance Carrier

Punitive damages long have been awarded 'to punish wrongdoers and thereby deter the commission of wrongful acts ... ' <i>Neal v. Farmers Ins. Exch.</i>, 21 Cal. 3d 910, 928 n.13, 148 Cal. Rptr. 389, 399 n.13 (1978). In order to accurately determine how large a punitive damage award should be, the financial condition of a defendant must be evaluated. If a punitive damage award is not large enough, then it is not likely to have any deterrent effect. Instead, because it simply would be a cost of doing business, it actually may serve as an incentive to further wrongful conduct. Therefore, in order to accurately determine how much of a punitive damage award is enough, but not too much, the financial condition of an insurance carrier needs to be evaluated. <i>Id.</i> at 928 (the wealth of defendant must be considered or else 'the function of deterrence ... will not be served if the wealth of the defendant allows him to absorb the award with little or no discomfort'); <i>Adams v. Murakami</i>, 54 Cal. 3d 105, 111-12, 284 Cal. Rptr. 318, 321 (1991) ('The most important question is whether the amount of the punitive damages award will have deterrent effect &mdash; without being excessive ... This balance cannot be made absent evidence of the defendant's financial condition.').

18 minute read March 29, 2007 at 11:21 AM

By

Kirk Pasich