California Insurers Oppose Giving Punitive Damages to State

August 31, 2006

The Association of California Insurance Companies’ (ACIC) has sent an opposition letter to SB 832, a late end-of-session development, to members of the Assembly.

According to ACIC, the bill would grant, for the first time, most of the punitive damage awards to the state of California.SB 832 is unfair, unreasonable and bad public policy. It would financially hurt victims while lavishly rewarding the state and trial attorneys, ACIC said.

Following is ACIC’s letter:

The Association of California Insurance Companies (ACIC) opposes SB 832 which is currently pending on the Assembly floor.

SB 832 would mandate that awards of punitive damages be directed to the State of California in a so-called “split recovery” scheme. The concept makes no public policy sense from either a fiscal or legal perspective.

As fiscal policy, the bill would burden certain defendants in civil actions with a new obligation to fund the operations of state government. As a revenue source, punitive damage awards would be both unpredictable and unreliable, thereby rendering rational fiscal planning illusory. The bill’s limitation on use of the punitive damage awards is meaningless. The restriction is so broad that practically any governmental function could be funded from this source.

From a legal perspective, the bill would encourage exorbitant punitive damage awards. Although the bill prohibits a jury from being informed that any portion of a punitive damage award will be paid to the state, this information would be widely known by the public.

SB 832 is unfair. It rewards attorneys and limits awards to injured parties. In a typical lawsuit, a punitive damage award of $100,000 would be split as follows:

State = $56,250
Plaintiff’s lawyer = $27,000
Injured party = $16,750

This is unfair, unreasonable and bad public policy.

ACIC respectfully requests your “NO” vote on SB 832.

Source: ACIC

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