Damage Awards

Damage awards function as a remedy for wrongdoing in civil lawsuits; they constitute money awarded to an injured party as compensation for injuries or other losses (“compensatory” damages). They can also serve as punishment for the wrongdoer (“punitive” damages). These awards are made mostly by juries and occasionally by judges who previously determined that a wrongdoer was liable for damages. Determining damages—especially for intangible injuries such as pain and suffering—can be difficult, and juries have been criticized for issuing awards that seem extravagant and unpredictable. Although some of the criticisms are unfounded (e.g., jurors are not especially sympathetic toward plaintiffs), jurors occasionally do experience difficulty in applying jury instructions and following procedures that blindfold them to the consequences of their verdicts. Reforms intended to address these issues should be based on empirical analysis, and psychologists are well-positioned to provide the relevant data.

Various Kinds of Damage Awards

Damage awards are of two general types, compensatory and punitive, and they serve different functions. Compensatory awards are intended to return an injured person or entity (e.g., a business, agency, or corporation) to pre-injury levels of functioning—that is, to restore that party to the position it was in prior to the injury or harm. For example, a person injured in an automobile accident may receive a compensatory damage award to cover any medical costs, lost wages, and pain and suffering related to the injuries sustained in the accident. As another example, a business may receive a compensatory damage award to cover any revenues lost to competitors involved in price-fixing, trademark infringement, or sharing of trade secrets.

Compensatory damage awards are themselves of two sorts: economic and noneconomic. Economic damages are intended to cover the financial or economic costs incurred by the injured party. These can include past and future lost wages, past and future expenses related to medical care and rehabilitation, past and future lost profits, and loss of reputation or business opportunity. In theory, these awards should be relatively easy to gauge because they are generally tied to objective data such as hospital bills, costs of property repairs, and amount of time away from work. In fact, even these losses are difficult to assess because they require jurors to make predictions about the future and then to discount their awards to present value (i.e., the injured party is given an economic damage award now that will, over time, grow to equal the amount that the jury has deemed appropriate). In addition, they may require a jury to agree on economic uncertainties such as future interest rates, the likelihood that injured persons would have been promoted or received raises or that businesses would have been profitable had they not been harmed, and projected life expectancies for persons who require lifelong care.

Determining noneconomic damages can be even more problematic. Their function is to compensate the injured party for “pain and suffering,” including bodily harm; emotional distress, such as fear, depression, and anxiety; loss of enjoyment of life; and pain and disfigurement. For example, after the drug manufacturer Merck was found liable for the death of a Houston man who had been taking the painkiller Vioxx, it was required to pay millions of dollars to the man’s widow to compensate her for pain and suffering. Noneconomic damages are especially difficult to assess because they have no obvious metric: There is no cost accounting of one’s pain and suffering. Juries have sometimes been criticized for being capricious and unpredictable in determining damages (as described below), and criticism often focuses on an unexpected award for pain and suffering.

Punitive damage awards are intended not to compensate for injuries but rather to punish wrongdoers for malicious and egregious behavior or gross negligence and to deter that party and others from similar conduct in the future. For example, juries have assessed large punitive damage awards against tobacco companies after finding that the companies knew about the health risks of cigarette smoking long before they made those risks known to the public. As another example, juries have awarded billions of dollars in punitive damages in cases stemming from the 1989 grounding of an Exxon oil tanker in Prince William Sound, Alaska, which devastated miles of shoreline, destroyed wildlife habitats, and financially ruined the local fishing industry. Punitive awards are usually not made in the absence of compensatory awards, and appellate court decisions require some reasonable relationship between the two.

Size of Damage Awards

The examples provided above were of large damage awards in high-profile cases; jurors have often been criticized for assessing damages of these magnitudes. In fact, though, multimillion dollar awards are atypical. According to data compiled by the Bureau of Justice Statistics from the 75 most populous counties in the United States in 2001, the median damages awarded to plaintiffs who prevailed at trial (only approximately half of all plaintiffs who went to trial) was a modest $27,000. Awards varied considerably by type of case. For example, the median awards in automobile negligence and medical malpractice cases were $16,000 and $422,000, respectively. Awards in excess of $1 million were rare, given in only 8% of cases in which plaintiffs prevailed.

Punitive damage awards were also rare and, when provided, were modest. According to the Bureau of Justice data, only 6% of winning plaintiffs were awarded punitive damages, and these awards were given only in certain kinds of cases: tort cases involving slander/libel or intentional wrongdoing and contract cases involving partnership disputes, employment discrimination, and fraud. Punitive damages are rare in personal injury cases. The median punitive damages awarded in jury trials in 2001 was $50,000 ($83,000 in contract trials and $25,000 in tort trials), and only 12% of plaintiff winners who received punitive damages were awarded $1 million or more.

Despite the fact that the median damage award is modest, some damage awards—particularly punitive damage awards—are indeed very large and contribute to the perception that juries are erratic and capricious in the manner in which they assess damages. Indeed, this perception has gelled into significant criticism of jurors’ ability to be fair and impartial in the awarding of damages, and on several occasions the U.S. Supreme Court has considered appeals based on the apparent excessiveness of a punitive damage award.

Controversy Surrounding Decisions about Damages

Criticism regarding damage award decision making has centered on two concerns: first, that juries are overly sympathetic to plaintiffs in awarding excessive sums of money, especially for punitive damages, and second, that they are biased against wealthy or deep-pocketed defendants. Valerie Hans and colleagues have examined both of these assumptions empirically by interviewing jurors who served in civil cases and by conducting laboratory-based research studies. Their data indicate that rather than favoring plaintiffs, most jurors tend to be skeptical of their motives. For example, the majority of jurors agreed that there are far too many frivolous lawsuits and that people are too quick to sue. When questioned about their own deliberations, jurors indicated that they questioned the legitimacy of plaintiffs’ complaints and scrutinized their motives. Jurors said they looked unfavorably on plaintiffs who did not seem as badly injured as they claimed or who had preexisting medical conditions. Jurors also scrutinized whether plaintiffs might have contributed to their own injuries and were unsympathetic to those who did little to mitigate their injuries. In fact, some jurors described themselves as acting as a defense against illegitimate grievances and frivolous lawsuits. So, far from being overly sympathetic to plaintiffs, jurors apparently tend to be skeptical of their claims.

The second concern is that juries are biased against wealthy defendants, including large corporations, and act as a sort of “equalizer” in transferring monies from wealthy defendants to poor or needy plaintiffs. There is some evidence that awards tend to be higher in cases that involve corporate defendants than in cases with individual defendants. Other data suggest, however, that this finding may not be the result of the defendant’s financial well-being. Rather, juries apparently treat corporations differently than individual defendants because they hold the former to a higher standard than the latter (a “reasonable corporation” standard) and reason that corporations are better positioned than individuals to anticipate harms and to work to minimize or prevent them.

In general, these concerns may be related to the fact that jurors have relatively little guidance from their jury instructions about how to assess damages or translate their judgments onto a monetary scale. The laws of damages are relatively vague, leading some critics to suggest that this situation allows jurors’ biases to operate freely and that extravagant and unpredictable awards are the result. The problem is especially acute in areas of the law that are still developing or that lack precision: sexual harassment claims, libel actions, and cases involving intentional infliction of emotional distress.

Some commentators have suggested that a solution to the unbounded nature of jury decisions on damages is to make judges responsible for determining punitive damages. Judges already have occasion to award damages in bench trials and can control damage awards in jury trials through the mechanisms of additur and remittitur, which allow them to add to or reduce damage awards to the levels that they deem appropriate. In some states, only judges can assess punitive damages. An obvious question, then, is how punitive awards issued by judges compare with those assessed by juries. Data suggest that in most cases (particularly in cases with modest punitive awards), juries’ and judges’ awards are of similar size and variability and that both are based on the actual and potential severity of harm to the plaintiff.

Determining Jury Damage Awards

Psychologists have been especially interested in analyzing the factors that influence jurors’ decisions about damage awards. In part, this reflects an objective of much psycholegal research conducted to assess the validity of legal assumptions about human behavior. In the context of damage awards, the law assumes that particular factors will be considered by jurors in their decisions about compensatory damages and that different factors will be considered in decisions about punitive damages. Psychologists have asked whether jurors are able to compartmentalize their decision making in this way.

The data on this topic are mixed; many studies suggest that jury awards are influenced by variations in legally relevant evidence, yet simulation studies show that jurors occasionally consider information that is theoretically unrelated to the decision at hand. For example, though most studies show that evidence of a defendant’s egregious conduct appropriately influences punitive but not compensatory damage awards, a few studies have found that it is sometimes considered (inappropriately) by jurors in assessing compensation. Similarly, though most studies have found that the severity of the plaintiff’s injuries appropriately influences compensatory but not punitive damage awards, a few studies have shown that jurors inappropriately factor injury severity into their judgments of punitive damages, at least in cases involving medical defendants.

Interestingly, jurors’ intuitions about what normally or typically occurs in various injury-producing situations also influence their awards. Injuries that are perceived as atypical (e.g., suffering a whiplash after a fall) evoke greater sympathy in jurors than do typical injuries (e.g., suffering a broken bone in a fall) and result in greater compensation.

There are many ways in which damages can be assessed; some data suggest that jurors assimilate their awards to the monetary figures provided by the attorneys during the trial. The ad damnum is the amount of money requested by the plaintiff; defense attorneys sometimes counter this with their own suggested amounts. These suggested figures (sometimes referred to as “anchors”) are likely to influence jurors because people tend to doubt their abilities to attach monetary values to unquantifiable injuries. According to the pioneering jury researcher David Broeder, the ad damnum does “yeoman service as a kind of damage jumping-off place for jurors” (Broeder, 1959, p. 756). More recent studies have shown that, in general, the higher the ad damnum, the larger the award. There is an upper limit to this effect, however; damage awards boomerang if the request is wildly excessive and out of line with the evidence.

Another way in which jurors assess damages involves evaluating separate components of a plaintiff’s request (e.g., lost wages, loss of future earning capacity, loss of life’s pleasures), attaching monetary values to each of these components, and then summing them to arrive at a total compensatory damage award. Jurors are forced to perform a componential analysis in courts that use special verdict forms that require them to answer specific questions about the facts of the case and to calculate awards related to each set of facts.

Finally, some data suggest that rather than analyzing the components of an injury, jurors reason more holistically by agreeing on a general figure that “seems” right. Interviews with jurors who served in tort and contract cases revealed that approximately one third of juries determined damages by picking a number that seemed fair and just.

A peculiar aspect of some civil jury trials is the application of “blindfold rules,” which prohibit disclosure to jurors of the implications of their verdicts. Judges sometimes blindfold the jury regarding information such as attorneys’ fees, the tax consequences of damage awards, the insurance carried by the parties, and the possibility of additions to or reductions in damage awards by appellate courts. The rationale for these rules is that with blindfolds in place, jurors will not become confused by complex evidence or influenced by evidence that is lacking in probative value.

In fact, there is substantial evidence that blindfolding rules may result in, rather than prevent, verdicts based on misinformation. Jurors are naturally inclined to consider information to which they are blindfolded even when this information is not presented in court. On occasion, these discussions involve explicit reference to these so-called “silent topics.” A large percent-age of jurors interviewed about their deliberations report that their juries discussed factors such as attorneys’ fees and the defendant’s insurance. Even if these factors are not explicitly talked about, jurors’ implicit beliefs (not always correct) can influence their verdicts on damages. As a result, awards are sometimes unpredictable and inconsistent. Research suggests that it may be preferable to treat jurors like the careful and thoughtful arbiters they usually are and to provide them with clear and complete instructions, at least about those facets of damage awards on which all parties agree.

Reforming Jury Damage Awards

Given the controversial nature of some jury damage awards, it is not surprising that proposals for changing the system have been offered, primarily by groups interested in tort reform. In fact, during the 1980s and 1990s, a majority of state legislatures implemented laws aimed at reducing jurors’ discretion and reining in large awards. Among the reforms are laws that cap damage awards at some specified amount (primarily for noneconomic and punitive damages) or eliminate them altogether (for punitive damages), clarify the elements of damage award decisions, bifurcate the trial into two segments so that jurors are presented with discrete questions and sets of evidence in each segment and cannot consider irrelevant evidence, require some portion of a damage award to be paid to a governmental or charitable organization rather than to the injured party, and (as previously mentioned) move punitive damage assessments from the jury to the judge.

Importantly, many of these reforms were instituted without empirical backing; as a result, their implications are only now being understood. But recently conducted studies have brought into focus some unintended consequences, at least in terms of caps on damages. For example, mock jury research has shown that in cases with injuries of low to moderate severity, limits on awards for pain and suffering actually increased both the size and the variability of the awards. Other research has shown that although caps on punitive damage awards certainly reduce the size of punitive awards, they also increase the size and variability of compensatory awards. Similarly, caps on noneconomic damages result in larger economic damages, which are unbounded. Further research suggests that if jurors are altogether prevented from awarding punitive damages, the compensatory award may be augmented as a way to punish the defendant. These findings reflect the holistic reasoning notion described previously. Sometimes, jurors have a sense of “total justice”—an idea of what they think is fair in terms of compensation for the injured party and payment by the injurer—and, lacking clear guidance on the complementary functions of various kinds of damage awards, do what they can to deliver it.

Psychologists have much to offer in this realm, particularly by conducting sophisticated psycholegal research that mirrors jurors’ actual task demands and that can illuminate the effects of these reform laws on jurors’ judgments. Carefully conducted empirical research studies can show how jurors manage the difficult task of awarding damages and what procedural changes can help them function more effectively.

References:

  1. Broeder, D. (1959). The University of Chicago jury project. Nebraska Law Review, 38, 744-760.
  2. Diamond, S., Saks, M., & Landsman, S. (1998). Juror judgments about liability and damages: Sources of variability and ways to increase consistency. DePaul Law Review, 48, 301-325.
  3. Greene, E., & Bornstein, B. (2003). Determining damages: The psychology of jury awards. Washington, DC: American Psychological Association.
  4. Hans, V. (2000). Business on trial: The civil jury and corporate responsibility. New Haven, CT: Yale University Press.
  5. Vidmar, N. (1998). The performance of the American civil jury: An empirical perspective. Arizona Law Review, 40, 849-899.

Return to the overview of Trial Consulting in Forensic Psychology.