What are Punitive Damages in Utah?

SALT LAKE INJURY, BUSINESS LITIGATION & MEDICAL PROVIDER BLOG

What Are Punitive Damages in Utah?

Punitive damages are damages that may be available to an injured party in order to punish the defendant for outrageous conduct, and to deter others from similar conduct in the future.

Punitive damages different from what are known as “compensatory” damages.  Compensatory damages are designed solely to compensate an injured victim for the actual damages suffered.  In a personal injury care accident case, compensatory damages might include the cost of a totaled vehicle, the medical expenses relating to the care of an injury victim, the lost wage sustained by the injury victim from missing work, and the pain and suffering incurred from injuries.

Conversely, punitive damages are not meant to compensate the injury victim, although the injury victim will receive part of the punitive damages award.  Instead the award is meant to send a strong signal to both the defendant – and others who may be similar to the defendant – that the type of outrageous conduct that occurred will not be tolerated.

What Standards do Utah Courts Consider When Determining Whether Punitive Damages May Be Considered by a July?

Once a court awards compensatory damages, it is authorized to award punitive damages if the offending party’s conduct was “willful and malicious,” “intentionally fraudulent,” or “manifests a knowing and reckless indifference toward, and a disregard of, the rights of others.”  Punitive damages are not awarded for mere inadvertence, mistake, errors of judgment and the like, which constitute ordinary negligence.  They are not ordinarily permitted merely for a breach of contract unless the offending party’s conduct creates a claim for fraud independent of the contract itself.

What Factors May Juries Consider in Determining the Amount of a Punitive Damage Award?

In determining the appropriate amount of punitive damages, a jury or judge must consider: (1) relative wealth of the offender, (2) nature of the misconduct, (3) circumstances surrounding the conduct, (4) effect on lives of the plaintiff and others, (5) probability of its recurrence, (6) relationship of the parties, and (7) amount of actual damages awarded.

Because punitive damages are designed to punish a defendant and to send a strong message, jurors will usually want to clearly understand that financial worth of the defendant in order to assess a fair judgment for punitive damages.  Thus a million dollar net worth company/defendant that engages in a wrongful practice will likely get a much lower punitive damage award against it than a billion dollar company/defendant that engages in exactly the same practice.

Jurors are also especially concerned about the egregiousness of the conduct in question.  In some cases, where the defendant engaged in conduct which was highly likely to result in horrific injury or death, jurors will usually make a much higher punitive damages award than conduct that less likely to result in injury or death.

As Utah injury and punitive damage lawyers, our role in cases involving outrageous conduct is to make the case to a judge that punitive damages are applicable, and then to make the cases of our clients to a jury and requesting that an appropriate amount of punitive damages be awarded to send a clear message to the defendants and others that the type of outrageous conducts that occurred will not be tolerated.

Do Plaintiffs Get to Keep All of a Punitive Damages Award in Utah?

Most people believe that punitive damages are a windfall for plaintiffs – they rarely are.  Punitive damages are generally taxable, under state and federal laws, as gross income, and the taxes are assessed on the total amount awarded before attorney fees.

Additionally, punitive damages are also affected by Utah’s split-recovery statute.  Under this statute, a recipient of punitive damages receives the first $50,000 of the award, and any amount beyond that is split 50/50 with the state.  So, even though a plaintiff is awarded $1,000,000 in punitive damages, they will not walk away with that money.

For example, deductions from a punitive judgment award will typically include the attorney’s contingent fee (often 33.3%), the state’s award of 50% beyond $50,000, state income tax, and federal income tax.  Thus for a $1,000,000 hypothetical punitive damage award, this would be the breakdown:

$1,000,000 Total punitive damage award
– $475,000 State’s 50% beyond $50,000
$525,000 Plaintiff’s punitive damage award
– $26,250 5% UT state income tax
 – $194,250 37% federal income tax
– $174,983 33.3% attorney contingent fee
$129,517 Net Award to a Plaintiff

In the end, punitive damages are unique to each case and require a detailed analysis of the facts.  In some cases, claiming punitive damages may do more harm than good.  It is up to the client and the attorney how they would like to proceed on seeking punitive damages and how they might align with the overall litigation strategy.

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