In the case of Warren v. Shelter Mutual Ins. Co., decided by the Louisiana Supreme Court on October 18, 2017, they upheld a finding that punitive damages were available in a maritime product liability case.
In Warren, a boating accident occurred when the boat lost its steering because of a hydraulic oil/fluid leak in one of the steering system’s hydraulic lines at a hose/nut or coupling assembly. The decedent was killed after he was ejected from the boat. The defendant manufactured and supplied the boat’s hydraulic steering system, which was inherently dangerous because a very small loss of fluid would result in loss of steering that could cause ejection and death.
The first jury returned a verdict finding no liability on the part of the defendant for failure to warn; however, the trial court granted a new trial because the jury was shown a manual that contained warnings, but this manual had been revised after the boat was purchased and was not applicable. The court of appeal and Supreme Court found the trial court did not abuse its discretion in granting a new trial.
In the second trial, the jury found defendant had acted recklessly in not placing on the steering system a visible sticker warning that loss of fluid could result in sudden loss of steering, ejection, and even death. The evidence at trial showed that (1) the defendant was well aware a small fluid loss could result in total loss of steering control, (2) there had been numerous complaints about fluid loss, (3) there was a total loss of steering control when the boat was on plane, and (3) that this could result in ejection and severe injury.
The jury further concluded that applicable standards at the time the product was sold provided for a warning sticker on the product itself and that the manufacturer had had the opportunity to warn. As a result, the jury awarded compensatory damages of $2.125 million and punitive damages of $23 million. Appeals were taken a second time to the Louisiana Supreme Court.
In this second appeal, the justices found the trial court properly rejected defendant’s proposed instruction relative to “component part manufacturers”, reasoning that the part involved was an entire hydraulic steering system. The court also concluded that while the risk of injury was greater in some types of boats compared to others, this did not relieve defendant of its duty as a manufacturer to warn against all reasonable uses and misuses of its steering system.
Additionally, the Supreme Court found the trial court did not err in refusing to bifurcate the trial on liability and punitive damages. The Court reasoned that while there may be valid policy reasons for mandatory bifurcation of liability and punitive damages, such policy reasons are better left to the legislature.
Finally, and importantly, the Louisiana high court ruled that an award of punitive damages was found to be appropriate under general maritime law, where a defendant’s intentional or wanton and reckless conduct amounts to conscious disregard for the rights of others. The Court reviewed the record and concluded it contained evidence on which the jury could reasonably have found that the defendant acted recklessly in not placing on the steering system a visible sticker warning that loss of fluid could result in sudden loss of steering, ejection, and even death. Instead, they found the evidence showed defendant was (1) well aware a small fluid loss could result in total loss of steering control, (2) there had been numerous complaints about fluid loss, (3) that total loss of steering control when the boat was on plane could result in ejection and severe injury, (4) that applicable standards at the time the product was sold provided for a warning sticker on the product itself, and (5) that it had had the opportunity to warn.
In reviewing whether the $23 million punitive damages award was excessive, the Louisiana Supreme Court found that the U.S. Supreme Court’s holding in Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008) did not limit punitive damages to a 1:1 ratio in all maritime cases and did not expressly address whether potential harm remains a valid consideration in general maritime cases with regard to the 1:1 ratio. While compensatory damages in this Warren case were low in comparison to other cases, they could have reasonably totalled $2,125,000 million, which when compared to the punitive damages awarded by the jury, would result in a ratio of 10.8:1. The Louisiana high court noted this was well beyond the single digit limits of constitutional due process as well as the upper limits set in the Exxon decision.
In addition, they reasoned the award of $23 million was excessive because plaintiff failed to prove defendant acted maliciously or that its behavior was driven primarily by desire for gain. In this case, the harm caused was great – physical injury resulting in the violent death of a young man – while the defendant’s conduct was not the most egregious on the spectrum of punishable cases, and the compensatory damages actually awarded were relatively small.
As a result, based on the actual harm and the relevant compensatory damages as outlined in the Exxon line of cases, the Louisiana Supreme Court found that a punitive damage award of $4,250,000 million with a ratio of 2:1, to possible compensatory damages of $2,125,000 million, more appropriately furthered the goal of punitive damages; i.e. to punish and to deter future conduct, while protecting the defendant’s right to due process.
The full decision can be found here.