Constitutionality of Tennessee’s Statutory Caps on Noneconomic Damages and Punitive Damages – Insurance Coverage Corner Blog Post by Smith Howell
Recent Insurance Coverage Corner Blog post by Smith Howell.
Recently, there have been numerous challenges to statutory caps placed on noneconomic damages and punitive damages in Tennessee. In 2018, the U.S. Court of Appeals for the Sixth Circuit held the statutory cap on punitive damages in Tennessee is unconstitutional. Lindenberg v. Jackson Nat’l Life Ins. Co., 912 F.3d 358, 364 (6th Cir. 2018). In 2020, Tennessee Supreme Court upheld the constitutionality of a $750,000 statutory cap on noneconomic damages in certain civil liability actions. Jodi McClay v. Airport Management Services, LLC, 2020 WL 915980 (TN 2020). The McClay decision by the Tennessee Supreme Court calls into question the future precedential value of the Sixth Circuit’s decision in Lindenberg.
I. Tennessee’s Statutory Punitive Damages Cap
Under Tennessee statute, punitive damages may be awarded in civil cases where the plaintiff proves by “clear and convincing evidence that the defendant acted maliciously, intentionally, fraudulently, or recklessly.” T.C.A. § 29-39-104(a)(1) (2014). In cases where punitive damages are sought, the punitive damages are awarded in a bifurcated trial that takes place after compensatory damages are awarded. § 29-39-104(a)(2). However, the punitive damages awarded in this bifurcated trial shall not exceed two times the total amount of compensatory damages awarded or $500,000, whichever is greater. § 29-39-104(a)(5). This cap is not disclosed to the jury and is only applied by the court when the punitive damage verdicts exceeds the cap. § 29-34-104(a)(6).
The punitive damages cap does not apply in the event of four exceptions: (1) if the defendant had specific intent to inflict serious injury and the intentional conduct did in fact injure the plaintiff; (2) if the defendant intentionally falsified, destroyed, or concealed records; (3) if the defendant was under the influence of alcohol, drugs, or other intoxicant resulting in defendant being substantially impaired and causing the death (does not apply if he was using prescription drugs as prescribed); and (4) if the defendant’s act or omission results in the defendant being convicted of a felony, and that act or omission caused the death. T.C.A. § 29-39-104(a)(7).
The Tennessee statutory punitive damages cap was challenged in the Sixth Circuit in Lindenberg v. Jackson Nat’l Life Ins. Co.. In its majority opinion, the Sixth Circuit held the statutory cap on punitive damages was unconstitutional by violating a plaintiff’s right to a trial by jury. Because this decision required an application of state law to an issue that had not been settled by the Tennessee courts yet, the Sixth Circuit was asked to predict how the Tennessee Supreme Court would decide the matter. Lindenberg v. Jackson Nat’l Life Ins. Co., 912 F.3d 358, 364 (6th Cir. 2018).
Ultimately, the Sixth Circuit found that the punitive damage cap under T.C.A. § 29-39-104(a)(5) violated an “individual right to a trial by jury set forth in the Tennessee Constitution.” Id. The Sixth Circuit determined that punitive damage awards were part of the right to a trial by jury at the time the Tennessee Constitution was adopted. Id. Furthermore, the measuring of punitive damages is a “‘finding of fact’ within the exclusive province of the jury.” Id. According to the Sixth Circuit’s interpretation of Tennessee law, the punitive damage cap violates the Tennessee Constitution and is therefore invalid.
Lindenberg did not involve a challenge to the statutory cap on noneconomic damages. Nevertheless, many speculated after Lindenberg that the similar statutory cap on noneconomic damages was equally invalid. However, when the Tennessee Supreme Court heard a challenge to the statutory cap on noneconomic damages, they reached a different decision than the Sixth Circuit.
II. Tennessee’s Statutory Noneconomic Damages Cap
Under Tennessee law, each injured plaintiff in a civil action may be awarded compensation for noneconomic damages not to exceed $750,000. T.C.A. § 29-39-102(a)(1) (2020). This amount is increased to $1,000,000 in cases where the injury or loss is catastrophic in nature. T.C.A. § 29-39-102(c). An injury or loss is catastrophic when it involves (1) a spinal cord injury resulting in paraplegia or quadriplegia, (2) amputation of two hands, two feet, or one of each, (3) third degree burns over 40% or more of the body as the whole or 40% or more of the face, or (4) the wrongful death of a parent resulting in a surviving minor child or children. T.C.A. § 29-39-102(d). The statutory cap on noneconomic damages does not apply in the event of the same four exceptions as the four exceptions to the punitive damages cap discussed above.
The cap on noneconomic damages was finally challenged in Jodi McClay v. Airport Management Services, LLC. In McClay, the plaintiff argued that the statutory cap violated a plaintiff’s constitutional right to a trial by jury. Id. Similar to the plaintiff in Lindenberg, the plaintiff in McClay argued the existence of a cap precluded plaintiff’s constitutional right to have a jury award damages. The Court held that while a plaintiff “has the right to an unbiased and impartial jury to decide, as a question of fact, the amount of any noneconomic damages sustained by the plaintiff,” the Tennessee Constitution does not entitle a plaintiff to any particular remedy or cause of action. Id. Rather, the remedies a plaintiff may seek “are matters subject to the determination by the [state] legislature.” Id.
The Court noted that the cap on noneconomic damages is only applied by the trial judge, as a matter of law, after the jury has returned an award for an amount over the cap. Id. The trial jury is not instructed on the statutory cap at any point. Id. Thus, the statutory cap does not impede on plaintiff’s constitutional right to have a jury determine questions of fact. Id. Therefore, the cap is constitutional under Tennessee law. Id.
Furthermore, the Court held that the Sixth Circuit’s decision in Lindenberg was not binding on the Tennessee Supreme Court and its reasoning was unpersuasive in McClay. While the Court declined to rule on the punitive damage cap because it was not an issue in McClay, the Court’s decision does call into question the future precedential value of the Lindenberg decision in Tennessee. The Court seems to suggest in McClay that it would rule that the punitive damages cap in Tennessee is constitutional, invalidating the decision in Lindenberg. If a challenge to the punitive damages cap is heard in the Tennessee Supreme Court, the McClay decision seems to indicate that the Court will uphold the punitive damages cap. Until then, however, the ruling Lindenberg will remain in place.
The Tennessee Supreme Court’s decision in McClay solidifies the cap on excessive judgments for certain civil actions in the state of Tennessee. However, the Sixth Circuit’s conflicting decision in Lindenberg regarding the punitive damages cap calls into question the constitutionality of the punitive damages cap. Until more clarification comes from the Tennessee Supreme Court, the constitutionality of the statutory cap on punitive damages may remain unclear.