In April 2015, the Ohio Supreme Court upheld the punitive damages cap in the case of Sivit v. Village Green of Beachwood, L.P., limiting punitive damages to no more than two times compensatory damages in any tort action. Following a fire at an apartment complex in 2007, a jury awarded a group of residents $582,328 in compensatory damages and $2 million in punitive damages. The punitive damages award was upheld by the appellate court despite the fact that the award exceeded the statutory limit on punitive damages. This appellate decision called into question the scope of the limit on punitive damages; however, the Supreme Court ultimately reversed this decision, firmly establishing the punitive damages cap in Ohio.
Scope of the Punitive Damages Cap The punitive damages cap is a statutory limitation that arose through the tort reform movement in Ohio. The statute limits the amount of punitive damages that can be recovered, in any tort action, to two times the amount of compensatory damages awarded to the plaintiff. Further, if the defendant is a small employer, meaning employing not more than 100 persons on a full-time basis, any punitive damage award will be limited to the lesser of two times the amount of compensatory damages or 10 percent of the employer’s net worth when the tort was committed, and the maximum punitive damages that can be awarded against a small employer is $350,000. These limitations, especially with respect to a small employer, can prove invaluable in resolving a case involving gross negligence or egregious conduct. The limitations also protect defendants from an enraged jury that awards excessive punitive damages.
Attempt to Limit the Scope of the Cap In Sivit, the residents’ claim was based on a fire occurring at the property in 2007, which resulted in the residents being displaced from their homes and losing most of their personal belongings. The punitive damages cap applied to this action, would have reduced the punitive damage award from $2 million to $1,164,656 (two times the compensatory award of $582,328). However, the trial court did not apply the cap, and on appeal it was determined that the cap did not apply because the action arose out of landlord-tenant agreements, which are contractual in nature, and the cap only applies to tort actions. Applying the appellate court’s decision in the context of a nursing home or long-term care facility may result in a limitation in the application of the cap to these facilities, as the argument could be made that the landlord-tenant agreement at issue in Sivit is similar to the residency agreements generally in place at nursing homes and long-term care facilities.
Supreme Court Upholds Damages Cap In April 2015 when the Ohio Supreme Court reversed the decision of the trial and appellate courts in Sivit, it limited the scope of the damages cap as it related to claims in the landlord tenant context. Thus, the Ohio Supreme Court alleviated any concern regarding a limitation in the scope of the punitive damages cap to nursing homes and long-term care facilities.
The Supreme Court determined that despite the fact that there was a contractual agreement between Village Green and its residents, the claim of the residents constituted a tort action and was subject to the punitive damages cap. The court found that the harm caused to the residents was not a result of a breach of contract, but was based on the landlord’s negligence in maintaining the property, and as such the punitive damages cap applied. As a result of this decision, and the reversal of the lower court decisions, nursing homes and long-term care facilities can take solace in the fact that the punitive damages cap will apply to claims of negligence brought by residents of their facilities.
Editor’s Note: After submission of “The Erosion of Medical Claims Protection” article, a new version of R.C. 2305.113(E)(3) took effect March 23, 2015, wherein the Ohio General Assembly modified the definition of a medical claim by allowing claims arising under a nursing home resident’s plan of care to be considered medical claims. Presumably, the Ohio Legislature added the “plan of care” language to give greater protection to nursing homes by allowing more claims to be considered medical claims. Time will tell whether claims that courts previously found to be ordinary negligence claims will now be found to be medical claims under the new language of the statute.
Brian F. Lange