I have written in the past about the failure of punitive damages to have the deterrent effect they were designed to have. Rather than deter intentional harm or egregious behavior, the threat punitive damages pose is seemingly ignored by corporations and employers who put profits before preventing harm, thanks in part to awards frequently being reduced on appeal.
A local recent blockbuster jury verdict may test whether this will change and real deterrence, as intended, will occur.
Thanks to stellar advocacy from the attorneys at Kline & Specter and Arnold & Itkin, a Philadelphia jury hit Monsanto with a $2 billion punitive damages verdict earlier this year when ruling in favor of a plaintiff who claimed he was sickened from the popular weed killer Roundup. Despite the staggering figure, the reality is that punitive damages in our civil justice system, and similar penalties in the workers’ compensation realm, continue to not deter bad and hurtful corporate conduct. After all, Roundup remains on the market.
Large punitive damage jury verdicts capture headlines, but don’t deter bad behavior
The recent Philadelphia Roundup verdict awarded the plaintiff, John McKivison, $250 million in compensatory damages and $2 billion in punitive damages for his claims that Roundup caused him to develop non-Hodgkin lymphoma. According to court documents, McKivison alleged he developed cancer by using Roundup at work and at home. He further alleged that Monsanto tried to influence certain scientific literature on the safety of Roundup and its potential to cause harm.
Monsanto’s defense lawyers argued that Roundup is safe and that random environmental factors, as opposed to weedkillers, caused non-Hodgkin lymphoma. A spokesperson for Bayer (Monsanto’s parent company) said that Monsanto believes it has “strong arguments on appeal to get this verdict overturned and the unconstitutionally excessive damage award eliminated or reduced.”
Several trials involving Roundup will take place this year throughout various U.S. courts. An additional 50,000 Roundup cases are currently pending in the country. Though it has won several recent trials, Monsanto has suffered trial losses that came with nine- and ten-figure verdicts. But it’s unlikely that Monsanto will end up paying anything close to the amounts of those verdicts. In fact, the above words from the Bayer spokesperson were not uttered out of pure hope but, likely, out of a sense of what’s coming. Monsanto has appealed the large Roundup verdicts rendered against it, and has done so successfully.
For example, in 2018, a California state judge reduced a jury’s $289 million verdict against it ($39 million in compensatory damages and $250 million in punitive damages) by nearly 73 percent to $78 million ($39 million for both compensatory and punitive damages).
In 2019, another California state judge reduced a $2.055 billion jury verdict against Monsanto ($55 million in compensatory damages and $2 billion in punitive damages) by nearly 96 percent to $86.7 million ($17 million and $69 million, respectively).
That same year, a California federal judge reduced an $80 million verdict against the company ($5 million in compensatory damages and $75 million in punitive damages) by nearly 69 percent to $25 million ($5 million and $25 million, respectively).
Though successful appeals are never guaranteed, Monsanto’s success knocking down high punitive damages verdicts against it only encourages it, and other companies selling dangerous products, to continue selling those products. Over time, the profits they make off those products will exceed the reduced punitive damages awards against them. So why pull Roundup off the market? Despite evidence of harm, its profits outweigh its health risks. In other words, it pays to harm consumers.
If punitive damage awards are not deterring bad conduct, what good are they doing? The clear legislative intent was to stop, or at least change, wrongdoers’ behavior.
The equivalent of punitive damages in Pennsylvania’s workers’ compensation system also lacks deterrence power
Section 435 of the Pennsylvania Workers’ Compensation Act allows Workers’ Compensation Judges to penalize employers and insurers for violating the statute, including assessing a penalty five times as large as the default penalty in situations where they cause unreasonable or excessive delays. These penalties are designed to deter bad behavior by employers and insurance companies, similar to how punitive damages theoretically deter bad behavior in general civil negligence cases.
Pond Lehocky Giordano uses these petitions as a tool to demand responsibility from employers and insurers when they unlawfully deny our clients the lost wages or fail to pay the medical expenses they’re entitled. Unfortunately, courts and fact finders often question the utility of these petitions or turn their backs on them altogether, frequently denying them or awarding $0 in penalties. Additionally, given the nature of most workers’ compensation claims, if a penalty was assessed against a defendant in a case where a claimant has been denied medical treatment or has not received checks for medical benefits or lost wages because of an insurer’s malfeasance, the harm can be medical or financial ruin, but the penalty assessed against an insurer could be but a few hundred dollars.
We see this reality daily. As I’ve said in past writings, a recent review of only my inventory of cases—not my entire firm’s—revealed the majority of my cases have a penalty component arising out of an insurer’s wrongful conduct. Attempts to defraud our clients. Sending late checks—or not sending checks at all. (Most of our clients live paycheck to paycheck, so missing even one can cause financial ruin.) Illegal stoppages of benefits. Failing to properly investigate claims. Failing to authorize medical care. Denying medical care. The list goes on.
What does an insurer have to lose by continually harassing an injured worker and wearing them down? Not much. Insurers’ returns on their investments in these harassment campaigns is that they force injured workers to concede to their requests, receiving pennies on the dollar for their claims, even when the facts or the law is on the workers’ side.
Not only are penalties not awarded often enough, the amounts don’t deter wrongful conduct. In fairness to the decision makers, even a 50 percent penalty on a $1,000 check won’t stop insurers from issuing late checks.
The penalty provisions of the Pennsylvania Workers’ Compensation Act need more bite. Our elected officials must hear the horror stories of injured workers and their families and amend the Act to include penalty provisions with severe enough penalties and deterrents that insurers would have no reasonable choice but to comply with the Act. For example, late checks, denied treatment, misuse of documents, and other common delay or harassment tactics employed by insurers should have corresponding mandatory dollar amounts for each violation.
By doing so, our elected officials would be upholding their duty to carry out their side of the Grand Bargain, in which injured workers agreed to give up their constitutional right to sue a wrongdoer in a court of law in exchange for a statutory process that provides them prompt payment of lost wages and their medical bills.
The takeaway for injured workers in Pennsylvania and their workers’ compensation counsel is that Workers’ Compensation Judges (the fact finders in workers’ compensation cases) don’t have enough ammunition in most cases to impose penalties on employers or insurance companies that do not comply with the law. That’s a far cry from our expectations as both lawyers and U.S. citizens that individuals and organizations comply with the law and their contractual obligations, and pay injury victims they’re liable to in a timely fashion as the law or their obligations require. Without penalty petitions that cause some pain, employers and insurance companies have little deterring them from thumbing their noses at their obligations under the Pennsylvania Workers’ Compensation Act and their contracts.
This is in the context of, according to a new report by the National Academy of Social Insurance, record workers’ compensation insurance profits across the U.S. According to that report, since experiencing a loss in 2011, the profit levels in the workers’ compensation insurance industry have “increased dramatically. The steep declines in the benefits to cost ratio and the [incurred loss ratios] over that period—to near-record lows and record lows, respectively—reflect changes in the economy and workers’ compensation statutes that have made the industry more profitable.” According to the NASI’s report, employers’ workers’ compensation costs are at a 40-year low.
Deterrents that scare no one are not deterrents
The next time you’re in your local mom-and-pop or big-box hardware store, check for a container of Roundup. I bet you will find more than a few because Monsanto has made no efforts to discontinue the product or limit its production levels.
And why should it?
With punitive damage awards getting slashed after juries hear the evidence before them and hand up their verdicts, there’s simply no incentive for Monsanto to put human lives before profits. Granted, punitive damage awards may remain somewhat intact when all is said and done, but reductions of up to 96%, if not 100%, do absolutely nothing to prevent the sale of chemicals that science says may very well cause sickness or death.
Similarly, in the Pennsylvania workers’ compensation realm, a $0 penalty assessment will do nothing to prevent a deep-pocketed employer or insurance company from engaging in unlawful and unfair business practices concerning paying workers’ compensation benefits to injured workers—practices that further injure workers whose injuries affect their ability to put food on the table for their families.
A $0 penalty in the workers’ compensation world, or even a penalty in the hundreds of dollars, lacks any punch and will not deter hurtful bad acts. If real penalties were awarded, then our firm and others across Pennsylvania wouldn’t have to file as many penalty petitions as we do because destructive behavior would be deterred, not incentivized.
Punitive damages, penalty petitions, and other similar mechanisms exist inside the legal system and out to dissuade large corporations and other actors from engaging in activities that cause injuries and other societal harm. But until these mechanisms can function as intended, without artificial limitations clipping their wings, the Monsantos, nefarious employers and insurance companies, and other bad actors of the world will not think twice before intentionally engaging in irresponsible and harmful acts.
Samuel H. Pond is the managing partner of Pond Lehocky Giordano LLP, the largest workers’ compensation and social security disability law firm in Pennsylvania, and one of the largest in the U.S. He can be reached at spond@pondlehocky.com.
Reprinted with permission from the April 19, 2024 edition of The Legal Intelligencer © 2024 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.
