Examining Indiana’s Punitive Damages Cap

In Indiana, the amount of punitive damages recoverable is limited by statute.  Under Indiana Code Section 34-51-3-4, punitive damages in civil cases are limited to three times the amount of compensatory damages, or $50,000, whichever is greater.  But, what are considered “compensatory damages” under the statute?  For example, consider a plaintiff who is awarded $100,000 in a breach of contract claim and $50,000 in a related defamation claim.  If the jury also finds that punitive damages are warranted for the defamation claim, but not the contract claim, can it award $450,000 in punitives, or three times the total damages award, under the statute?

Under Techna-Fit, Inc. v. Fluid Transfer Products, Inc., 2015 Ind. App. LEXIS 676 (Ind. Ct. App. 2015), the answer is no.  In Techna-Fit, the Court of Appeals considered a question similar to the one above.  The plaintiff was awarded damages for both breach of contract and for a related tort claim.  The jury also awarded punitive damages.  The punitive damages were within three times the total damages, but were greater than three times the amount awarded solely on the tort claim.  The court considered the meaning of the phrase “compensatory damages” under the above statute..  Acknowledging Indiana’s policy that punitive damages should be awarded on a limited basis, the court ruled that punitive damages can only be based on those damages for the underlying claim for which punitives are sought.  In other words, because the plaintiff did not seek punitive damages for his contract claim in the complaint, he cannot use his contract damages to magnify his punitive damages.

Applying the Techna-Fit rule to the example above, the maximum amount of punitive damages recoverable would be three times the amount awarded on the tort claim, but excluding the contract damages for which punitives were not sought.  Hence, the maximum punitive damage award would be three times the tort damages, or $150,000.

What effect might this ruling have on parties in the future?  For plaintiffs, they should be careful to include a prayer for punitive damages in their complaint, where applicable.  The Tehcna-Fit ruling explains that a court will rely on the plaintiff’s complaint to determine whether punitive damages were sought, and only those claims may serve as the magnifier under the statute.  If not plead within the complaint, then a plaintiff will be left to argue that the claims for punitive damages were “tried by consent” of the parties at trial, which is a difficult argument to prevail on.  For defendants, they should use caution when proposing a jury verdict form prior to trial.  A jury verdict form should strive to clarify what damages are being sought for each particular claim.  Doing so can help clarify what damages are awarded for claims for which punitives are applicable, and to clarify what amount will serve as the basis for any potential award of punitive damages by a jury.