New York Law Review

Tag: punitive damages

  • Matter of Rosbaugh v. Town of Lodi, 2025 NY Slip Op 01406 (2025): Treble Damages Under RPAPL 861 Are Punitive and Not Recoverable Against Municipalities

    2025 NY Slip Op 01406

    Treble damages under RPAPL 861 are punitive in nature, thus unavailable in a suit against a municipality due to the state’s immunity from punitive damages.

    Summary

    The Town of Lodi, acting under the belief that trees on Rosbaugh’s property posed a hazard, hired a tree service to trim or remove them, resulting in the removal of fifty-five trees. The Rosbaughs sued, seeking treble damages under RPAPL 861. The arbitrator awarded treble damages, which was upheld by the lower courts. The Court of Appeals reversed, holding that treble damages under RPAPL 861 are punitive. Because municipalities are immune from punitive damages, the award against the Town was improper. The court found that the good faith exception in the statute and the legislative history confirmed the punitive nature of the damages.

    Facts

    The Town of Lodi determined that trees on Rosbaugh’s property, bordering an unpaved road, presented a hazard. The Town hired a tree service to cut or trim the trees. Rosbaugh disagreed with the Town’s assessment, however fifty-five trees were cut or trimmed. Rosbaugh sued, seeking treble damages under RPAPL 861. The parties went to arbitration, and the arbitrator awarded damages, including treble the stumpage value of the damaged trees. Supreme Court confirmed the award, and the Appellate Division affirmed. The Town appealed to the Court of Appeals.

    Procedural History

    The Rosbaughs initiated an action against the Town of Lodi seeking damages, including treble damages under RPAPL 861. The case proceeded to binding arbitration. The arbitrator awarded damages, and Supreme Court confirmed the arbitrator’s award. The Appellate Division affirmed the Supreme Court’s decision. The Court of Appeals heard the case on appeal from the Appellate Division.

    Issue(s)

    1. Whether treble damages awarded under RPAPL 861 are punitive in nature.

    2. Whether punitive damages can be awarded against a municipality.

    Holding

    1. Yes, because the structure and history of RPAPL 861 indicate that the treble damages authorized are intended to punish those who do not act in good faith.

    2. No, because municipalities are immune from punitive damages under established New York law.

    Court’s Reasoning

    The court relied on the principle that the state and its political subdivisions are generally not subject to punitive damages. The court examined RPAPL 861 to determine whether the treble damages it provided were intended to be punitive. The court noted that the statute defines “stumpage value” and allows for treble damages, unless the defendant can establish by clear and convincing evidence that they acted in good faith. The court found this “good faith” provision demonstrated the punitive nature of the damages: “In contrast to compensatory damages, which are intended to redress the concrete loss that a plaintiff has suffered by reason of the defendant’s wrongful conduct, punitive damages are essentially private fines levied by civil juries to punish reprehensible conduct, and deter its future occurrence.” The court reasoned that the good-faith exception indicated that the treble damages were intended to punish culpable behavior, not merely compensate for loss. The court also reviewed the statute’s legislative history, finding that the damages were intended to deter illegal timber harvesting, and the damages had historically been punitive in nature. The court cited Sharapata v. Town of Islip, reiterating that public funds should not be used for punitive damages as it does not advance the purposes of punishment and deterrence. The court reversed the lower court’s ruling, concluding that the arbitrator lacked authority to award treble damages against the Town.

    Practical Implications

    This decision clarifies that treble damages under RPAPL 861 cannot be recovered against municipalities. Attorneys must be aware that governmental entities are immune from punitive damages. When representing clients pursuing claims under RPAPL 861, the defendant’s status (private individual or municipality) will be critical in determining the potential remedies. This decision reinforces the importance of carefully considering the potential for punitive damages against governmental entities, as public funds are not available for these types of damages. Cases involving tree cutting or damage on public property will require thorough legal research to determine the availability of remedies against the governmental entity. This case reaffirms New York’s general prohibition against punitive damages against municipalities and sets precedent for similar statutory damage schemes.

  • Marinaccio v. Kieffer Enterprises, Inc., 20 N.Y.3d 501 (2013): Standard for Punitive Damages in Intentional Tort Cases

    Marinaccio v. Kieffer Enterprises, Inc., 20 N.Y.3d 501 (2013)

    Punitive damages in tort cases require more than just intentional conduct; they necessitate a showing of malice, fraud, evil motive, or a conscious and deliberate disregard of the interests of others implying criminal indifference to civil obligations.

    Summary

    Marinaccio sued Kieffer Enterprises, Inc. (KEI) for trespass and nuisance, alleging intentional diversion of stormwater onto his property causing significant damage. The jury awarded compensatory and punitive damages against KEI. The New York Court of Appeals reversed the punitive damages award, holding that while KEI’s actions were intentional and caused considerable damage, the evidence did not demonstrate the requisite malice or wanton disregard necessary to justify punitive damages. The court emphasized that compliance with regulations and engagement of experts, even if ultimately unsuccessful, negated a finding of criminal indifference to civil obligations.

    Facts

    KEI, developing a residential subdivision, diverted water into a ditch that was mistakenly believed to be on KEI’s property but was actually on Marinaccio’s land, without his permission. The mitigation pond was insufficient, leading KEI to install drainage pipes that routed water onto Marinaccio’s property, creating a large flooded wetland. Marinaccio complained to KEI, but was ignored. The flooding caused mosquitos and frogs, which Marinaccio feared, to proliferate on his property. However, Marinaccio refused to allow the Town to clean the ditch on his property which would have alleviated the flooding.

    Procedural History

    Marinaccio sued KEI and the Town for trespass and nuisance, seeking damages. The trial court denied KEI’s motion to dismiss the punitive damages claim. The jury awarded compensatory damages against both the Town and KEI, and punitive damages against KEI. KEI appealed the punitive damages award. The Appellate Division affirmed. The New York Court of Appeals reversed the Appellate Division’s decision regarding punitive damages.

    Issue(s)

    Whether the evidence presented was sufficient to justify an award of punitive damages against KEI for intentional diversion of stormwater onto Marinaccio’s property, constituting trespass and nuisance.

    Holding

    No, because the evidence did not demonstrate malice, fraud, evil motive, or a conscious and deliberate disregard of the interests of others implying criminal indifference to civil obligations, which is required to justify punitive damages in tort cases.

    Court’s Reasoning

    The Court of Appeals emphasized the strict standard for awarding punitive damages, stating that it requires “spite or malice, or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that the conduct may be called wilful or wanton.” While KEI’s actions resulted in damage to Marinaccio’s property, KEI complied with planning and development laws, worked with the Army Corps of Engineers, and hired experts. This, even if ultimately unsuccessful in preventing damage, demonstrated that KEI’s actions could not be considered wanton or malicious. The court acknowledged that KEI should have ensured the Town obtained an easement from Marinaccio, making them liable for trespass and nuisance. However, “something more than the mere commission of a tort is always required for punitive damages.” The court found that KEI’s behavior, while not ideal, did not rise to the level of moral turpitude required for punitive damages. The court distinguished between volitional acts and those demonstrating a purposeful or grossly indifferent causing of injury. Punitive damages are awarded to punish and deter behavior involving moral turpitude, and KEI’s behavior did not meet this threshold. The court quoted Prozeralik v Capital Cities Communications, 82 NY2d 466, 479 (1993) stating that “[s]omething more than the mere commission of a tort is always required for punitive damages”.

  • Dupree v. Giugliano, 20 N.Y.3d 921 (2012): Sexual Relationship as Medical Malpractice

    Dupree v. Giugliano, 20 N.Y.3d 921 (2012)

    A sexual relationship between a therapist and patient can constitute medical malpractice if it is substantially related to and interferes with the patient’s mental health treatment; however, punitive damages require a showing of malicious or evil conduct beyond a breach of professional duty.

    Summary

    Kristin Dupree sued her therapist, James Giugliano, for medical malpractice after they engaged in a sexual relationship during her treatment for depression and anxiety. The New York Court of Appeals held that the sexual relationship could be considered medical malpractice because it was substantially related to her treatment. However, the court vacated the punitive damages award because there was no evidence that the doctor willfully caused the plaintiff’s transference or harm. The court also upheld the jury’s finding of comparative fault, concluding that the plaintiff was partially responsible for the affair.

    Facts

    Kristin Dupree sought treatment from James Giugliano for depression and stress. Giugliano prescribed antidepressants and referred her to a therapist. Later, Dupree and Giugliano began an adulterous relationship, initiated at a gym where he was showing her exercises to relieve stress. The affair lasted nine months, ending by mutual decision. Dupree confessed the affair to her husband, leading to a contentious divorce.

    Procedural History

    Dupree sued Giugliano for medical malpractice. The trial court charged comparative fault, and the jury found Giugliano liable, assigning 25% fault to Dupree. The jury awarded damages for mental distress and lost income, as well as punitive damages. The Appellate Division affirmed the judgment. Both parties sought leave to appeal, which was granted. The Court of Appeals modified the Appellate Division’s order by vacating the award for punitive damages, and affirmed the remainder of the order.

    Issue(s)

    1. Whether a sexual relationship between a therapist and patient can constitute medical malpractice.

    2. Whether the trial court properly charged comparative fault to the jury.

    3. Whether the circumstances warranted an award of punitive damages.

    Holding

    1. Yes, because the sexual relationship was substantially related to and interfered with Dupree’s mental health treatment.

    2. Yes, because the jury could reasonably conclude that Dupree was partly responsible for the affair, even considering the “transference” phenomenon.

    3. No, because there was no evidence of evil or malicious conduct beyond a breach of professional duty.

    Court’s Reasoning

    The Court of Appeals reasoned that the standard for medical malpractice is whether the challenged conduct constitutes medical treatment or bears a substantial relationship to the physician’s treatment of the patient. Here, Giugliano was treating Dupree’s mental health problems, including prescribing medication and counseling. The court held that “a jury might reasonably conclude that the sexual relationship was substantially related to and, in fact, interfered with the treatment so as to constitute medical malpractice.”

    Regarding comparative fault, the court found that the affair continued for nine months, and both parties sought out repeated sexual encounters. Thus, the jury could reasonably discount the expert’s testimony that Dupree was wholly without volition in the matter.

    Finally, the court determined that punitive damages were improperly charged because the standard for such an award requires a defendant to manifest evil or malicious conduct beyond any breach of professional duty. The court quoted Prozeralik v Capital Cities Communications, 82 NY2d 466, 479 (1993) stating the test is whether there was “aggravation or outrage, such as spite or ‘malice,’ or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that the conduct may be called wilful or wanton’.” There was no evidence that Giugliano willfully caused Dupree’s transference or harm.

  • Ross v. Louise Wise Services, 8 N.Y.3d 478 (2007): Punitive Damages in Wrongful Adoption Cases

    8 N.Y.3d 478 (2007)

    Punitive damages are not available in wrongful adoption cases where the agency’s conduct, though tortious, does not demonstrate a high degree of moral turpitude or malicious intent.

    Summary

    Arthur and Barbara Ross sued Louise Wise Services, alleging the agency fraudulently misrepresented their adopted son’s biological family history. The agency withheld information about the birth parents’ mental health issues, specifically schizophrenia. The Rosses claimed this concealment led to emotional distress, the dissolution of their marriage, and financial losses. The Court of Appeals held that while the Rosses could pursue compensatory damages for wrongful adoption/fraud, punitive damages were not warranted because the agency’s conduct, while tortious, did not exhibit malice or criminal indifference. The court also ruled that the statute of limitations barred the negligence and intentional infliction of emotional distress claims, rejecting the application of equitable estoppel.

    Facts

    In 1960, the Rosses sought to adopt a child through Louise Wise Services, specifying they wanted a healthy infant from a healthy family, preferably with an artistic background. The agency placed Anthony with them in 1961, disclosing some health information about the birth parents, such as allergies and heart disease in the family. However, the agency failed to disclose that both birth parents had a history of emotional disturbance, including schizophrenia. The agency’s files contained information about the birth mother’s struggles with mental health and the birth father being classified as a paranoid schizophrenic. Anthony exhibited behavioral problems from a young age, eventually being diagnosed with paranoid schizophrenia at age 34.

    Procedural History

    The Rosses sued Louise Wise Services for wrongful adoption/fraud, negligence, and intentional infliction of emotional distress. The Supreme Court denied summary judgment on the wrongful adoption claim but dismissed the other two claims based on the statute of limitations. The court limited compensatory damages and allowed the punitive damages claim to proceed. The Appellate Division affirmed. The Court of Appeals modified the Appellate Division’s order, dismissing the punitive damages claim and affirming the dismissal of the negligence and emotional distress claims.

    Issue(s)

    1. Whether punitive damages are available for a wrongful adoption/fraud claim against an adoption agency that intentionally misrepresented or concealed material facts about a child’s biological family history.
    2. Whether equitable estoppel applies to prevent the adoption agency from asserting a statute of limitations defense against claims of negligence and intentional infliction of emotional distress.

    Holding

    1. No, because the agency’s conduct, while tortious, did not demonstrate a high degree of moral turpitude or malicious intent warranting punitive damages.
    2. No, because the agency’s conduct after the adoption did not amount to a subsequent fraudulent misrepresentation designed to induce the plaintiffs to refrain from filing suit on the negligence and emotional distress claims.

    Court’s Reasoning

    The Court reasoned that punitive damages are reserved for cases where the defendant’s wrongdoing evinces a high degree of moral turpitude and demonstrates wanton dishonesty implying a criminal indifference to civil obligations. The Court acknowledged the agency intentionally misrepresented facts about Anthony’s background and the suffering endured by the plaintiffs, but found the agency’s conduct did not rise to the level required for punitive damages. The court emphasized that in the 1960s and early 1980s, the prevailing belief among social workers and psychiatrists was that nurture outweighed nature in child development, leading to a policy of non-disclosure regarding certain medical information. The court noted that Social Services Law § 373-a, requiring disclosure of medical histories, was enacted only in 1983, suggesting the agency’s actions, while potentially tortious, did not warrant punitive damages given the context of the time. Regarding equitable estoppel, the Court stated that the doctrine requires a subsequent fraudulent misrepresentation designed to conceal the initial wrongdoing and induce the plaintiff to refrain from filing suit. Because the agency’s conduct after the adoption did not specifically aim to prevent the Rosses from filing suit on the negligence and emotional distress claims, equitable estoppel did not apply. Quoting Walker v Sheldon, 10 NY2d 401, 405 (1961), the court reiterated that punitive damages are permitted when the defendant’s wrongdoing is not simply intentional but “evince[s] a high degree of moral turpitude and demonstrate[s] such wanton dishonesty as to imply a criminal indifference to civil obligations”.

  • Katt v. City of New York, 4 N.Y.3d 333 (2005): Punitive Damages Against Municipalities Under the NYC Human Rights Law

    4 N.Y.3d 333 (2005)

    Under New York law, a municipality is immune from punitive damages unless there is express legislative authorization to the contrary, and general references to punitive damages in a statute are insufficient to waive that immunity.

    Summary

    Alii Katt sued the City of New York and a police lieutenant, alleging sexual harassment and a hostile work environment. After a jury verdict in her favor that included punitive damages against the City, the District Court struck the punitive damages award. The Second Circuit certified the question of whether punitive damages could be recovered from the City under the New York City Human Rights Law (NYCHRL). The New York Court of Appeals held that the NYCHRL did not contain a sufficiently explicit waiver of the City’s immunity from punitive damages. The court emphasized the need for clear legislative intent to waive such immunity and found the general language of the NYCHRL insufficient for that purpose.

    Facts

    Alii Katt, a civilian employee of the New York City Police Department, alleged she was subjected to sexual harassment and a hostile work environment by her supervisor, Police Lieutenant Anthony DiPalma. Katt sued the City and DiPalma under federal and state law, including the New York City Human Rights Law (NYCHRL).

    Procedural History

    The United States District Court for the Southern District of New York initially entered judgment on a jury verdict in favor of Katt, which included compensatory and punitive damages. The District Court subsequently struck the punitive damages award against the City, finding no clear legislative intent to waive the City’s immunity. The Second Circuit Court of Appeals affirmed the denial of a new trial but certified to the New York Court of Appeals the question of whether the NYCHRL allows for punitive damages against the City.

    Issue(s)

    Whether a person claiming gender-based employment discrimination can recover punitive damages from the City of New York under section 8-502(a) of the New York City Human Rights Law, N.Y.C. Admin. Code § 8-502(a)?

    Holding

    No, because the NYCHRL does not contain an unambiguous expression of legislative authorization to subject the City to liability for punitive damages.

    Court’s Reasoning

    The Court of Appeals relied on the principle that a municipality is immune from punitive damages unless there is express legislative authorization to the contrary. Citing Sharapata v. Town of Islip, 56 N.Y.2d 332 (1982), the court emphasized that a statute in derogation of sovereignty must be strictly construed, and waiver of immunity by inference is disfavored. While the NYCHRL expressly references punitive damages, it does not specifically mention municipalities. The court reasoned that the phrase “[e]xcept as otherwise provided by law” in the NYCHRL suggests an intent to preserve the common-law principle of municipal immunity. The court also noted the lack of legislative history indicating the City Council considered the issue of punitive damages against the City. The court found that the general statements that the provision was intended to give “enhanced protection against discrimination” did not conclusively show that the City Council intended to abrogate the longstanding common-law principle. The court stated, “we must presume that the City Council was aware of the common-law rule and abrogated it only to the extent indicated by the clear import of its enactment” (quoting Juarez v Wavecrest Mgt. Team, 88 NY2d 628, 646 [1996]). The court also pointed to the Fiscal Impact Statement, which did not include potential punitive damages in its estimated impact on expenditures. Finally, the court reasoned that it made little sense for the City Council to cap civil penalties paid into a city fund while allowing for open-ended punitive damages liability to be paid to a plaintiff.

  • Zurich Insurance Co. v. Shearson Lehman Hutton, Inc., 84 N.Y.2d 310 (1994): Choice of Law and Public Policy in Insurance Indemnification for Punitive Damages

    Zurich Insurance Co. v. Shearson Lehman Hutton, Inc., 84 N.Y.2d 310 (1994)

    When determining whether New York’s public policy against indemnification for punitive damages precludes coverage under an insurance policy for out-of-state judgments, New York choice-of-law principles apply, and this policy generally prevails unless the punitive damages award in the foreign state also encompasses a compensatory element.

    Summary

    Zurich Insurance sought a declaratory judgment that it had no duty to indemnify Shearson Lehman Hutton for punitive damages awarded in Georgia and Texas slander actions. The New York Court of Appeals held that New York’s public policy against indemnification for punitive damages applied, necessitating a choice-of-law analysis. The Court found that while New York law applied, the Georgia award, which could have included a compensatory component, was indemnifiable. However, the Texas award, solely for punitive purposes, was not, due to New York’s strong public policy against indemnifying punitive damages, even in cases of vicarious liability, reinforcing deterrence and preserving the condemnatory nature of such awards.

    Facts

    Shearson faced two slander suits: one in Georgia (Simon case) and one in Texas (Tucker case). In the Simon case, a Shearson broker forged a letter, leading to Simon’s firing by Burt Reynolds and a subsequent slander suit where Simon won both general and punitive damages. In the Tucker case, a Shearson executive falsely claimed the SEC would revoke Tucker’s license, leading to a successful slander suit with compensatory and punitive damages. Zurich sought a declaration that it was not obligated to cover the punitive damages due to New York public policy.

    Procedural History

    Zurich initiated a declaratory judgment action in New York Supreme Court. The Supreme Court ruled that New York’s policy applied, precluding indemnification for the Georgia award, but not the Texas award because it deemed the latter to have a compensatory component. The Appellate Division reversed, precluding indemnification for the Texas award as well. The New York Court of Appeals reviewed the case, modifying the Appellate Division’s order to allow indemnification for the Georgia award but not the Texas award.

    Issue(s)

    1. Whether New York’s public policy against indemnification for punitive damages applies to punitive damage awards rendered in other states against a New York insured?

    2. Whether the nature of the punitive damages awarded in Georgia, which could have been partly compensatory, requires indemnification under New York law?

    3. Whether New York choice-of-law principles dictate the application of New York’s public policy against indemnification for the punitive damage award in Texas, precluding coverage?

    Holding

    1. Yes, because New York choice of law principles require the application of New York’s public policy, especially when the insured is a New York entity and the insurance contract was negotiated and issued in New York.

    2. Yes, because the jury in the Georgia action was instructed that the punitive damage award could include both punitive and compensatory elements, and there was evidence to support each.

    3. Yes, because New York’s public policy against indemnification for punitive damages is strong and unambiguous, outweighing the policy of Texas, which permits such coverage, and because the Texas award was solely for punitive purposes.

    Court’s Reasoning

    The Court reasoned that under Home Ins. Co. v American Home Prods. Corp., a New York court must examine the nature of the claim to determine if the conduct warrants punitive damages under New York law. The Court distinguished between the conduct and the method of proof, stating that New York will not collaterally review a sister state’s application of its own law. The Court emphasized that New York’s policy against indemnification for punitive damages is intended to punish the offender and deter similar conduct, not to compensate the plaintiff. Regarding the Georgia judgment, because the jury was instructed that the punitive damages could be both punitive and compensatory, indemnification was required. However, the Texas award was solely punitive. The Court applied a “grouping of contacts” approach to the choice-of-law question, noting Shearson’s principal place of business in New York, the negotiation and issuance of the insurance contract in New York, and Zurich’s presence in New York. The Court emphasized New York’s strong public policy against indemnification, even in cases of vicarious liability. Quoting from Soto v State Farm Ins. Co., the Court reiterated that the goal of preserving the condemnatory and retributive character of punitive damage awards remained clear and undiminished. The Court further noted that New York imposes vicarious punitive damages to motivate employers to supervise their employees adequately, thus preventing harmful corporate cultures. The court noted “the deterrent as well as the condemnatory character of the award is implicated”. The Court concluded that the strength of New York’s policy outweighed Texas’ policy allowing indemnification, dictating the application of New York law and precluding coverage for the Texas punitive damage award.

  • Soto v. State Farm Insurance Company, 83 N.Y.2d 718 (1994): Insurer Bad Faith and Punitive Damages

    83 N.Y.2d 718 (1994)

    An insurer cannot be held liable for the punitive damages portion of a judgment exceeding policy limits, even if the insurer acted in bad faith by refusing a settlement offer within those limits.

    Summary

    This case addresses whether an insurer, acting in bad faith by refusing a settlement offer within policy limits, can be liable for the punitive damages portion of a judgment exceeding those limits. The New York Court of Appeals held that public policy precludes such liability. While an insurer may be liable for the excess judgment when refusing to settle in bad faith, this does not extend to punitive damages because these are meant to punish the wrongdoer (the insured), and allowing the insurer to pay would undermine this purpose. The insured’s own conduct is the reason punitive damages were awarded.

    Facts

    Elisio Montanez, driving Mary Casey’s car (his girlfriend), caused a fatal accident, killing Nelson Rivera and Angel Luis Echevarria. Montanez was legally blind without glasses and intoxicated. The victims’ administrators sued Casey and Montanez. The insurance policy limit was $50,000 per death. The insurer, State Farm, refused to settle within the policy limits, arguing Casey had not consented to Montanez driving the car. The jury found Montanez had permission and awarded significant compensatory and punitive damages exceeding the policy limits. State Farm paid the compensatory damages but refused to pay the punitive damages.

    Procedural History

    The victims’ administrators, as assignees of Montanez’s and Casey’s rights, sued State Farm, alleging bad faith refusal to settle. The trial court dismissed the complaint. The Appellate Division affirmed. The New York Court of Appeals granted leave to appeal and affirmed the dismissal.

    Issue(s)

    Whether an insurer who acts in bad faith by refusing to settle a claim within the policy limits can be held liable for the portion of a judgment that represents punitive damages assessed against the insured.

    Holding

    No, because New York’s public policy prohibits indemnification for punitive damages, even when the insurer acted in bad faith. The court reasoned that allowing recovery for punitive damages would undermine their purpose of punishing the wrongdoer.

    Court’s Reasoning

    The court acknowledged that an insurer refusing a reasonable settlement offer in bad faith is generally liable for the excess judgment. However, punitive damages are different. The court emphasized New York’s long-standing policy against indemnification for punitive damages, stating it is a “fundamental principle that no one shall be permitted to take advantage of his own wrong”. The court reasoned that punitive damages are designed to punish and deter the wrongdoer, not to compensate the plaintiff. Allowing the insurer to pay these damages would defeat this purpose, even if the insurer acted wrongfully in refusing to settle. The court stated that the insurer’s bad faith only put the insured at risk of a jury finding them morally culpable, warranting punitive damages. “Regardless of how egregious the insurer’s conduct has been, the fact remains that any award of punitive damages that might ensue is still directly attributable to the insured’s immoral and blameworthy behavior.” The court distinguished this situation from one where the insured seeks punitive damages from the insurer for the insurer’s own misconduct.

  • Thoreson v. Penthouse International, Ltd., 80 N.Y.2d 490 (1992): Recovery of Punitive Damages Under New York Human Rights Law

    Thoreson v. Penthouse International, Ltd., 80 N.Y.2d 490 (1992)

    In a court action brought under Executive Law § 297(9) for violations of the New York Human Rights Law, punitive damages are not recoverable.

    Summary

    Thoreson sued Penthouse International, Ltd. and Robert Guccione, alleging sexual harassment and seeking both compensatory and punitive damages. The trial court awarded compensatory and substantial punitive damages. The Appellate Division affirmed the compensatory award but vacated the punitive damages. The New York Court of Appeals affirmed, holding that the plain language and legislative history of Executive Law § 297(9) indicate that the legislature did not intend to allow punitive damages in court actions for Human Rights Law violations, especially given that such damages are not permitted in administrative proceedings before the State Division of Human Rights, except in specific housing discrimination cases.

    Facts

    Thoreson, a former employee of Penthouse International, Ltd., alleged that she was subjected to sexual harassment. She claimed Guccione coerced her into having sexual relations with his business associates as a condition of her employment, constituting quid pro quo harassment.

    Procedural History

    Thoreson filed suit in Supreme Court, which found in her favor and awarded both compensatory and punitive damages. The Appellate Division affirmed the compensatory damages but vacated the punitive damages award. Both parties appealed to the New York Court of Appeals, which granted leave.

    Issue(s)

    Whether punitive damages are permissible in a statutory action under Executive Law § 297(9) for violations of the New York Human Rights Law.

    Holding

    No, because the language and legislative history of Executive Law § 297(9) do not indicate a legislative intent to allow punitive damages in court actions for Human Rights Law violations, and such damages are generally not permitted in administrative proceedings before the State Division of Human Rights, except in housing discrimination cases.

    Court’s Reasoning

    The court focused on the statutory language of Executive Law § 297(9), which creates a cause of action for “damages and such other remedies as may be appropriate.” The court reasoned that “damages” in this context refers to remedies intended to alleviate the harm suffered by the aggrieved party, not to punish the wrongdoer. Punitive damages, by contrast, serve as a warning to others and are intended as punishment. The court emphasized that in administrative proceedings before the State Division of Human Rights, the focus is on rectifying the wrong to the injured party, not on punishing the transgressor.

    The court highlighted the legislative history of the Human Rights Law, noting that the Legislature rejected a proposal to empower the State Division to award exemplary damages. Furthermore, in 1991, the Legislature added a specific provision for punitive damages in cases of housing discrimination only, suggesting that such damages were not intended to be recoverable in other types of discrimination cases. The court applied the principle of expressio unius est exclusio alterius. The court quoted from the State Division’s memorandum: “At present the Human Rights Law * * * [p]ermits only compensatory damages to aggrieved persons.”

    The Court reasoned that allowing punitive damages in court actions would be incompatible with the remedial nature of the Human Rights Law and would encourage aggrieved persons to bypass the administrative process in favor of court proceedings where they could seek punitive damages. The Court stated, “It would seem highly improbable that the Legislature in adopting Executive Law § 297 (9) could have intended to permit the recovery of punitive damages in a court proceeding when that relief is expressly excluded in a proceeding before the State Division.”

  • Home Ins. Co. v. American Home Products Corp., 75 N.Y.2d 196 (1990): Insurance Coverage for Out-of-State Punitive Damages

    Home Ins. Co. v. American Home Products Corp. , 75 N.Y.2d 196 (1990)

    New York public policy generally prohibits insurance indemnification for punitive damages awards, even when the underlying conduct is not intentional, and this policy applies to punitive damage awards rendered in other states when a New York insured seeks to enforce coverage against a New York insurer.

    Summary

    The Home Insurance Company sought a declaratory judgment that it was not obligated to indemnify American Home Products (AHP) for punitive damages awarded in an Illinois case, where AHP was found liable for failing to warn about the risks of its drug, aminophylline. The Second Circuit certified the question of whether New York law would require the insurer to reimburse the insured for these out-of-state punitive damages. The New York Court of Appeals held that indemnification would violate New York public policy, as punitive damages are intended to punish and deter, and allowing insurance coverage would undermine this purpose.

    Facts

    AHP, through its subsidiary Wyeth Laboratories, manufactured aminophylline. Marcus Batteast, a two-year-old, suffered severe injuries from the drug due to AHP’s failure to provide adequate warnings about its risks. An Illinois court awarded Batteast $9.2 million in compensatory and $13 million in punitive damages. The Illinois appellate court affirmed, finding AHP was aware of the risks but failed to warn the medical profession. Home Insurance, AHP’s excess liability insurer, sought a declaration in New York that it was not obligated to cover the punitive damages.

    Procedural History

    Home Insurance initiated a declaratory judgment action in New York State Supreme Court. The case was removed to the Federal District Court, which ruled that Home was liable for the punitive damages. Home appealed to the Second Circuit Court of Appeals, which then certified the question of New York law to the New York Court of Appeals.

    Issue(s)

    Whether New York public policy requires an insurer to reimburse an insured for punitive damages awarded against the insured in an out-of-state judgment.

    Holding

    No, because requiring indemnification for punitive damages would be contrary to New York’s public policy of punishing and deterring wrongful conduct.

    Court’s Reasoning

    The court emphasized that New York public policy generally bars insurance coverage for punitive damages, whether based on intentional actions or gross negligence. The rationale is that allowing insurance to cover punitive damages would defeat their purpose of punishment and deterrence. The court found no significant difference between New York and Illinois law regarding punitive damages, both aiming to punish the defendant and deter others. The court stated, “[T]o allow it would defeat ‘the purpose of punitive damages, which is to punish and to deter others from acting similarly, and that allowing coverage serves no useful purpose since such damages are a windfall for the plaintiff who, by hypothesis, has been made whole by the award of compensatory damages.’” The court also rejected AHP’s argument that the court should conduct a de novo review of the Illinois trial record, emphasizing that it must respect the judicial proceedings of sister states. While punitive damages can be awarded in product liability cases based on failure to warn, indemnification for such damages would still offend New York’s public policy against allowing wrongdoers to escape punishment through insurance coverage. The court noted, “It is the punitive nature of the award coupled with the fact that a New York insured seeks to enforce it in New York against a New York insurer which calls for the application of New York public policy.”

  • Giblin v. Murphy, 73 N.Y.2d 769 (1988): Fiduciary Duty of Corporate Directors to Pledgees and Punitive Damages for Wanton Negligence

    Giblin v. Murphy, 73 N.Y.2d 769 (1988)

    Corporate directors owe a fiduciary duty to protect the interests of pledgees of the corporation’s stock, and punitive damages are appropriate when directors engage in wanton or reckless disregard of those rights.

    Summary

    Giblin sold his shares in Westwood Paper to Sinclair Distributors, receiving a promissory note secured by a pledge agreement. The individual defendants, officers of Sinclair, breached their fiduciary duties by diverting corporate assets and failing to provide Giblin with access to records. The New York Court of Appeals affirmed the lower court’s decision, holding the individual defendants liable for compensatory and punitive damages. The court found that the directors owed a fiduciary duty to Giblin as a pledgee and breached that duty through wanton and reckless conduct, justifying punitive damages even without harm aimed at the public generally.

    Facts

    Giblin, president and majority shareholder of Westwood Paper, sold his shares to Sinclair Distributors. The terms of the sale included a purchase agreement, a promissory note, and a pledge agreement. The pledge agreement granted Giblin the right to inspect Westwood’s records, required notification of corporate actions, and stipulated that distributions from the Westwood shares be held in trust to pay off the debt. The individual defendants, officers and directors of Sinclair, received distributions of corporate assets in violation of the pledge agreement and failed to provide Giblin with access to the books and records.

    Procedural History

    Giblin sued Sinclair, Westwood, and the individual defendants after Westwood went bankrupt and payments on the note ceased. The Supreme Court awarded compensatory and punitive damages. The Appellate Division remitted for a new trial on attorneys’ fees, reversed the finding of fraud in the inducement, but otherwise affirmed. After retrial, the Appellate Division affirmed the judgment, and the New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the individual defendants, as directors of Sinclair, owed a fiduciary duty to Giblin, the pledgee of Westwood stock.

    2. Whether the individual defendants breached their fiduciary duty to Giblin.

    3. Whether the award of punitive damages was appropriate in the absence of harm aimed at the public generally.

    Holding

    1. Yes, because as directors, the individual defendants had a fiduciary duty to protect Giblin’s continuing ownership interest in the stock of Westwood.

    2. Yes, because the individual defendants breached their fiduciary duty to Giblin by failing to notify him of corporate action and by repeatedly diverting corporate assets to themselves and others.

    3. Yes, because punitive damages are allowable in tort cases so long as the very high threshold of moral culpability is satisfied.

    Court’s Reasoning

    The Court of Appeals found that the individual defendants owed Giblin a fiduciary duty as directors to protect his interest as a pledgee. The court cited Business Corporation Law § 717, Alpert v Williams St. Corp., and Matter of Cohen v Cocoline Prods. in support of this duty. The court noted that the affirmed findings of fact showed the individuals breached this duty by failing to notify him of corporate action and diverting corporate assets. The court stated, “The corporate entity cannot shelter individuals from responsibility for breaches of duty of care they may independently owe as directors.” The court distinguished the case from those falling under the business judgment rule, noting the defendants’ conduct was “wantonly negligent, even reckless.”

    Regarding punitive damages, the court noted that the Appellate Division determined the defendants’ operation of the business “amounted, at least, to willful or wanton negligence” and to “a wanton or reckless disregard of plaintiff’s rights,” and that they were “grossly negligent and reckless.” The court found this sufficient to sustain the award of punitive damages, citing Nardelli v Stamberg. The court rejected the argument that punitive damages require harm aimed at the public, stating, “Punitive damages are allowable in tort cases such as this so long as the very high threshold of moral culpability is satisfied…as it is here on the established findings of defendants’ wrongful diversion and squandering of corporate assets, granting of excessive credit, payments of salaries to themselves, and other acts constituting willful, wanton and reckless misconduct.” The court cited Welch v Mr. Christmas and Cleghorn v New York Cent. & Hudson Riv. R. R. Co. in support of this proposition.