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When is a Company Liable for Punitive Damages?


When we think of punitive damages, we often think of personal injury cases, and wrongdoers who have done something egregiously wrong. But anybody can potentially be liable to pay punitive damages, including a business. ‘

How is a business liable for punitive damages? A business isn’t a person. It can’t have the intention, malice, or reckless disregard for the law or safety that a human person can have…or can it?

When Companies Get Hit With Punitive Damages

In fact, a company can be liable for punitive damages. If you are a business, you’ll be glad to know that punitive damages aren’t easy to get. A victim or someone who is wronged has to show that the business acted with a conscious disregard or an indifference to life and safety and that behavior contributed to the injury or the damages.

Making it more difficult for a victim to recover punitive damages is that against a corporation, a victim has to show that a managing agent or owner knew about, sanctioned, or actually performed the act that led to the injury. In other words, it isn’t enough for just an employee, or a mid-level manager to have known that the company was doing something wrong. It has to be someone with managerial authority who knew.

Courts have often refused to award punitive damages to people who want them, on the basis that nobody in upper level ownership or management for the company had any awareness that the offending behavior was taking place.

Remember also that punitive damages against a company aren’t just awarded when there is physical injury. Fraud, lies, or deceptive and unfair trade practices can lead to punitive damages as well (in fact punitive damages often are awarded hand in hand with violations of Florida’s Unfair and Deceptive Trade Practices Act).

Avoiding Punitive Damages

You cannot remain purposely ignorant. In other words, telling a manager “don’t tell me if anything bad happens,” or shutting off your phone to avoid learning about problems, are not good risk-avoidance strategies.

How can you help your business avoid punitive damages? One easy way is to have written policies and procedures—including safety procedures. A written policy that instructs employees how to do their job safely, is like a written statement from you saying that you do not approve of or condone dangerous or fraudulent activity.

Don’t take a blind eye to problems. Let’s say an employee is making a lot of money for your company by defrauding clients. It can be easy to look the other way, as the money rolls in. That’s a sure way to get your business in trouble. Step in and stop illegal, deceptive or bad behavior when you see it. That may include reprimanding or punishing employees who engage in this kind of behavior.

Call the West Palm Beach business litigation lawyers at Pike & Lustig to help if your business is in trouble, or to help keep it out of trouble.



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