The Effects of Seeking Punitive Damages on the Processing of Tort Claims

Abstract

Punitive damages are one of the most controversial aspects of tort litigation and have been the subject of various theoretical, empirical, and experimental studies. One criticism of punitive damages refers to the effect that they have on civil litigation processes. In particular, Polinsky (1997) argues that the uncertainty and unpredictability that punitive damage claims inject into a case may increase both the rate and amount of settlements, thus implying that punitive damages carry systemic consequences for the general processing of tort claims. This paper represents the first, empirical examination of this implication. With one of the largest and most comprehensive data sets of tort litigation (over 25,000 cases filed from 1994 through 1997 in several counties in Georgia), we analyze both cases that are likely to have caps on punitive damage awards and cases that are likely to be uncapped. We examine the effect of the decision to seek punitive damages on several major decision points in the tort litigation process in a series of logit regression models. With extensive control variables for type of case and plaintiff, defendant, and case characteristics, we find that seeking punitive damages has no statistically significant effect on most phases of the tort litigation process.

Keywords: Tort, punitive damages, tort reform, litigation

JEL Classification: K13, K41