Recent Insurance Coverage Corner Article by Skyler C. Wilson.

Many of the South Carolina Bar have awaited how our supreme court would handle the Garrison v. Target Corporation case.  When the court of appeals ruled that the statutory cap on punitive damages was an affirmative defense, every circuit court and litigator in the state felt the impact of the decision that caused a flurry of filing amended pleadings asserting the defense.  Our supreme court reversed that ruling, but the opinion contains other important reminders, including the effect of spoliation of evidence and interest on punitive damages.

As a reminder, the claims in Garrison arose after a mother unintentionally punctured herself when she swatted a syringe from her daughter’s hand that her daughter had picked up from a Target parking lot.  Target had possession of the syringe, but it could not be found at the time of trial.  The jury was shown pictures of the syringe and instructed on the spoliation of evidence.  Target was found negligent and the jury awarded the mother $100,000 in compensatory damages and $4.51 million in punitive damages.  Both parties appealed the ruling.

Statutory Cap on Punitive Damages

Disagreeing with the court of appeals, our supreme court held the statutory cap on punitive damages is not an avoidance or an affirmative defense.  The court reasoned the cap lacks a common characteristic of the affirmative defenses enumerated in Rule 8(c), SCRCP: barring liability for the cause of action.  The court also reasoned that, unlike the statutory cap, affirmative defenses shift the burden of proof to the defendant.  Because the statutory cap is not a bar to liability and does not shift the burden of proof, it is not an affirmative defense.

The ruling is straight forward but contains important guidance for defense attorneys deciding what to assert in an answer. Although Rule 8(c), SCRCP, outlines specific defenses, it also indicates a party must assert “any other matter constituting an avoidance or affirmative defense.” Garrison provides assistance when deciding whether to assert a matter in a pleading as an affirmative defense when it is not enumerated in Rule 8(c):  If the matter would bar liability for a cause of action, or shift the burden of proof, it should probably be asserted in the answer.

Spoliation

Target moved for a JNOV on the ground that there was insufficient evidence it had constructive notice of the syringe—the dangerous condition on its premises.  The motion was denied, and our supreme court affirmed.  The supreme court reasoned there was sufficient evidence for many reasons, including photographs showing the weathered appearance of the syringe and evidence of Target’s lack of cleaning and inspection procedures.

Importantly, however, the court also found Target’s spoliation of the syringe supported a finding of constructive notice.  The jury was charged on spoliation and how it can support an adverse inference.  Although it was not the sole reason for denying Target’s motion, the court’s reasoning remind us all to ensure our clients preserve evidence as early as possible.

Interest on Punitive Damages

The court found that Rule 68 and section 15-35-400(B) of the South Carolina Code, which govern offers of judgment, permit the recovery of interest on an award of punitive damages. This holding is not much of a surprise because the rule and statute on offers of judgment are unambiguous.  However, it serves as an example of how exposure can change.

When an offer of judgment is rejected, interest can be recovered when the verdict is at least as favorable as the offer of judgment.  Punitive damages have two important considerations in the offer of judgment context.  First, assuming you have appropriately evaluated a plaintiff’s actual damages and your client receives an offer of judgment mirroring expected actual damages, an award of punitive damages could make the overall verdict “at least as favorable as the rejected offer,” making an award of interest appropriate.  Second, the interest is calculated on the full amount of the award, including punitive damages.

Although the majority of cases will not include the possibility of a punitive damages award as significant as in Garrison, make sure to advise your clients on the possible ramifications of refusing an offer of judgment, especially if you believe there is any possibility a jury could award punitive damages.