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VSCPA Opposes Increased Caps on Punitive Damages

September 30, 2018

February 16, 2016

Dear Members of the Virginia House of Delegates,

At a time when Virginia has been dropping in nearly every business climate ranking, it is unwise to pass SB 111, which raises the caps on punitive damages from $350,000 to $500,000. Virginia’s longstanding reputation as a reasonable and balanced state for tort liability makes us more attractive to new businesses wishing to relocate here. Bills such as SB111 that will make litigation more costly would put that reputation and our existing businesses at risk. We should be finding ways to promote job creation and attract new businesses to Virginia, not creating new impediments to growth.

When businesses spend scarce resources to fight and settle tort cases, they have less capacity to hire and expand. Three-quarters of attorneys at U.S. companies say a state’s lawsuit environment is likely to impact important business decisions at their company, including where to locate or expand according to a recently released survey by the U.S. Chamber Institute for Legal Reform (ILR). That is an 18 percent increase from eight years ago and an all-time high.

The United States already has the costliest legal system in the world. Lawsuits cost the U.S. economy $264 billion dollars per year, or about $850 for every man, woman, and child in the United States. Small businesses face some of the highest burdens under our tort system; with a recent report estimating that the tort liability costs for small businesses with less than $10 million in annual revenue was more than $100 billion a year. One in three small business owners report that they have been sued or threatened with a lawsuit — and if sued, more than two-thirds say they would likely have to pass legal costs on to consumers, reduce employee benefits and hold off on hiring new employees. Finally, The U.S. Supreme Court expressed serious concern in recent years that punitive damages awards in the nation have “run wild,” jeopardizing constitutional rights. 

Maintaining our current caps on punitive damages will help keep Virginia from falling further behind other states in our business climate rankings, and will prevent a new roadblock to economic recovery. An equitable and fair legal system is one of the core priorities for long-term economic growth.

Passing legislation that favors the trial bar at the expense of Virginia businesses takes us in the wrong direction, especially when many other states are currently reducing their punitive damages caps. For instance, North Carolina limited their punitive damage awards to three times the award of compensatory damages or $250,000 whichever is greater. The following businesses, local chambers, and trade associations respectfully ask that you vote No on SB 111 in order to ensure that Virginia stays competitive economically and to protect our reputation as a “business friendly” state.   

American Insurance Association
Associated Builders and Contractors — Virginia Chapter
Chesterfield Chamber of Commerce
Dulles Regional Chamber of Commerce
Fredericksburg Regional Chamber of Commerce
Greater Richmond Chamber of Commerce
Greater Williamsburg Chamber & Tourism Alliance
Halifax County Chamber of Commerce
Hampton Roads Chamber of Commerce
The ILEX Group
Loudoun County Chamber of Commerce
National Association of Mutual Insurance Companies
Northern Virginia Chamber of Commerce
Prince William Chamber of Commerce
Property Casualty Insurers Association of America
Roanoke Regional Chamber of Commerce
Twin County Regional Chamber of Commerce
Virginia Asian Chamber of Commerce
Virginia Manufacturers Association
Virginia Peninsula Chamber of Commerce
Virginia Retail Association
Virginia Society of CPAs


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