Recently, the Ohio Supreme Court reiterated a long-standing common law rule that had caused confusion among appellate district courts over the last few decades. In
Lucarell v. Nationwide Mut. Ins. Co., the Court announced that under Ohio common law, “punitive damages may not be awarded for breach of contract, no matter how willful the breach.” It clarified that this has been the law in Ohio since 1922, as first announced in
Ketcham v. Miller. Despite
Ketcham, appellate courts throughout Ohio during the last century – including the Seventh District Court of Appeals from which
Lucarell had been appealed – made an “exception” to that common law rule, awarding punitive damages if a breach of contract is accompanied by a separate but independent tort. The
Lucarell decision makes clear that such an exception does not exist.
This issue arose after a jury in the Mahoning County Court of Common Pleas returned verdicts in favor of plaintiff Christine Lucarell in excess of $42 million in compensatory and punitive damages, finding that defendant Nationwide Mutual Insurance Company had breached its contracts with her, invaded her privacy, retaliated against her, and constructively discharged her. After applying statutory caps on damages, the trial court entered judgment against Nationwide for more than $14 million in compensatory and punitive damages. The Seventh District Court of Appeals affirmed, holding that that punitive damages could be awarded for breach of contract if Lucarell proved her fraud claim and that the jury could have found Nationwide prevented her from performing obligations of releases she signed. Nationwide appealed.
On appeal, the Ohio Supreme Court squarely addressed whether punitive damages can be awarded for a breach of contract claim, reiterating that it had never recognized the exception that has found its way into lower court decisions. According to the Court, while
conduct constituting a breach can also constitute a tort, Ohio law is clear that punitive damages are only recoverable “when the claimant suffered a harm distinct from the breach of contract action and attributable solely to the alleged tortious conduct.” Therefore, punitive damages can only be awarded for the harm attributable to the tort – and that harm must be distinct from and separate from the harm attributable to the breach of contract.
In light of the holding in
Lucarell, when a breach of contract involves conduct that also constitutes a tort, punitive damages may be awarded only for the tort, not for the breach, and any punitive damages awarded are subject to statutory limitations on punitive damages imposed by Ohio Rev. Code § 2315.21.